May 2014 newsletter
South AfricaN Automotive benchmarking club
About the SAABC
T
HE South African Automotive Benchmarking Club (SAABC) is a privately funded, non-profit Continuous Improvement (CI) programme. Since its inception in 1997, the club has achieved considerable success in providing tangible interventions to facilitate economic development of the automotive sector. The SAABC supports the South African automotive component manufacturing industry in order to achieve World Class Manufacturing levels through firm-level benchmarking and clustering activities. It also receives support from suppliers in all major automotive manufacturing locations in the country as well as five OEMs; access to benchmarking data from North America, the European Union, India and more recently South East Asia; and access to world class benchmarking methodology. As a privately funded programme, an industry led Regional Committee and a National Executive Committee oversees the activities of the SAABC and provides critical input on its direction and focus.
Powered by B&M Analysts
B
ENCHMARKING and facilitation services are provided by Benchmarking & Manufacturing Analysts SA (Pty) Ltd (B&M Analysts), an organisation that provides high value specialised support services to drive sustainable industrial development. Over the past 15 years, B&M Analysts has developed methodologies and skill sets that allow it to play a unique role in relation to supporting the competitiveness of value chains and the growth of industrial sectors. These services are tailored to support the industrial development goals of government organisations, private sector organisations and public-private partnerships (PPP). B&M Analysts is a verified Level 2 B-BBEE contributor under the Codes of Good Practice for Broad-Based Black Economic Empowerment (B-BBEE). For more information on B&M Analysts please visit www.bmanalysts.com.
Compiled & Distributed by
Tel: +27 (0) 31 764 6100 Email: admin@bmanalysts.com Fax: +27 (0) 86 607 4510 Website: www.bmanalysts.com
SAABC
South African Automotive Benchmarking Club
2
Contents Powered by B & M Analysts
| 2
About the South African Automotive Benchmarking Cluster (SAABC) | 2 New Member
| 4
New Look
| 5
Focus Article - Waste in the process – the SA Auto Components Performance | 6 Recent Events
| 11
Upcoming Events
| 14
SAABC
South African Automotive Benchmarking Club
New Member The SAABC would like to welcome Hulamin as our newest member to the club. Hulamin is one of the leading manufacturing businesses in South African, supplying Aluminium to both the local market and abroad. We anticipate a beneficial relationship that will enable a rewarding experience through their membership!
SAABC
South African Automotive Benchmarking Club
4
! K O O L New The SAABC is proud to introduce our new Logo!
SAABC
South African Automotive Benchmarking Club
5
Focus Article Waste in the process The SA Auto Components Performance Introduction
T HE automotive sector is one of South Africa’s most important contributors to the local
economy. With its ability to link throughout the economy, the government has identified the automotive industry as a key growth sector. At the same time, the manufacturing climate in South Africa is becoming increasingly more difficult for SA automotive component firms with increasing input costs coupled with ongoing pressure from customers to reduce price points and technological challenges. In light of this, the reduction of waste (or Muda as commonly referred) is of critical importance. The following article unpacks the South African Automotive Components Industry’s performance in terms of amount of operational waste. The benchmarking findings compiled consider the performance levels of three comparators in 2013, namely, the SA supplier industry (SA firms), Developed Countries (DC) and Less Developed Countries (LDC).
SAABC
South African Automotive Benchmarking Club
6
What is waste?
T
AIICHI Ohno, who is considered to be the father of the Toyota Production System
and developed the concept of Lean manufacturing, defined the 7 types of waste that describe all activity that adds cost but not value: 1. 2. 3. 4. 5. 6. 7.
Waiting Transport Over-Processing Inventory Correction / Defects Overproduction Motion
In a Lean organisation, these 7 types of “Muda” are the target of an endless pursuit of waste elimination. Waste can be defined as “…anything that adds to the time and cost of making a product but does not add value to the product from the customer’s point of view. Value-added activities transform the product into something the customer wants. In manufacturing, this is generally a physical transformation of the product to make it to conform to customer expectations”. The focus on reducing waste looks at the removal of any non-value added activity. An 8th waste is recognised as Unused Employee Creativity; losing time, ideas, skills, improvements, and learning opportunities by not engaging or listening to employees. 1
Source: Lean Manufacturing Principles Guide, Version 0.5, 2000, Jeffrey K. Liker AND Thomas Lamb
SAABC
South African Automotive Benchmarking Club
7
The SA Automotive Component Manufacturing Sector Performance
T HE SAABC’s Waste Analysis considers the direct unnecessary costs or waste incurred
by operational performance levels at firms. The analysis considers the direct costs linked only to the following operational measures namely; inventory control, quality management, production flexibility and reliability as well as absenteeism with a cost of each item calculated.
