FLOW

Strategic development of the

VELUX value chain from
supplier to finished goods
stock

Supply Chain Leaders Forum 2012
Anders A. Ellegrd / VELUX
FLOW
Content
VELUX
Optimize Supply Network - FLOW project
Why FLOW? Strategic decision
Project targets and organisation
Roll-out
Approach and results
Learning's and new mindset
FLOW
Content
VELUX
Optimize Supply Network - FLOW project
Why FLOW? Strategic decision
Project targets and organisation
Roll-out
Approach and results
Learning's and new mindset
FLOW
The VELUX Group

Established in 1941
More than 10.000 employees globally
2.600 in Denmark
VKR Holding
Revenue 2011: 2,4 billion Euro
Net profit: 140 million Euro
Sales companies in almost 40 countries
Production in 11 countries
Head office in Hrsholm

FLOW
The VELUX Group

Anders A. Ellegrd

Education
Cand. Scient. Oecon from rhus
MBA courses from Henley
Back ground
Consultant in MRP-systems
Worked for VELUX for 14 years
Working areas
Responsible for Lean in production
Responsible for Value Stream Optimisation
Programme management managing larger
cross functional/cross site improvement
projects - Quality and Flow



FLOW
Content
VELUX
Optimize Supply Network - FLOW project
Why FLOW? Strategic decision
Project targets and organisation
Roll-out
Approach and results
Learning's and new mindset
FLOW
Content
VELUX
Optimize Supply Network - FLOW project
Why FLOW? Strategic decision
Project targets and organisation
Roll-out
Approach and results
Learning's and new mindset
FLOW
2010 basis for the FLOW initiative
Volatility in demand
The FLOW project was a strategic decision
Reduce lead time / through put time
Be agile, responsive and productive
FLOW
The supply network is complex with many flows of
materials
Windows Accessories
Supply network
FLOW
Conclusions from Supply Chain value stream mapping
AS-IS assessment
24 weeks lead time (much money in inventories)
Increasing upstream fluctuations (cv 0,3 -> 1,5)
Decoupled planning loops and many inventory points
? ?
Functional culture
Local KPIs / Sub optimization
Little compliance to plan, Replanning
Limited escalation/problem solving
Slacks (buffers, capacity) + Fire-fighting
No holistic planning
Local planning, Little transparency, No responsible
Conclusions from As-Is findings
FLOW
Content
VELUX
Optimize Supply Network - FLOW project
Why FLOW? Strategic decision
Project targets and organisation
Roll-out
Approach and results
New Learning's and new mindset
FLOW
VELUX Strategy
pursue operational excellence
5% increase in
productivity per
year
Remove waste
Increase stability, predictability and
productivity
Improved delivery performance:
- Finished goods: > 98%
- Components: from 72-97% to 98%
- Suppliers: from 26-85% to 95%
Reduce lead time and stocks:
- Total stock reductions (not FG): 50%
- Reduction in lead time: 60%
Avoid replannings and fluctuations
- no local / factory replannings
- fluctuations lower than on sales
VMM GloBIZ
Optimise
Quality
Systems
Optimise Supply Network
Best
Cost
Producer
Project targets
We decided to initiate a FLOW project to support agility,
responsiveness and productivity
FLOW
The first step was to create and discuss an Ideal Future State
this set our vision and challenged our mindset
Ideal Future State
FLOW Comments from discussions
Our mindsets where challenged
The best people we have
are our fire fighters! What
should we do without
them?
Our suppliers will
never deliver 95% - we
are only minor
customers
Big batches =
low costs
FLOW
Content
VELUX
Optimize Supply Network - FLOW project
Why FLOW? Strategic decision
Project targets and organisation
Roll-out
Approach and results
Learning's and new mindset
FLOW
Project organisation
Mobilization
and planning
Sales & Operation Planning / Assembly loop
Factory loop
Supplier loop
Program and change management

