CH Prahallad , Country head QO & Regional manager SAS & IMA ODG , 19th November, 2010

OPEX Project
LV Breakers & Switches, Bangalore
ABB Group December 13, 2010 | Slide 1

Content

Project

background & situation

overview Background reality tree ( CRT)

Business Market

Challenges Current

Project

Scope, Objective & timeline approach

Change Management Production process. Supply chain integration Quality Improvement Order delivery process SAP integration

Solution Work

pack overview

WP1: WP2: WP3: WP4: WP5: WP6:

Project Summary & sustenance plan Lessons learned leveraging tools

Project

Knowledge
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LV Breakers & Switches Business overview

ABB has currently Breakers and switches factory worldwide:

ABB Group December 13, 2010 | Slide 3

Business plan and challenges

Business challenges to meet business plan
.

Growth of Revenue is expected to be 30% Y-O-Y till 2013 ACBs market requirement growing 10~15% , MCCBs 40~50% and Switches -5% Y-O-Y, but needed support from operations. Many Issues in Production like line stoppage due to

Missing parts ( Major issue, 50% of time) Incoming Quality problem In process Quality problem

OTD is 47% which need improvement. (Target 100%) Long Order delivery time for breakers. Inventory is 15.8% - to be reduced. Poor Supplier OTD ( 42%) and quality needs improvement. Data punching in SAP needs improvement, Key metrics data from SAP to be verified. Stock mismatch resulting in improper material management

There was a compelling reason to start OPEX activity

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Current Reality Tree ( CRT)

Current Reality Tree was build with all problems identified which affects EBIT and Customer satisfaction Major cause are classified in following work packs Production process

Microsoft Visio Drawing

No proper Drawing & BOM from Principles BOM changes at last minute Less skill of concern people on production process Last minute intimation of problems in line on tools, etc., Cumbersome procedure to get replacement of defective items. production stoppage due to shortage of Material . No proper storage of material Identification and traceability an issue. Supplier OTD No proper drawing updates to supplier. Supplier process and quality More than 30% rework after mech. testing (MCCB). Line stoppage due to rejection of component No proper data capturing in SAP on OTD and FPY

Supply Chain Integration

Quality Improvement

SAP Integration

ABB Group December 13, 2010 | Slide 5

Project Vision, objective & timeline

Vision. To become the most reliable supplier with the shortest delivery time in the market by providing a robust and flexible value chain to our customers.

Scope
To improve Order delivery process for ACB, MCCB and SFU lines from receipt of customer order at central warehouse till delivery to central warehouse by factory

Objective & Goal

To Improve order delivery process by improving following parameters

On time delivery from 46% to 100%. Order delivery Lead time reduction from 13 days to 5 days (Customer order receipt to Invoice at warehouse) for in-house manufactured products Manufacturing Lead time from 12days to 3 days. Inventory reduction from 15.8% to 8% Key Supplier OTD from 42% to >90%.
Jan08 Aug08 Oct08 Jan09 Aug09
Implementation

Oct09

Mar10

0 Analysis

Planning

Redesign

Execution
Piloting

Sustain

ABB Group December 13, 2010 | Slide 6

Solution approach
Supplier Customer

Stores Receiving Quality Water spider Improveme nt

Order delivery process

SAP SAP Integrati on

Supply chain integrationChange management

Central Warehouse

Dock Quality Improveme nt Finished Goods ABB SACE

Production process
Under scope
ABB Group December 13, 2010 | Slide 7

MCCB/ACB/ SFU Cell

Scraps
Out of scope

Project Organization

ABB Group December 13, 2010 | Slide 8

WP 1. Change management

Purpose

& Scope: gain organisational level commitment to change identify risks related to change initiative Evaluate project execution Planned : Training and benchmarking Review, document and implement communication plan Define, agree and monitor target KPI Monitoring weekly tasks based on Master Project plan and Weekly Action list. Periodic Risk evaluation. Define roles and responsibilities.

