Supply Chain Process Management in Vestas

Supply Chain Process
Management in Vestas
Presentation done by
Roxana, Christel, Beathe
John and Thomas
The study
SCPM Problems
7 objectives
Recommendation / conclusion
Study question
The study of Supply Chain Process
Management application in Vestas
Vestas changed their strategy in 2006 to
improve its market leader position in the
global wind power industry
Facing problems, especially in SC process
Supply Chain Process Man
Towers and
Steel components
- Private owners
- Wind turbine asso
- Local power companies
Company Information
Vestas is the world’s leading producer
of high-tech wind power systems
Head office in Randers Denmark.
13000 employees.
Production facilities in: Denmark,
Germany, India, Italy, Scotland,
England, Spain, Sweden, Norway,
Australia and China.
“Vestas’ strategy is to supply customized
wind power solutions… that can
generate electricity of the optimal
quality at the most competitive price”
Vision: Oil, Wind and Gas
Mission: At Vestas failure is not an
Share price 1998 - 2007
Supply chain
Complex product (over 8000 parts)
Deteriorating customer satisfaction
The stability of supplies of key
components is crucial to Vestas’ ability
to fulfill orders
•Goodwill from capital markets
 Lack of production
•Geographically spread (less risk)
facilities in the US
•R&D department with great
 Past production errors
has resulted in
•Employee development programs
•Market-leader position in all
 Backorders
product segments
 Green power is supported
politically with subsidies, and
preferred choice among
 Deregulation of power
 The production price per
output (kWh)
 Economy of scale makes
 Large projects with large
customers e.g. offshore wind
 local community attitude
towards turbines
 Larger customers lead to
more competition and
bargaining power
 Growth without the
necessary capital for
 Dependent on high-tech
components from suppliers
SCPM objectives
Customer Friendly
Supplier Friendly
Environmentally Friendly
Mistake proof
Effective SCPM
Until 2005: effectiveness internally:
growth, R&D, market share, acquisitions
Efficiency demanded by suppliers
Mergerforced suppliers to lower prices
Pricetag sourcing
Lack of common SCP improvement
Defects occurred after installation  loss
Source: Bang, 2005
Lack of common SC
Ideal situation
Difficult to balance effectiveness and efficiency
but needed to survive in compettition
Efficiency and effectiveness in SCPM after 2005
 efficiency in Vestas
 effectiveness in suppliers
 Goals:
short and long term profitability for all trading
asset utilllization in SC
Vestas’ Six Sigma consultants help suppliers for
long term commitment alliances
Increase prices to take advantage of capacity
shortage and high demand
 Lesson learned:
”The fundamental challenge of integrated mangement
is to redirect traditional emphasis on functionality
in an effort to focus on process achievement”
(Bowersox et al. 2006)
Adapt to changes in the environment
2005 New business structure
Geographically distributed business units
Closer to the customers (logistics)
Local knowledge (culture)
Improved relations with local suppliers
ERP system (SAP) implemented in 2006-2009
(parallel integration)
Full integration of the different BU’s
Customer Friendly
Study shows a decrease in customer
satisfaction due to poor…
Turbine performance
Handling of customer wishes and enquires
Handling and performance of service
Information/knowledge sharing with customers
Delivery of spare parts on time
2006: “Dialogue for development”
Improving customer satisfaction
Investing in testing facilities
Policies for quick responses to customers
Acting proactively, contacting customers
regularly to get feedback (Use of Key
Integrate customers in the ERP system, to
improve knowledge sharing
Extensive reporting
Supplier Friendly
Forecasting and Demand
High Demand
Pressure on suppliers
High emphasis on
Dialogue suppliers
Estimate safety stock and inventory pre-build
Good forcast can be made from statistical data
Supply Demand Vestas
Actual demand –
Rates are the answer
Suppliers’ and own inventory –
Magnifies with the Supplier inventory over or under
Replenishment rules Magnifies with the customers replenishment rules
Supplier key suggestions
 Integrated product development is the key
word with strategic suppliers
 Due to ERP they can intergrate supplier in the
 Never be dependent on one supplier
 Why = To reduce reliability and vulnerability
 Recognizes the need for strategic suppliers,
and give a fair margin on their products
 Why = satisfactory is more important in the long run
Environmentally friendly processes
“With quality and care we use the wind to create competitive
environmentally friendly energy”
 Big issue: Environmental awareness is increasing
throughout the world
 At Vestas consideration for environmental aspects
the foundation for the products
and the basis for the business concept
 high priority to the environment– both globally and
Increase in external environment issues and safety
How are processes being made environmentally
 Certifiable management system
 ISO 14001 and OHSAS 18001 (77%)
 Communicating knowledge at all levels
 integrated enviromental policy
 Continuous environmental improvement
 Suplliers auditing
 abide by Vestas’ chemical and material blacklist
 Reporting system
 Group level environmental reporting
Impact on the external environment
Most significant environmental impact: CO2savings from
Vestas’ turbines. Environmental pay back time: 7 months
HOW: true LCA (Life Cycle Assesment) reports and Environmental Product Declarations
Suggestion: Sponsor ”green” events to increase brand awareness and attention like
theFIRST LEGO League (FLL) tournaments
Occupational health & safety issues
 Top priority at Vestas: Safety
 Integration: ’Will to win’ culture = high safety culture
 Changing mission: ’Failure is not an option’= zero
Major challange: reducing injuries by improvement,
information and training implementation
Results: decrease with 22 % from last year but still major
 Suggestions:- continuous improvement in in-house
processes, training and education
 integrate different cultures together
Mistake proof
Failure in First Off Shore project
Weakness was component quality
Repair at sea not possible transport on
shore for repair extremely costly
failure is not an option also apllies to suppliers
education of everyone in Vestas also suppliers:
Vestas lends Six sigma consultants to its suppliers
Stop selecting by pricetag
New Mission:
Failure is not
an option
Focus on importance of supplier
qualification and selection by:
Implementing an efficient supplier selection
Contract administration
 Emphasis should be put on some issues in particular
 Improving communication throughout the supply-chain
 Quality problems escalate throughout the SC
 An efficient supplier management is of central
importance for successfull supply chain
Questions ….
Why does supplier management (or
suppliers as trading partners) – play
such an important role in SCPM?
What possible risks and losses can an
enterprise face due to lack of
integration, collaboration to trading
partners in the SCM?