High-level plan implementing the Future
State
Wave 1
Proof-of-concept
Wave 2
Parallel roll-out (up to 40% of
Velux)
Wave 3
Parallel roll-out (up to 90-
100% of Velux)
Sustain
Continue roll-out (100%)
and sustain
Oct 10 Jan 11 Feb 11 May 11

June 11 Oct 11

Oct 11 June 12

FLOW
Change management
Strong coalition for change
Steering Group with CEO
Meetings
every 6-8
weeks
Project accountable group CEO +
Every week
(telephone)
Global
Focus Participants Frequency
Global
Strong project team Every week End-to-end
supply chain
Factory project team Every week Local
FLOW
Montag
e
Kompone
nt
produktio
n
FLOW
B
u
f
f
e
r

PULL

B
u
f
f
e
r

High-vol >80%
Low-vol <20%
Suppliers
Predictable flows
from external
suppliers
Sales &
Operation
Planning
Levelled, holistic
plans with no
replannings
Components
Predictable flows from
component suppliers
(internal)
Roll out in end-to-end Value streams
Holistic focus
FLOW
Content
VELUX
Optimize Supply Network - FLOW project
Why FLOW? Strategic decision
Project targets and organisation
Roll-out
Approach and results
Learning's and new mindset
FLOW
Content
VELUX
Optimize Supply Network - FLOW project
Why FLOW? Strategic decision
Project targets and organisation
Roll-out
Approach and results
Learning's and new mindset
FLOW
Levelled plan Sales orders
Finished goods warehouse as
buffer
Levelled orders and frozen periods
Stability in factories no
replannings, MRP-ordering
Customer
Supplier
Ideal Future State for information flow for planning
and ordering - predictable, levelled orders
Good forecasts fixed
process
Holistic planning and ordering
FLOW
Results Delivery performance
Improved KPIs
Delivery Performance factory to sales company
Delivery Performance stock orders
FLOW
Sales forecast
Results forecasts and volatility
Improved KPIs
CV factor
Target: 0,4
Target: 0,25
Sales: 1,0
FLOW
Stability
Improved KPIs
Results component deliveries and replannings
Delivery Performance - internal
FLOW
Improved KPIs
Factory results from one of the factories
Lead time reduction
Stock reduction
Dashboard meetings in each
factory - Business control
- Supply chain KPIs
- Follow up
- Synchronisation
FLOW
Delivery
Performance
Stocks
Results delivery performance from Suppliers
Improved KPIs
FLOW
Content
VELUX
Optimize Supply Network - FLOW project
Why FLOW? Strategic decision
Project targets and organisation
Roll-out
Approach and results
Learning's and new mindset
FLOW
Content
VELUX
Optimize Supply Network - FLOW project
Why FLOW? Strategic decision
Project targets and organisation
Roll-out
Approach and results
Learning's and new mindset
FLOW Comments from discussions
Our new mindsets
Fire fighting is
reactive, we want
to be proactive
and react asap
Fact based reactions
it is what we see
not what you say!
Do not hide problems/red
KPIs. Make them visible and
use them as potential
improvements
FLOW
The FLOW guiding principles
Reduce
lead time
Create
TAKT
Frequent
deliveries
Link
processes
Avoid decoupling
points
Avoid decoupling points in the
FLOW like stocks. Create FIFO
flow wherever possible

Reduce lead time by focusing on
stocks, processes, change over time
and batch sizes

Create takt in the flow
by focusing on the
entire value chain
from customer to
supplier

Link processes internal as
well as between factories
and suppliers. Use SAP to
link processes together
Transport is not a constraint for implementing
flow. With more frequent deliveries on high
volume products, transport costs could increase
on some flows. Overall however costs is
believed to decrease
Agree principles before actions
FLOW
FLOW is a new mindset


Stay in control: Make deviations visible + React
proactively + Respond fast

Continuously improve: It never stops

Work cross-functional: Site level (daily performance
review, weekly CI meeting), Supply Chain level (similar)

Top management commitment and support: Dont accept
wrong mindset, Follow-up and ask for FLOW

Think FLOW designing new products, production
processes, qualifying suppliers, etc. etc.
Change management