Tasks

Benefits Employees

Motivation to change and participation (reduce resistance to change) Secure that change is sustainable Reduce implementation time

ABB Group December 13, 2010 | Slide 9

WP 1. Change management
Training program on Lean to all BU employees Steps for adaptation to change

Project Weekly review meeting report

ABB Group December 13, 2010 | Slide 10

WP 2: Production process
Purpose & Scope: Optimize the flow of materials and information and remove Non-Value-Adding (NVA) activities in Production and despatch of MCCB, ACB and SFU. Tasks Planned and completed : Time study of each operation and analysis of VA and NVA. Bring employees on board for improvements activities Focus on the main flow, identify and reduce the waste through teams. Improve workstation layout and tooling to create safe and ergonomic working conditions Standardize the new process as per future state ( VSM) List of poka yokes for MCCB assembly operation Arriving on Production resource requirement based on TAKT and preparation of layout. Collect production data, and investigate the proportions of total time devoted to the various activities in production floor (missing material, missing information, breakdowns, etc. Install ergonomically good U line for MCCB ( T1 E and T1 U) with 2 bins at respective workstation. Implement identified Poka yokes and update work instruction Assign owners for continuous improvement Develop and perform internal training plan based on the gap analysis. (additional suggested training topics: pull, teaming, 5s, flow and rules) Benefits:
The

TPT is reduced from 12 days to ~4 Days progressively for both the product lines. spider movement has reduced the replenishment time/order picking times in the assembly

Water

lines.
The
ABB Group December 13, 2010 | Slide 11

usage of Barcode replenishment had reduced the work content such as pick list generation, Order picking & and replenishment to Assembly line.

WP 2: Production process Line Design

Features;

U shaped balanced line Water spider movement for materials and FG Ergonomically good work stations Single piece flow

Takt time calculation sheet for arriving on

Number of workstation required w.r.to Forecast for N+3 years. Number of lines required for N+3 years. Number of operators required for N+3 years Hourly Output per line for respective years

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WP 2: Production process MCCB Line Design

Original MCCB Line:

1.

Issue of Material from stores to production based on pick list . Material issued in one pallet with all for one project. Batch production in each assembly process.

2.

3.

Current MCCB Line:

1.

U- Line with balanced operations. 2-Bin with Barcoded kanban system for replenishment at point of usage. Fully good ergonomically designed workstation to improve efficiency and ease for operators. Very minimal manual communication from production to stores.

2.

3.

4.

ABB Group December 13, 2010 | Slide 13

WP 2: Production process ACB Line Design

Pole Mechanism

assembly Supermarket Trolley

FixedPart Assem (20,000/Year) bly

assembly Supermarket Trolley

M oving Part Assem (15,000/year) bly
Pole A bly ssem

Basic

Breaker assembly Supermarket Trolley

High Voltage Test

Primary Injection Test

Basic Breaker Finishing

Fixed Part Packing Fixed Part A bly ssem

Sam Test ple

Basic Breaker Inspection

Customisation

Basic Breaker Assembly

Mechanical Testing

Term A bly inal ssem

Packing

M echanism A bly ssem

Spring A bly ssem

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WP 3: Supply Chain Integration

Purpose & Scope:

achieve desired RM inventory level without material shortage through proper procurement policy & method and by deployment of Sales and operations planning.

Tasks Planned and Completed

Material analysis using ABC clasification and Kraljic Matrix. Establish right procurement method for critical materials.(e.g., pull, replanishment, kanban, VMI) Calculation of Stores volume and arriving on stores layout for N + 3 yrs with progressive addition of facilities.

Plan for Implementation of defined procurement strategy Update of SAP with correct data for future process ( Correction of existing master data, BOM ect ).

S&OP process ready in quality server.

Inventory management

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Implement future procurement method through collaboration with supplier. Set up process for procurement to reduce internal lead time and effort Deployment of Sales and Operations planning (S & OP). Simplify logistics and material flow ( Milk run, Water spider movement) Arrive on Standard packing qty ( equivalent to Bin Size in Workstation) To zero on dead stock.

WP 3: Supply Chain Integration

Receiving

The incoming materials are loaded on racks directly with the bin information from SAP system Ensure data accuracy and on-time update On Time Updating : - Information update should match the physical movement Strictly Follow Procedure and update material location on system FIFO picking racks and storage (Physical Flow) Use both fixed bin and dynamic bin for storage . To define Fix Bin Location for all references to eliminate searching in picking area Store the material in one area to manage the logical flow and for easy visualization

Storage

Issuing

Introduce Water Spider (Picking from Warehouse Bench Location) System for frequent and medium movers of raw materials

Target : Replenishment triggered by Kanban Target : Kanban Box Quantity should be tally with production consumption (bar code)