Area Inventory
Flexibility
Operational measure RM, WIP & FG Inventory Holding
Calculated against 25% of inventory value on hand
Customer return rate
Calculated against sales x estimated 10
Internal rework rates
Calculated against labour costs
Internal scrap rates
Calculated against material costs
Downtime due to machine changeovers Downtime due to machine breakdowns
Reliability
Waste calculation
Downtime due to tooling breakdowns
Calculated against overhead and labour costs
Downtime due to internal and external material unavailability HRD
Absenteeism rate
Calculated as 2 x direct labour costs
8
30
25.56
% of MVA
25
Average waste as % of MVA 23.06
22.07
20
18.39
15 9.26
10 5 0
Cost Quality Flexibility Reliability HRD
SA 2011
SA 2012
SA 2013
DC 2013
LDC 2013
6.51 4.23 4.66 8.24 1.92
6.07 3.74 3.85 7.51 1.88
6.28 3.53 4.12 6.47 1.67
4.24 1.97 2.73 8.02 1.43
2.70 2.10 1.58 2.09 0.79
perational waste indicators for the SA firms are compared to the average performance Oof Developed Countries and Less Developed Countries. From the data it is clear that while
SA firms have steadily reduced their overall waste as a percentage of manufacturing value addition over the 3 years, SA component firms incur the largest amount of waste costs. These figures are the direct unnecessary costs, or waste, that firms incur as a result of their operational performance. From the above figure it is evident that inventory control (3.07%) and production reliability (2.85%) are the highest contributing waste costs for SA firms respectively. With rising global competition and external costs, reducing waste in operational activities is critical for local manufacturers in order to maintain profits as well as remain competitive. Reducing waste ultimately results in improved profitability and increased customer satisfaction through the delivery of goods and services on time and in full and of highest quality.
SAABC
South African Automotive Benchmarking Club
9
Manufacturing Excellence Award
The SAABC is proud to be introducing the inaugural Manufacturing Excellence Awards this year. These awards are determined strictly by the manufacturing data from the benchmarks and only firms that have been members for 2 or more years and are still members are eligible. Our first award is bestowed to the firm with the lowest waste as a percentage of manufacturing value added. As we have seen in this article, waste reduction is of critical importance for our SA firms. This year, the firm with the lowest waste in the South African Automotive Benchmarking Club is HESTO Harnessses and therefore they have been bestowed with the Manufacturing Excellence award. HESTO Harnesses produces and supplies Wiring Harnesses and Combination Meters to the local automotive industry. HESTO is situated on the KZN North Coast and is the largest employer in the area with around 1800 employees. HESTO is owned by Metair (74.9%) and Yazaki (25.1%), the largest Global producer of Wiring Harnesses (with 230 000 employees), supplying Technical and Quality System expertise. The award was presented to John Chandler (General Manager: HESTO Harnesses) at the National Localisation Indaba 2014. The SAABC awards were made by a previously disadvantaged artist, using scrap metal and scrap wood – waste utilised to make an award for waste and made to look like a car!
SAABC
South African Automotive Benchmarking Club
10
Recent Events
PE Industry Workshop
Industry Workshops A consideration of the industry’s status quo for 2013 The SAABC recently hosted three Industry Workshops in Port Elizabeth, East London and KwaZulu-Natal. These informative sessions focused on the latest automotive trends, as well as the major findings to emerge from the Benchmarking Club database. The SAABC findings reviewed the performance of the auto component industry in South Africa against those of auto component firms located in Developed Countries (DC) and Less Developed Countries (LDC). The sessions also included an overview of the new SAABC benchmark methodology.
SAABC
South African Automotive Benchmarking Club
11
KZN Industry Workshop
SAABC
South African Automotive Benchmarking Club
12
Gauteng Health and Safety Study Tour The SAABC hosted a Study Tour in the Gauteng region. The objective of Health & Safety is to prevent accident and environment incidents through proactive control. The tour took place in Gauteng on 22 – 23 May 2014 and entailed visits to three firms (BMW, Nampak Glass and Nampak Tubes). This tour allowed personnel to reflect on their approach to Health & Safety over the two day period.
13
Upcoming Events Industry Workshops A consideration of the industry’s status quo for 2013 The SAABC will be hosting the remainder of the Industry Workshops in Gauteng and Western Cape. These informative sessions will focus on the latest automotive trends, as well as the major findings to emerge from the Benchmarking Club database. Please contact the SAABC (saabc@bmanalysts.com) to find out more about the workshop in your region.
Best practice study tour workshops for 2014 Five Regional Study Tours are planned for 2014. As per the highly successful 2012 and 2013 format, the tours will take place over a two-day period. While in 2012 and 2013 a particular WCM element was focused on for each tour (i.e. JIT, TPM, etc), the theme for 2014 for all the Study Tours will be Health & Safety (H&S). Each tour will focus on the crucially important aspect of H&S. In this regard, the firm visits will include tours to firms that perform strong in terms of H&S.
SAABC
South African Automotive Benchmarking Club
14
F H E L Q E X U I A R E L I A B I L I T I I C O S T L I Y T Y
SAABC
South African Automotive Benchmarking Club
S A L T H F E T Y
15