Powertrain
Volvo Powertrain
VMI Implementation at Volvo Powertrain Fredrik Olofsson Volvo Powertrain Project Manager for Inbound Supply and Logistic...
VMI Implementation at Volvo Powertrain Fredrik Olofsson Volvo Powertrain Project Manager for Inbound Supply and Logistics Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
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Powertrain
The Volvo Group Organisation AB Volvo
Business Areas
Mack Trucks
Renault Trucks
Volvo Trucks
Volvo Buses
Trucks Business 3P Units Powertrain Parts Logistics Information Technology Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
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Volvo CE
Volvo Penta
Volvo Aero
Financial Services
Powertrain
Strong positions in all areas
DCX
Mercedes + Setra
Caterpillar
FAW
Volvo Bus
Komatsu
Volvo Group
IRIS Bus
Dongfeng Motors
Neoman
Paccar
Brunswick
Volvo Powertrain
Volvo Penta
DC Powersystems
Yanmar
Caterpillar
Caterpillar Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
Volvo CE
Scania
> 16 ton
Cummins
Case & New Holland
> 12 ton
Deere
Volvo Aero
y World leading in development and production of selected engine components.
y Engine components from Volvo
Cummins 9-18 l
Scania
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Aero is included in 80% of all larger civil aircrafts.
Vénissieux Vénissieux // St St Priest Priest // Limoge Limoge -- Renault V.I. PTD HQ Renault V.I. PTD HQ -- Engines Engines -- Foundry Foundry -- R&D R&D -- Purchasing Purchasing
Employees Employees Sweden Sweden France France
4.450 4.450 2.100 2.100
USA USA Brazil Brazil
1.200 1.200 150 150
Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
Köping Köping -- Transmissions Transmissions
Curitiba Curitiba -- Engines Engines
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Powertrain
VMI – A definition “Vendor Managed Inventory (VMI) is a concept and process for consumption-based Supply Chain Management. It requires the supplier to maintain inventories within a predefined and mutually agreed thresholds based on a min/max-range. The supplier can freely deliver within this indicated range” (Odette definition) General VMI scope: VMI can be realized with customer-, supplier- or 3PL-owned stock Terms and conditions for transport may vary In VPT we limit our scope to a VMI process where the supplier takes full responsibility for the supply chain including ownership of the stock and responsibility for the transport and warehousing of their goods.
Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
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Powertrain
VMI Implementation - Overview To be able to create value to Volvo Powertrain and its suppliers through a robust VMI set-up it is essential to review the following steps:
VMI process Warehousing solutions Transport solutions INCOTERMS External IS/IT support Material Control
First Tier Suppliers
Third/Second Tier Suppliers
Component Plants
VMI Interface
Components Information
Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
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Components: Engines Axles Gearboxes Cabs
Final Assembly Plants
Europe Overseas
Powertrain
Background to VMI implementation Customers demand for flexibility increases – Firm time-fence (ex. RT 4 hours) – Variations
Capital tied-up is driven by the uncertainties in supply Transport time from suppliers 1-5 days Cost for management of emergencies is high – – – –
Administration Rush transports Production disturbances Effect on work morale
Variations in supply demand is high, plan vs. real consumption Supply chain delivery performance is low
Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
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Powertrain
Why VMI? - Mutual Interest
Fluctuations of Demand
To deal with the high demand volatility, the supply chain needs to be highly integrated to reduce the bullwhip effect, i.e., the increased fluctuations along the supply chain
“Bullwhip Effect”
••Increased Increasedinventory inventory ••Increased Increasedhandling handling cost cost ••Sub-optimised Sub-optimised production productionand and transportation transportation ••Material Materialshortage shortage ••Poor information Poor information sharing sharing
Reduced fluctuations caused by VMI
Customer
Tier1
Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
Tier2
Tier3
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Powertrain
VMI – VPT Supply Information o lv o P o w eas r t r a in , Vo lv o D iv is io n , Tof r a ndemand s m is s io n P r ovariance d u c t io n VMI Vserves an absorber
A m p litu d e s M ont
A m p li t u d e s B e a m s 300
m a n u f a c tk beam s s c h e d u le
250
200
150
100
50
VPT Manufacturing Batches VPT V o lv o P oAssembly w e r t r a i n Consumption C o r p o r a t io n 2 7 / 1 1 / 2 0 0 5 /1 Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
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2000274
2000264