Main

results and comments: Overall inventory reduced from 15.6% to 9% and consistency found in the last 6 months. Non moving inventory (Dead Stock) reduced from 18 MINR to 9.45 MINR. Reduction in stores transaction time, waiting time, searching time

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WP 3: Supply Chain Integration Stock analysis

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WP 3: Supply Chain Integration Target stock calculation

ABB Group December 13, 2010 | Slide 18

WP 3: Supply Chain Integration - Procurement strategy and Extrapolation of Stocks

Procurement strategy and Stock extrapolation - MCCB
Extrapolated Stock Level w.r.to Revenue 2 Bin / Kanban 0% 13% 0% 25% 100% Extrapolated Stock Level w.r.to Revenue 1.08% 3.8% 1.1% 3.8% 61%

Change

in procurement strategy has given a RM inventory reduction from 8% to 4.4 %

ROP

MRP

MRP Anticipation Current 25% 100%

ROP 13% 0%

2 Bin / Kanban 61% 0%

Procurement strategy and Stock extrapolation - ACB

Extrapolated Stock Level w.r.to Revenue 2 Bin / Kanban ROP MRP 3.03% 7.2% 16% 0% 79% 0% 5% 2 Bin / Kanban 16% 0% 100% ROP 79% 0% Extrapolated Stock Level 3.03% 7.2%

MRP Anticipated Current 5% 100%

ABB Group December 13, 2010 | Slide 19

WP 4: Quality Improvement

Purpose & Scope: To achieve desired Quality level in incoming component and finished product by ensuring Quality at Source. Tasks :

identify top 10 problems form pareto analysis and find root cause for Components. identify critical suppliers and carry out frequent quality audits. identify supplier process for defect prevention wherever possible ( Poka Yoke). identify Poke yoke for potential causes for in-house assembly process.

Pilot Planned for MCCB product line.

improve in-house assembly process by introducing poka yokes at critical process. implement action point derived from supplier process audit and root cause analysis. convert 50% of component to green channel. Developed SQA procedure for accepting new supplier from SCM team.

Use of ERP to track FPYs. Main results and comments: Out of 44 MCCB component 14 has been converted to green channel. Supplier FPY has increased from 94% to 100% Final testing FPY is 100%.

ABB Group December 13, 2010 | Slide 20

WP 4: Quality Improvement FPY Improvement

Q 1: Measure - understand current state

INCO MING FIRST PASS YEILD "MCCB T1E" O ct - 2008

Q 2: Analyze - pinpoint and verify root causes

Tp0otibtr frMBat. o1cn u so C prs r o C
300 00 10 0 8 0 6 0 4 0 2 0 0
Percent
Part Name:Cover T1E 3 pole Problem Description Why1
Short fill & part damages (broken) during receipt. Operators not aware @ supplier end of the quality requirement

Why2
1. controlled samples not available. 2. Work instruction not available @ work place

Why3
1. Control samples not provided by the customer. 2. Control plan is not made available.

Why4
1. No system was in place before start of the business with the supplier. 2. Supplier is not aware of preparing control plan.

Why5

Conclusion

4Q - MCCB
100.00% 95.00% 90.00% 85.00% 80.00% 75.00% 70.00% 65.00% 60.00% 55.00% 50.00%
Rej.Quantity

99.20%

200 50 200 00 100 50 100 00 50 00

Supplier Name :M/s Raman Thermoset Part No.2615001

Supplier not aware about the quality requir ements Control plan & of the components control samples is not available at the supplier end

9 8 .3 4 %

100%

100%

9 4 .0 0 %

9 2 .0 0 %

9 2 .0 0 %

97%

8 6 .0 9 %

89%

0 Dcipo e r ti n s
w U r r le te U U r e 1 e e o a 1 1 e cr T ld ld P l eT T th s er hu hu 3 p s r O b ld So So u br a oe p e C v ru o m m r C G lH s s go am i i h e n n ft c d a n a h h r a ch c Sa Ac H e e M M H H R L Cut 61 40 31 1838 0014 75 14 on 14 50 4638 0930 8512 36 Pret 2.7 1.9 1.1 1.3 1.9 1.6 6 6 4 ecn 1 5 2 1 0 0 .5 .1 .8 Cm 2.7 3.6 4.7 6.0 7.0 8.6 8.1 9.210 u % 1 7 9 1 2 2 9 5 0.0

