Productivity and competitive power

1. Productivity and competitive power İSTANBUL CHAMBER OF INDUSTRY - 7th INDUSTRY CONGRESS 4th of December 2008 BSH-TR/FIG, Dr. Jörg Ulrich

2. Content • BSH TR – Household appliances for Turkey • Market trend in white good business • Need for continuous productivity • Productivity as a holistic approach to be competitive • Production System as key success factor for productivity increase Productivity and competitive power; 04.12.2008 I slide: 2

3. BOSCH AND SIEMENS HOME APPLIANCES GROUP • BSH Bosch und Siemens Hausgeräte • %50 Robert Bosch, Stuttgart • %50 Siemens AG • Info • 43 factories in 14 countries • 70 companies in 44 countries • 14 brands • 39,000 employees • 8.8 billion euro turnover • BSH • NUMBER THREE WORLDWIDE • NUMBER ONE IN EUROPE Productivity and competitive power; 04.12.2008 I slide: 3

4. BSH Ev Aletleri Sanayi ve Ticaret A.Ş. • Shareholders • BSH Bosch und Siemens Hausgeräte (%95.936) • Deutsche Bank (%0.866) • Other (%3.198) • Financials • Turnover 1.076 million Euro (2007) • Employees 3300 • Location • Headquarters in Istanbul • Production Facilities in Çerkezköy • Spares Part Warehouse in Silivri Productivity and competitive power; 04.12.2008 I slide: 4

5. BSH Cerkezköy - Biggest Production Location within BSH Group • 450.000 m² facility. • 3 million units of LDA Production. (2007) • Production of cookers, Refrigerators, dishwashers, washing machines Productivity and competitive power; 04.12.2008 I slide: 5

6. Production output vs. Employees in BSH-TR factories • Average yearly employee productivity of 6.4 % % 125 % 65 Refrigerator, Washing Machine, Cooking Appliances, Dishwasher Productivity and competitive power; 04.12.2008 I slide: 6

7. Market trend in white good business Decreasing trend in market price and margins in white good business are challenging production sites for cost reduction and therefore for continuous productivity increase • Increasing competition by internationalisation of worldwide business • Price reduction by aggressive Asian competitors • End customer are focussing more and more on value price segments • High pressure on profit margins by trade partner Price changes of major white good appliances compared to the previous year in % (Source: GFK Germany) Productivity and competitive power; 04.12.2008 I slide: 7

8. Need for continuous productivity – survive in competition Increasing international competition and decreasing margins require a clear focus on cost position. The market shows a clear consolidation trend, even speeded up by the new worldwide economical situation. Only companies with a clear focus an cost and productivity will be competitive and survive in future business • Cost driver like raw material, energy, logistic costs are clearly increasing in long term trend • In production cost Turkey is competing with the new boom region in eastern Europe, countries like Poland, Bulgaria, Rumania are setting cost trends • Constantly increasing labour and energy cost are jeopardizing Turkeys position as low cost production area High productivity and efficiency and smart and lean investment are the key success factors for future successful business Productivity and competitive power; 04.12.2008 I slide: 8

9. Productivity as a holistic approach to be competitive Direct labour cost reduction is the classic field of productivity increase. But productivity in modern production sites is more. The whole production chain offers areas for sustainable increase of productivity and efficiency Typical breakdown of production cost of a white good appliance in Turkey: Areas for productivity improvement: Other OH cost/Fix costs Invest amortization Indirect labour cost Direct labour cost Material (including logistic cost) 6 % • Process improvement • Smart and lean investment, machine productivity • Processes improvement and increase of efficiency • Constant increase of staff productivity • Constant focus on material rationalization • Supplier development • Improvement of whole logistic chain 5 % 4 % 5 % 80 % Productivity and competitive power; 04.12.2008 I slide: 9

10. Production System as key success factor for productivity increase A Production System is a holistic approach for the sustained optimization of all production processes. The objective of which is to produce exactly what the customer wants" • The Production System is everyone’s business • It is the foundation for the ongoing optimization and further development of all processes along the value creation chain • Processes, methods and tools have to be standardized in all areas • A production system has to become a part of the corporate philosophy Look at it as a whole Look at it individually Productivity and competitive power; 04.12.2008 I slide: 10

11. BSH Production System – A holistic approach for improvement BSH Production System Demand oriented production Robust product phase-in / phase-out Challenging and fostering our people Avoiding defects (zero-defects) Avoiding waste Employees need to be challenged and supported. They are a critical success factor for the success of the BSH Production System Waste is continually identified and eliminated along the value creation chain Only produce when and where demand exists Product phase-in and phase-out must be of a robust design Defects are avoided during all phases of the value creation chain Standardization and Sustainability = principle Productivity and competitive power; 04.12.2008 I slide: 11

12. BSH Production System – A holistic approach for improvement BSH Production System Demand oriented production Robust product phase-in / phase-out Challenging and fostering our people Avoiding defects (zero-defects) Avoiding waste Team work Pull-principle Phase-in / phase-out management Defect prevention Standardized work Variants management and ECO Defect detection /test planning Visual management Employee qualification and development Customer takt Project management Defect analysis / correction CIP Procurement management Performance orientation Product development process 6 - SIGMA Standardization and Sustainability = principle = method Productivity and competitive power; 04.12.2008 I slide: 12

13. Standardized work • Work place organization (5S) • Standard operating sheet • Total Productive Maintenance (TPM) Transportation Waiting time Movements Visual management • KPI management • Labeling and markings Overproduction Inventory Unnecessary processing Rework/ Scrap CIP • Problem solving techniques • Improvement workshops Avoiding waste as starting point for productivity increase Avoidingwaste The seven types of waste Productivity and competitive power; 04.12.2008 I slide: 13

14. Continuous productivity increase as the key for future competitiveness • Increasing competition and decreasing market prices are challenging production costs • Only by sustainable productivity increase in all areas future requirements to a competitive production can be fulfilled • A holistic and standardized production system is the key for continuous productivity increase Global standards in production …instead of individual solutions! Productivity and competitive power; 04.12.2008 I slide: 14