ia er Simplify to Grow! – Reduce Bad Complexity European Manufacturing Strategies Summit 28 November 2017 Martin Berg Former Business Development Director Group Operations & Technology ROCKWOOL International A/S Click “View” and select MB
ia er Disclaimer The presentation draws from previously experience with managing complexity in The ROCKWOOL Group The points expressed in this presentation is solely my own opinions, as I am no longer employed with The ROCKWOOL Group, but recently changed position and joined Valcon Consulting as a partner. Click “View” and select
ia er Agenda 1 Introduction to ROCKWOOL Group What is complexity in ROCKWOOL and how does it 2 affect our company? 3 How do we manage complexity? 4 What benefits do we get? Click “View” and select 3
ia er Agenda 1 Introduction to ROCKWOOL Group What is complexity in ROCKWOOL and how does it 2 affect our company? 3 How do we manage complexity? 4 What benefits do we get? Click “View” and select 4
ia er Founded in 1937 Now the ROCKWOOL Group is the world’s leading supplier of innovative products and systems based on stone wool 2.2 billion EUR turnover 28 factories 10,500 employees 38 countries 4.6 billion tonnes of CO2 savings Click “View” and select 5 MB
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ia er Insulation improvements are the most profitable CO 2 saving according to a McKinsey/Vattenfall study €/tonnes CO2 equivalents 100 Biodiesel Costs 50 Industrial motor systems Solar Wind 0 -50 Fuel efficient vehicles Savings Lighting systems -100 Fuel efficient commercial vehicles Insulation improvements -150 Click “View” and select 7 Source: McKinsey Global Institute: “The carbon productivity Challenge”, June 2008 MB
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ia er Agenda 1 Introduction to ROCKWOOL Group What is complexity in ROCKWOOL and how does it 2 affect our company? 3 How do we manage complexity? 4 What benefits do we get? Click “View” and select 11
ia er Around the clock 24/7/365, our 28 factories produce ~4,6 tons of ROCKWOOL insulation every minute… Click “View” and select 12 MaBe
ia Complexity Management at ROCKWOOL - EMS Summit, Berlin, November 28, 2017 er Click “View” and select 13
200,000 full truck loads annually makes ROCKWOOL one of the top 10 manufacturers in Europe when it 14 14 comes to transporting cubic meter volume
ia 100.000 Beginning of 2015, we had more than SKUs er in ROCKWOOL and more were added every day Click “View” and select 15
ia 47.000 Now, we have around than SKUs in er and more are removed every day ROCKWOOL Click “View” and select 16
ia Complexity Management at ROCKWOOL - January 11, 2016, Technical University of Denmark er The average unprofitable C product in Market A, B and C sells only 6 tons per year, which is about... 30 minutes of Production: Does it make sense to produce these products? 1 Full truck of light building insulation: ½ Truck of heavy roof insulation: Click “View” and select 17 AM
ia Complexity Management at ROCKWOOL er We realized that profitable products covered over unprofitable products Unit costs – high volume vs. low volume products Normal ”Peanut butter ”Complexity adjusted approach” cost approach” Click “View” and select 18 MB
ia Complexity Management at ROCKWOOL er Slow moving products have shorter run lengths and higher perecentages of changeover waste Run length x 1/2 Slow High mover runner waste % x 3 Click “View” and select 19 ABN
ia er Using advanced analytics we found that run length and sequence are significant factors in affecting productivity Roof Insulation Roof Insulation More product variety R Shorter oo production runs f In su More variable lat output rates io n Click “View” and select 20
ia er Agenda 1 Introduction to ROCKWOOL Group What is complexity in ROCKWOOL and how does it 2 affect our company? 3 How do we manage complexity? 4 What benefits do we get? Click “View” and select 21
