Safilo Group – October 2018 by Supply Chain Digital

EYEING LONG-TERM GROWTH ACROSS THE SUPPLY CHAIN

DELIVERING QUALITY RESULTS THROUGH SUPPLY CHAIN DISRUPTION WRIT TEN BY

CATHERINE S TURM AN PRODUCED BY

CHARLOT TE CL ARK E

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Nearing the end of its procurement strategy 2020, Director for Sourcing for Asia and APAC, Jorge Gonzalez, discusses how the business continues to go from strength to strength

ppealing to all ages and demographics, the global eyewear market is undergoing considerable growth. Set to exceed $165bn by 2026,

optical companies and those specialising in eyewear will 04

need to transform traditional business models behind the scenes in order to cater towards increased demands. From the purchase of designer sunglasses, to the improvement of everyday vision, 99% of all frames worldwide are produced in Italy, China and wider Asia, creating significant opportunities for eyewear creator, Safilo Group. Famed for its extraordinary designs and propriety brands, such as Carrera and Polaroid, as well as its licensed brands, BOSS, Tommy Hilfiger, Kate Spade, Marc Jacobs and more, the group has become the second largest eyewear company in the world. Safilo is a frontrunner in the global distribution of premium sunglasses, optical frames and sports eyewear, bringing the latest design and manufacturing capabilities. Housing a number of its factories in Italy, its sourcing activities are mainly undertaken in China and Japan,

“ We source a large share of what we sell with partner companies, instead of with our own direct manufacturing. The sourcing team is extremely well recognised, as it is a key source of innovation” — Jorge Gonzalez, Director of Sourcing in Asia and APAC

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Imagination enriched by precision Who are HuaQiang? Huaqiang is a precision metal component solution provider to mainly optical, but also watch, luxury accessory, medical and electronic industries. Through 35 years of experiences and constant reinvestments in production, HuaQiang is able to use precision to help its customers realise its widest imaginations and design. We have offices in Shenzhen, Wenzhou and Veneto, Italy, whilst our HQ and production plants are in Yuhuan, China. How has the business changed over the years? Through almost 35 years of history, we started off by suppling metal component to the lowest segments of the eyewear manufacturing business. Until 15 years ago, when most of our domestic competitors started to invest in rapid booming and profitable real estate market, HuaQiang decided take bold steps to invest in a total production upgrade by acquiring two fully automated production lines from Japan.

We have been able to gain the trust of world’s two leading eyewear manufactures including Safilo, Luxottica, De Rigo and Essilor and have become one of the top four eyewear metal components suppliers in the world.

Basically, we help our customers to create added value by putting ourselves into our customer’s shoes.

Please outline HuaQiang’s business model

Whilst being an industrial leader in self-developed machinery in China, we also maintain industry’s highest level of investment in our Human Resources. One of the most effective ways is to acquire talented people from other industry leaders. Some of our brightest colleagues were recruited from Volkswagen and Bosch.

Our business models can be seen as two folds. For most of our customers, we ship our components directly to their plants, usually in Italy, China, Japan and Bazile. We are their first-tier supplier. This is referred as “Direct sales” in HQ and accounts 70% of our annual sales. Other customers that are brand or retail owners that do not have internal manufacturing capabilities, we supply to their frame producers. This accounts 30% of our annual sales. What technologies does the company utilise across its operations? We have been investing in new technologies, especially in 5-axis CNC machines. We also have a machinery workshop to develop and build all our machines for standard products, as well as utilising pressing, computer numerical control (CNC), metal injection moulding (MIM), laser cutting and more. How do you ensure strong relationships with customers and suppliers? We have selected a number of qualified candidates with the potential and willingness to grow. We have shared market information and production knowhow, and internalised the fundamentals, such as moulding and surface treatments so supplier risks are mitigated. Safilo, for example has an extensive brand portfolio, and is an industrial leader in quality and design. The business always challenges us to realise the wildest design ideas. The transformation of centralisation in procurement in recent years has also allowed HuaQiang not only to tap into business with Safilo, but also with its OEM suppliers. Safilo has been our most educative customer, which has allowed us not only to develop in terms of management, but has also opened us to further market opportunities.