Jan' 08 Feb'08 Mar'08 Apr'08 May'08 Jun'08 July"08 Aug'08 Sept'08

Series2

Trend

Q 4: Implement - Sustain - Institutionalize

Q 3: Improve - pilot solutions

Part Na me W hat (Actions Planned) Who ( Responsibility) W hen (Ta rget date) As the supplier could not meet the expectations, sourcing from the same is stopped. New supplier development is on progress M/s Paragon Fastners Note: Imported GRUB SCREW parts qty. CRUB SCREW 30k nos received untill new local Part No.RA0119001 supplie r is ful

Based on the improvement actions planned and after validation of the results as a outcome, standard operating procedures and control plans revision shall take place -

Suresh Rao,Shreehari(SCM) 31.01.09

RA1391001 Handel Holder T1U, Supplier : M/s Excel Metal

Hardning pocess changed to meet Dimn's as per drawing. PPAP completed Cpk was made for dimn's 20, 6.5 & 21.5mm found to be > 1.33. 20k parts received after PPAP. Validation of Hardning process to be carried out at Supplier place thr Ziaur Rahman(Quality)

7/2/2009

Mating part & dimn's provided to the supplier & Core pin steel dimn's corrected accordingly. Corrected samples ok for assy fitment. PPAP completed. RA2617001 Right Hand Revalidation of Moulding process will be Shoulder Supplier : done through process Audit and Action M/s Primax Plastics generating t Ziaur Rahman(Quality)

25-02-09

ABB Group December 13, 2010 | Slide 21

WP 4: Quality Improvement Green channel vendors

-Status

of the Green channel & PPAP parts completed for MCCB & ACB.

ABB Group December 13, 2010 | Slide 22

WP 5: Order-Delivery process
Purpose & Scope:
achieve 100% Customer OTD by Supermarket pull at warehouse (MCCB- MTS) and at Shop floor ( ACBATO). Tasks planned Local Manufactured Product

Manufacturing strategy identified for different products (MTS, ATO). Supermarket quantity is arrived in case of MTS and ATO. Delivery lead based on order quantity is arrived. pilot MTS strategy for MCCB product. monitor delivery lead time to customer. change and maintain stock level in ERP on Quarterly basis

Imported product

RRS analysis ( Runner, Repeater & Stranger) is performed for all imported finished good Product. Stock and Non stock Item has been arrived. Re-order level based on lead time is arrived for stock item. Stock level ( % of revenue) has been arrived till 2012. Comparison of cost saving out of Air and Sea freight. Pilot Replenishment to stock for Stock items identified. monitor delivery lead time to customer change and maintain stock level in ERP on Quarterly basis

check the cost saving out of Air and sea freight Main results and comments:

OTD 100% for INRO (MCCB) plant for month of June and July09. FG Inventory reduction from 7.8% baseline to 1.6% against target of 3%.

ABB Group December 13, 2010 | Slide 23

WP 5: Order-Delivery process Improve C-OTD

ABB Group December 13, 2010 | Slide 24

WP 5: Order-Delivery process Reduce FG stock

ABB Group December 13, 2010 | Slide 25

WP 6: SAP Integration

Purpose & Scope:

Integrate pull practices ( Kanban, 2 bin, ect) with ERP and to improve accuracy of OTD reports by correct data handling in ERP by creating awareness . Root cause of Inaccurate report ( OTD, FPY, TPT etc) generated by SAP. Training plan for users to create basic understanding. Base work to integrate pull practices in SAP ( Kanban SAP). Create / enhance Opex report for all product line. create OPEX report viewable in Caf HR of enterprise portal. implement kanban integrated with SAP

Tasks planned & Completed

Benefits:

Effective use of Business system (SAP). Accurate reports ( OTD, FPY, TPT etc) from SAP.

ABB Group December 13, 2010 | Slide 26

WP 6: SAP Integration - SAP screen on Kanban and KPI reports

ABB Group December 13, 2010 | Slide 27

OPEXA: Order delivery process improvement( LV Breakers & Switches)

Division / BU: AP-LV Breakers & Switches. Location: Bangalore, India. Project Type: 3d. - Increasing manufacturing capacity. Project Manager: Enzo Marotta Project Duration; Start 06-2008 End 09-2009 ODG Support M Chellapandian Amol Suryawamshi

Project Background & Situation

Poor on time delivery(46.9%) and long TTPT(24 days) High inventory of Raw material (15.8%) Poor Supplier OTD (42%) To Improve On time delivery from 46% to 100%. To reduce Order delivery Lead time reduction from 13 days to 5 days for in-house manufactured products To reduce Manufacturing Lead time from 12days to 3 days. Inventory reduction from 15.8% to 8% To Improve Key Supplier OTD from 42% to 100%.