ia er The Complexity Management process is used to guide our operating companies through the stages of the assortment review Execute Target Assort. Analysis Review Signoff and Setting Design Followup Review market Review Set strategic Propose new Obtain approval Perform agreed requirements and information for all direction for the assortment (i.e. from the actions. competitor SKUs. assortment. which products to management offerings. remove and team on the Quantify 2nd Check for: Set target for CM priceup). assortment, order effects. • New materials Perform ABC %. delivery • Growth analysis on Net Link delivery conditions and Track progress Sales / Group materials Set target for conditions to the action list. with Complexity • Closing CM per product. reducing SKUs. material Management classifications. KPIs. Perform XYZ anlaysis on sales Create action list frequency per (detailed version product. (details in Appendix) in Appendix) Click “View” and select Note: Performed once per year per product segment (PH1) 22
ia er The process uses a cross-functional approach involving Sales, Product Management, Production, Supply Chain, Master Data Team and Senior Management Target Analysis Review Assortment Design Sign Off Execution KPI Followup setting Set targets for Managing portfolio size, Approve Director profitability and new production assort- efficiency(e.g. ment CR%, CM, # Yes SKUs) No Marketing/ Prod. Prepare Managem. Perform Perform Con- Prepare Quantify Publish Approve knowledge Report on competitor detailed solidate Define suggestions impact of Prepare and additional of current EINSTEIN analysis ABC and information assort- for standard new proposal distribute materials portfolio KPIs to and identify XYZ class- for ment dimensions, assortment for new new to product logic and MT market ification for assortment strategy packaging, (effect of assortment product assortment price (Quarterly) trends SKUs review etc. price up) assortment ) positioning Contribute Communicate to Sales price changes, competitor Update new assortment analysis Review price lists and delivery and identify SKUs for conditions market removal, Define new trends price up, assortment con- , determine solidation the price Update Supply (e.g. Chain increases planning packaging, Capture 2nd- and create rules and thicknesse order effects action list delivery s, etc.) and conditions set delivery conditions Pro-duction Capture Remove SKUs 2nd-order from warehouse effects Master Create new Data SKUs, close old SKUs Supply Chain Track Group Assist with 2nd complexity Perform initial ABC order effects reduction with analysis and suggest calculation (as EINSTEIN initial targets Click “View” and select needed) KPIs (Quarterly Source: Simon-Kucher based on BEAT PCPM wave 1 Week 1/2 Week 3-4 Week 5-8 23 Note: The diagram shows those responsible for tasks. Those consulted and informed on various tasks are not shown (e.g. Pricing Champion and Finance from the OPCO will support the pricing tasks as needed).
ia er Two product classification schemes are used for complexity management and assortment review in the RW Group: ABC and XYZ Order Group CM Net Sales Pattern ABC classification Order frequency analysis A Products Stable (X): High sales Fast movers B Products Erratic (Y): Medium sales Medium movers C Products Lumpy (Z): Low sales and low Slow movers profitability (often MTO) Click “View” and select Categorization of profitability and Categorization of order patterns sales by material per country by material per country 24
ia er The Group-wide ABC Classification method is used to segment products for the assortment review Considers operational perspective (Inside Out) Threshold set to cover hidden complexity costs (e.g. Inventory and changeover cost) Considers customer Click “View” and select perspective (Outside In) 25
ia er Example of ABC classification of SKUs for a market in the ROCKWOOL Group Click “View” and select 26
ia er Different strategies are applied based on the ABC classification to improve the profitability of the assortment CM % Target Click “View” and select
ia er Each SKU is reviewed by a cross-functional team for inclusion in the assortment and an action plan is created Conceptual Order Net Group SKU ABC CR % Action plan pattern Sales CM ROCKWOOL10… A Stable 408.226 194.314 48% No price change ROCKWOOL20… B Lumpy 50.107 2.692 5% Price up 10% Keep, FLOORROCK30... C Lumpy 25.906 5% strategical SKU, increase 1.169 price by 20% Discontinue, FLOORROCK40 C Lumpy 623 53 9% Remove from published … price list and phase out Click “View” and select 2 28 8
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