What about the training and development of workers?

Our technical team routinely attend machinery and moulding exhibitions worldwide, and we also have established partnerships with a training firms for management training across all management levels. A personal development fund is also announced to all employees on yearly basis. What sets HuaQiang apart from the competition? The most crucial one is our dedication in both catalogue and custom-made products. In catalogue business, some are self-developed, but others can be standardised. By continuous investment in automation, R&D, and production management for catalogue products, we are more efficient than ever. When developing a new metal frame, a customer need to decide to which extend they will internalise the product. Our commitment in both product types enables us to be the ultimate metal solution provider to eyewear industry. We shipped 40mn pairs of catalogue products and 15mn pairs of custom made products in 2017, where we produce approximately 90,000 pairs per day. As a company that has deep roots in this industry for 35 years, we were able to capture new customers whilst maintaining good service level to existing ones which makes the first half of 2018 the best one we ever had.

How does HuaQiang help its customer such as Safilo to deliver special eyewear? Each time when we receive a drawing or a new idea, instead of going directly into product development, it is our instinct to look deep and try to understand the logic behind this design and all possible solutions to accomplish it. If such design is intent to be perfect in moving mechanism, we will suggest the most precise process to make sure the assembled product runs smooth like silk. If such design is intent to be perfect in aesthetics, we will introduce the right surface treatments to make it shine.

Dunno Huang Director of foreign & indirect sales, HuaQiang Optical

“ It is a matter of looking at the performance of that factory in somewhere like China and how it will impact our customers in countries such as Spain or Brazil, highlighting the relationship between market and supply” — Jorge Gonzalez, Director of Sourcing in Asia and APAC

where its frames are distributed worldwide. “From a supply chain perspective, we don’t have a strong segmentation by region, but more on a functional basis. However, sourcing is much more Asia focused, which is why we have a strong team in Hong Kong,” explains Jorge Gonzalez, Director of Sourcing in Asia and APAC. “We source a large share of what we sell with partner companies, instead of with our own direct manufacturing. The sourcing team is extremely well recognized, as it is a key source of innovation.

EXCEPTIONAL COLLABORATION Working across a number of supply chain functions for close to 20 years, Gonzalez

joined the business in 2016 taking over from Andrea Grassini who then became Global Sourcing Director. Grassini has been instrumental within the group’s procurement and supply chain transformation, and has taken the business’ procurement and supply chain capabilities to the next level. “Previously, the interface between design and sourcing was happening much more downstream in the process. Now, the way we work opens up more opportunities,” he explains. “When you have your own factories, it’s much more difficult to keep in touch with the market, so we keep in touch through our network of suppliers. “Instead of having one location, we have over 30. We don’t manage the production directly, but we operate like a factory, with production managers, scheduling and planning. Instead of production orders we use purchase orders, but it is similar. It’s part of our success.” Working alongside designers in Italy, New York and China, Gonzalez and his team work in sync with both designers and suppliers, passing on innovative design concepts which can be mass produced, placing particular emphasis on building mutually positive supplier relationships in the process. “We are like a revolving door, with suppliers on one hand and designers on the other, in w w w. s a f i l o g r o u p . c o m

visotticacomotec.com

Continuous improvement. Founded in 2003, Jin Yu Plastic Products Co Ltd is a dynamic and leading manufacturer of Cellulose Acetate Sheets in China with offices in Asia and Europe.

www.jinyuplastic.com Jin Yu is on Facebook Instagram Wechat

“ Our differentiator is that we go to their factories and seek to add value by highlighting opportunities for improvement in every factory” — Jorge Gonzalez, Director of Sourcing in Asia and APAC

lean and six sigma methodologies was a key turning point.”