2000254
2000244
2000234
2000224
2000214
2000204
2000194
2000184
2000174
2000164
2000144
2000134
2000124
2000114
2000104
2000154
Material Call-Off
2000094
2000084
2000074
2000064
2000055
2000045
2000036
2000026
2000016
1999525
0
Powertrain
VMI - Supply Process, Information and Components VMI replaces the vendor delivery stock and the present stock at VPT. The VMI inventory (vendor owned) could be localized within or outside VPT. One component might also have several customers within VPT and can be stored at one or several locations. Components
Vendor Production
Raw Raw material material
Internal Internal production production process process
Buffer Buffer
Internal Internal production production process process
Internal Internal production production process process
Information Inventory levels and material requirements
*Min and max including safety stock Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
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Powertrain
VMI Process, Warehousing and Transports - Options Second Option Utilization of a VPT warehouse for
First Option Supply to each VPT warehouses No drop and take off Optimum cost for most of the parts
global supply For some small flows that require grouping or for highly unbalanced flows -> Optimization of, at least, the major flow for one site
This implies that the warehouse should be located in the plants, but some transport optimization can occur before.
Third Option Utilization of an external HUB (VLC or others) To be justified by a global optimization at a Volvo AB scale
Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
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Lean Logistics – Inbound Supply and Logistics Powertrain
Study recommendations - Summary Develop warehousing facilities and systems that supports VMI and EMS at each site Create a global VMI process Short term: Keep the current FCA supplier set-up with a addendum to current purchasing contracts. Long term: Renegotiate delivery term for VMI suppliers on case-by-case from ‘FCA’ to DDU/DDP ‘Warehouse including warehousing and insurance’ INCOTERMS 2000 Use existing system at Transmission manufacturing Develop global VMI tool for VPT
Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
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Powertrain
VMI – Baseline Operating Model Vendor
PipeChain Net Net Delivery Delivery Suggestions Suggestions (EDI: DELINS/DELFOR) (EDI: DELINS/DELFOR)
Means of communication EDI messages – DELINS/DEFOR – AVIEXP/DESADV – STOACT/INVRPT
PipeChain features – Web Access – PipeChain B2B set-up
Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
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Powertrain
Other systems changes ¾ Goods Receiving Identification of the VMI package Mark the package (system wise) as a VMI package Separate routing to the inventory system, i.e. separate vendor and VPT owned stock “Virtual” goods receipt of vendor owned stock, i.e. goods is placed in the VMI but no economic transactions are generated = stock is still vendor owned Cancellation of deliveries Warnings for under/over deliveries
¾ Goods issue Consumption takes place when goods is withdrawn from the VMI, i.e. goods issue Goods receipt takes place at the same time as consumption At consumption the VMI balance is reduced and the VPT balance is increased At consumption a fictitious despatch note no. is created Records regarding (economic) transactions are generated at consumption Possibility to consume complete package or specific quantity Consumption of inventory is updated per part/vendor
Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
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Powertrain
Other systems changes ¾ Warehouse VMI part localisation FIFO Traceability Block possibility, i.e. a package must be able to block for rejection or quality inspection purposes (for example) Stock transfer inside the VMI inventory without causing any consumption transactions
¾ Inventory Balance The inventory balance must be separated to show vendor owned and VPT owned inventory
¾ Invoicing Invoicing takes place at consumption of inventory, i.e. at goods receipt (not “virtual” goods receipt) The vendor invoices VPT based on the communicated despatch note numbers identifying each goods issue Invoicing frequency is vendor specific and stated in the agreement between the parties The invoice and goods issue relationship is verified
Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
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Lean Logistics – Inbound Supply and Logistics Powertrain
Other areas to be developed Supplier selection Communication kit to suppliers Commercial and logistic agreements Develop negotiation and implementation strategy Perform training IS/IT development Document VAT, customs and other government regulations Future: self-billing?
Document: Volvo Powertrain - Best Practice Factory Date: 10/25/2006