Project Benefit
1.

NPV (3 yrs) 3.3 MUSD SMT saving: Yr2009: Target: 0.47 MUSD Yr2010: Target: 0.51MUSD

Target:

2.

Action Completed :

New Facility established in line with the lean principles Installed ergonomically good U line for MCCB products with water spider movement ATO scenario is implemented for ACB product line with super market for basic breaker. Implemented reorder point and kanban based procurement for the raw material to reduce inventory. Simplified the material issue flow through implementation of KANBAN and water spider movement from stores to production line Implemented actions from supplier process audit to establish control of defects On-time Delivery 46.9% to 72.2% Inventory reduction from 15.8 % to 8.6% Supplier OTD improved from 42% to 80% Manufacturing lead time reduction from 12 days to 4 days.

Results Achieved:

Today

ABB Group December 13, 2010 | Slide 28

0 Analysis

Planning

Redesign

Execution
Piloting

Implementation

Sustain

OPEX sustenance plan

Sustenance plan
Process Review Review ODG Support Deadline (if Frequency any) WP1: Change Mangaement, Owner: Venkatesh Prasad / Enzo Marotta
Chellapandian Venkatesh Prasad Soma Quarterly till Dec-2010 Yearly till Dec-2012 5th of Every Month Amol Chellapandian

Process Owner

Local Support

Sustenance Plan

Project Review

KPI Updation and Enzo Marotta communication Daily Production Meeting Earanna

Soma and Every day Respective morning (9 to 9.30 Prodcution team AM)

Everyday

Chellapandian

WP2: Production Process, Owner: Somasudarshan Chandraiah

Housekeeping & Earanna Zone leader Saturdays Weekly Audit Kanban Pradeep Production team Saturdays Weekly Audit(Internal) Sustenance review Enzo Soma / Earanna 5th Day Monthly (M) Sustenance review Enzo Soma / Earanna Mondays Weekly (W) WP3: Supply chain Integration, Owner: Pradeepkumar shetty 4Q for Supplier OTD Venkatesh Kumar Shashikala 5th Day Monthly Amol Chellapandian Chellapandian Chellapandian

Amol

ABB Group December 13, 2010 | Slide 29

OPEX Continuous improvement plan

Continuous improvement Plan

Process Review Review ODG Support Deadline (if Frequency any) WP3: Supplier Chain Integration, Owner: Pradeepkumar Shetty V. Kumar Shashicala 5th Day Monthly Amol Process Owner Local Support

CI Plan

4Q for Supplier OTD 4Q for customer OTD

WP5: Order Delivery process Improvement, Owner: Harish SR Harish SR NA 5th Day Monthly

Chellapandian

WP4: Continuous Flow, Owner: Vikas Khatri 4Q for TTPT Pradeep NA 5th Day Monthly Chellapandian WP2 : Production Proces, Owner: Somasudarshan Chandraiah House Keeping Earanna All Zone 5th Day Monthly Amol Leaders WP1: Change Management, Owner: Enzo Marotta / Venkatesh Prasad Prepare presentEnzo Marotta Enzo and all VSM/VSP VSP review - Chellapandian ( VSM, propose WP leaders preparation Quarterly On Need basis) future VSM. End of every Make VSP year

ABB Group December 13, 2010 | Slide 30

Project lessons learned

Overall team management Timely project progress reviews are very important Cross verification of values helps to sustain results Top management involvement will keep the project teams spirit high Too short and too optimistic time line for project cannot achieve desired results Planning and Procurement Strategies are core parts of successful product business Bringing Change is the toughest part 4Q approach and why-why analysis helps to know the root cause of a problem Overall skills and capability of Project team increased through continuous trainings Supplier development and selection through SQA process and continuous audit helps to achieve sustained quality of components and S-OTD Team Involvement is must

ABB Group December 13, 2010 | Slide 31

Knowledge leveraging items

Value Stream Mapping Use of Ergonomics for designing workstations. Lean Manufacturing Tools like: a) Takt B)Cellular Manufacturing c)Milk Run d) Water Spider Movement e)2-Bin f)Kanban g)7QC Tools h)4Q

ABB Group December 13, 2010 | Slide 32