BUILDING TEAM RESILIENCE As new materials, textures, colours and finishes, as well as types of lenses, continue to flood the market, Gonzalez and his team have remained adaptable against ongoing market volatility. With over a thousand new products each year, each member of the team plays a key role: Product develop-

order to produce prototypes, concepts

ment and engineering teams manage

and drawings. There is also an engineer-

all 1000 models from prototyping to

ing team, each housing over 15 years’

mass production readiness; the quality

experience, which is why our sourcing

manager ensures that all are manufac-

is world-class,” adds Gonzalez.

tured to high standards, whilst the pro-

“Appointing a number of individuals

duction manager remains responsible

with a background in manufacturing

for the procurement-to-pay process

has also helped our suppliers, as many

and delivery performance.

organisations won’t have the manpower

Additionally, one team is strategically

or the expertise to go deep into their

working with suppliers and gaining a

operations. They just want to negotiate

greater understanding of costings, the

the price and then leave things be. Our

bill of materials, and overhead percent-

differentiator is that we go to their

ages. Its sourcing house has illustrated

factories and seek to add value by

how a healthy manufacturing company

highlighting opportunities for improve-

should operate by creating a dedicated

ment in every factory,” he continues.

area for its purchasing operations and

“We have the background and the expertise. Manufacturing together with

giving its sourcing house greater autonomy. w w w. s a f i l o g r o u p . c o m

SAFILO GROUP

“I see myself as an enabler

examples to the table. We also

and facilitator. Each team is

brought the team to the facto-

given targets where they make

ries, to the suppliers, showing

the required choices and are

real examples of how we can

held accountable. They decide

be even better.

which projects they will run with

“It takes a while to embed

and the activities they believe

this kind of culture of fighting

the business should be under-

for every single opportunity.

taking,” explains Gonzalez.

The automotive industry had

The sourcing house is routinely encouraged to embrace

to do it in the ‘80s and we are having to do it now.”

new ways of working, particusign new styles to suppliers and

PROCUREMENT JOURNEY

balance capacity, as it contin-

Presently undergoing its

ues to transform from regional,

six-year accelerated procure-

isolated, “do-it-all” units, to

ment strategy, which is set to

global, category-focused pro-

complete in 2020, Safilo will

curement clusters to address

seek to balance its production

global spend by category while

and sourcing activities, in order

driving accountability for qual-

to deliver outstanding results

ity and delivery.

in five key areas: availability,

larly in areas such as how to as12

“The question is ‘why bother to do better if we are already

delivery, cost, partnerships and innovation.

doing very well?’ Trying to moti-

“With net inflation, we are

vate workers in this way was an

trying to accomplish around

internal challenge which we had

low single digits sourcing effi-

to overcome,” notes Gonzalez.

ciency year on year, which with

“We looked at other industries in order to bring some

inflation is a high single or even double-digit improvement es-

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“We have a manufacturing mindset and experience with lean and six sigma methodology. We do not just negotiate prices, but go deep into our suppliers’ production processes” — Jorge Gonzalez, Director of Sourcing in Asia and APAC pecially in countries like China,” says

product development, the purchase-

Gonzalez.

to-pay process and supplier and

“That is the driver towards all other

relationship management, Safilo looks

choices that are situated in quality and

at supplier production and scheduling,

lead time in production. All of this is

collaborating with suppliers across the

geared to removing defects and waste,

whole manufacturing process.

which will help us achieve purchasing ef-

“Having a manufacturing mindset

ficiency, not by reducing the profit of our

and experience with lean and six sigma

partners but by improving the processes.”

methodology. We do not just negotiate

Focusing on three main engines:

prices, but go deep into our suppliers’

production processes,” he says. “We look at their situation, their overheads, undertake a profit and

they are not able or willing to work to continuously improve quality and process and remove waste cost.”

loss (P&L) analysis and then give them a hint of where to look for opportunities.

SUPPLIER GROWTH

Partners are defined in addition to by

With increased pressures as a result

performance, by the level of collaboration

of the exchange rate with the dollar, as

we obtain during these conversations. At

well as Chinese inflation, the company’s

the end by natural selection suppliers will

relationship with its suppliers has been

end up being dropped and renewed if

completely disrupted. w w w. s a f i l o g r o u p . c o m

“In the past, cost was not so important. Every supplier had the notion that if they do a reasonable job then they will receive a certain amount of business the following year. We have therefore had to bring suppliers back to five KPI areas - compliance, social responsibility, quality, delivery performance, cost, and a ‘softer’ area of whether they are easy to do business with,” explains Gonzalez. “We have had to become very disciplined in making sure that new business and the growth of the supplier is 100% linked to this.” Introducing best in class management 16

€1.04bn Approximate revenue

1934 Year founded

practices, Safilo works with suppliers to create a yearly joint business plan (JBP), undertaking quarterly reviews, as well as visiting suppliers at their own locations to reach as many layers as possible. “I personally take the time to meet with the people, with my team and go all the way across the shop floor to understand the issues, work with them and do some problem solving together. “It is a matter of looking at the performance of that factory in somewhere like China and how it will impact our customers in countries such as Spain or Brazil, highlighting the relationship between market and supply.” By running a number of quality assurance programmes, the sourcing house has also

8000+ Approximate number of employees

undertaken a range of projects with suppliers to tackle long-standing issues. “Each year, KPIs are expanded further to provide new challenges for suppliers, whether it is through capacity or lead times. For example, last year, our KPI in delivery performance is at 95-97%,” notes Gonzalez. “We have three seasonal collections per year - in January, April and August - and each year we have removed one week off the lead time. Since 2016, we have cut off three weeks in terms of lead time. However, we need to maintain the same quality and service level, as well as reduce costs.

“We need to be faster and remove waste,” he adds. “We cannot do things the same way that we were doing before, so that forces us internally as well as our suppliers to review current processes, not just production but end to end. For example, lengthy and manual interfaces meant that a purchase order would move from office to the supplier in days, now it takes hours,” he continues. Soon to renew its 2020 vision following on from the appointment of its new CEO this year, Safilo will aim to further transform the business to uphold its 100% track record on delivery. Adopting lean deployment programmes to reduce lead times and shrink costs with w w w. s a f i l o g r o u p . c o m

FACTS

• The global eyewear market is set to exceed $165bn by 2026 • Safilo Group is the second largest eyewear company in the world. • Safilo houses a number of its factories in Italy, whilst its sourcing activities are mainly undertaken in China and Japan • Strategically working with suppliers and gain a greater understanding of costings, the bill of materials and overhead percentages, its sourcing house illustrates how a healthy manufacturing company should operate • The sourcing house is routinely encouraged to embrace new ways of working, particularly in areas such as how to assign new styles to suppliers and balance capacity • 99% of all frames worldwide are produced in Italy, China and wider Asia • Focusing on three main engines: product development, the purchase to pay process and supplier and relationship management, Safilo collaborates with suppliers across the whole manufacturing process • Safilo works with suppliers to create a yearly joint business plan (JBP), undertaking quarterly reviews, as well as visiting suppliers at their own locations • Soon to renew its 2020 vision following on from the appointment of its new CEO this year, Safilo will aim to further transform the business by looking for new opportunities

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year-on-year positive procurement efficiencies despite various challenges, Safilo’s unique team, deep knowledge of products and exceptional focus on quality has fully transformed the business. Implementing data-driven, six sigma problem-solving solutions to tackle quality issues, its dedicated team has delivered the best quality, delivery and cost from the start to support its manufacturing partners, as well as putting forth best-in-the-business engineers and materials experts. “With the ability to automate produc-

“ Since 2016, we have cut off three weeks in terms of lead time. However, we need to maintain the same quality and service level, as well as reduce costs”

— Jorge Gonzalez, Director of Sourcing in Asia and APAC

tion processes, we are open to new supply markets – this is one area of

ment underway on how to remove any

focus for us. Looking at Asia, we want

solvent based elements, so cleaner

to become less China dependent and

processes and the introduction of

be more diversified on the supply

increased bio-materials will definitely

market,” notes Gonzalez.

be a trend for the future,” he concludes.

The business is also set on embed-

“In sourcing, we will be able to

ding greener technologies and pro-

change much faster than any other

cesses to fully disrupt the traditional

internal factory because we are able

eyewear industry.

to leverage our suppliers’ world class

“Some of the materials that we use

expertise.”

are the same as 50 years ago, like cellulose acetate. Now there are new technologies for cellulose acetate, such as new formulations. There is investw w w. s a f i l o g r o u p . c o m

S A F I LO G R O U P Settima Strada 15, 35129 Padova, Italy T: +39 049 6985111 | F: +39 049 6985360 www.safilogroup.com