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Business review, Major challenge and issues November 10 , 201 1

Business review, Major challenge and issues November 10 , 201 1. Metaldyne Korea. Ⅰ . About Metaldyne Korea. Vision & Mission. Best plant in Metaldyne. VISION. Customer Satisfaction Best Quality Highest Productivity. MISSION. Brief History.

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Business review, Major challenge and issues November 10 , 201 1

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  1. Business review, Major challenge and issues November10, 2011 Metaldyne Korea

  2. Ⅰ. About Metaldyne Korea

  3. Vision & Mission Best plant in Metaldyne VISION Customer Satisfaction Best Quality Highest Productivity MISSION

  4. Brief History May. 1999 Established a Korea Office in Fukoku Korea Jun. 2001 Supplied twenty numbers of BSM pilot samples to HMC Aug. 2002 Established Metaldyne Korea Oct. 2003 Machining and assembly machine installation at Fremont plant Jul. 2004 Completed building construction of Pyeongtaekplant Oct. 2004 Started mass production for BSM Apr. 2005 Grand opening ceremony Sep. 2005 Received a prize in “Appreciation of Contribution” from HMC Nov. 2005 Acquired Certification of TS-16949 Sep. 2006 Acquired Certification of ISO 14001 Dec. 2007 Acquired 4.5-stars from HMC audit for Quality 5stars system Jun 2008 Started mass production for Tau engine FEMA Apr 2009 Started mass production for R engine BSM Aug 2011 Received LOI for BS from HMC

  5. Plant Org. Chart Representative Director Bob DeFauw Director of MKL operation HS Yoon Finance Anthony Seo HR Ken Lee Quality Daniel Lee Manufacturing Jonnny Kang CSE Michalel Chai Purchasing MS Han Sales Brian Choi Production SY Ahn Matl&Logis. Jake Kim Maintenance John Lee M.E James Yoon

  6. Plant Overview Soccer field Expansion In 2009 (6,500㎡)

  7. Lay-out W S N E #1 Line for Theta BSM #2 Line for Theta BSM Office R-BSM line Tau FEMA line Warehouse &Utility room for R-BSM Warehouse &Utility room for Theta-BSM

  8. Products

  9. Sales trend [Unit : In thousand USD] 8

  10. Location for Korean Auto Makers Bupyeong plant HQ, Purchasing, Sales R&D center Seoul Incheon R-BSM Theta BSM Pyeongtaek plant Hwasung plant Theta BSM Asan plant FEMA, R-BSM, IP Ulsan plant Busan Euro-5 BSM Gunsan plant IP Damper Changwon plant Jejudo

  11. Purchase Status (Jan to Oct, 2011) % of Purchasing amount % of Purchasing amount % of Suppliers’ location

  12. Communications & Employees Activities

  13. EHS activities Gold flag

  14. Business Achievement in 2011

  15. Business Target in 2011

  16. Headcount Hourly composition Average Headcount

  17. Safety • Date of last lost time incident occurred are 606 as of Oct 31,2011.

  18. Turn over BSM deletion for Theta 2.0 Turn over trend from 2006 Merged with Asahitec Bankruptcy No. of outsourcing employees who left the company Up to Oct

  19. Labor cost &Productivity Annual Labor Cost (Salaried & Hourly Empl.) In thousand Won ※ CS gear in sales, Incentives & severance pay in labor cost are not included. In thousand Won

  20. Annual Labor Cost (Hourly Empl.) In thousand Won ※ CS gear in sales, Incentives & severance pay in labor cost are not included. In thousand Won

  21. Sales by products (in 2010)

  22. Long term sales forecast by products [Unit: pcs] 21

  23. Key Index

  24. Internal Audit Remediation

  25. Production (by calendar) Quantity 531,300 Production Trend from Jan 2010. QPPLH Trend from Jan 2010.

  26. Material & Logistics Delivery Issue on Theta BSM into HMMA • A/F delivery to HMMA ended in June. • Back order quantity has been decreased by the end of October.

  27. Manufacturing Engineering Issues • Install two centrifuge oil remover for theta line #1 & #2. • Line try out for the Theta HDD Results • Installed two centrifuge oil remover for theta line #1 & #2 in Oct,2011. There is no complaint from customer and MKL reduced one worker whose jobs are just to clean BSM. • Applied Theta HDD Module on Theta #2 Line in May,2011. KPI (Tool and Oil price per piece) TOOL(\) OIL(\) TOOL(\) OIL(\) target 368 target 438 target 406 target 407 THETA ENG BSM R - ENG BSM

  28. Maintenance Issues • MKL doesn’t have enough time for thepreventive maintenance due to busy production schedule. • Some (manufactured in 2002) of machines are too old that causes a lot of problems. -It makes hard to keep proper spare inventory because some machine parts are not produced any more. - Low machine efficiency and many machines are needed overhaul. • U axis of SW machine on the second Theta line should be repaired but MKL can not make a plan for it due to increased volume. Failure rate Trend (Theta line)

  29. Plan for R-BSM volume increase Customer’s requirement Plan for Neck C/T ※ Calculation : 21 HR/day * 22 DAYs/Month * 85%

  30. Quality

  31. Supply Quality Main reasons

  32. Assembly PPM [PPM] [PPM] Rejected % of Theta BSM Rejected % of R- BSM • To improve the NVH problem, DIC(Local gear supplier) changed the material of brush tool from wire to ceramic coating on May 18th. • Got a big NVH failure for R BSM in Sep due to cleanliness issue of test oil

  33. Customer Quality [PPM] [PPM] 2011 Main reasons

  34. Quality 5star Improvement plan and Target • Customer ppm was getting worse for the changing rating criteria of HMMA from the 2nd half of 2010

  35. Gear Localization Status

  36. CSE

  37. ASSEMBLY Theta BSM _ Oil Suction Location Current Production HMC Preference MKL Proposal 36

  38. Roof damage & risk management

  39. Summary of roof damage Maint. Room Tool Room Parking Area Spare Parts Room Theta GDI line Theta MPI line CMM Room Theta BSM line QC office R - BSM line Test Room Office 2’nd collapse 1’st collapse Tau FEMA Oil storage room Shipping & Receiving Area Utility room Utility room Warehouse Warehouse

  40. Reason for roof damage Maint. Room Tool Room Parking Area Spare Parts Room Theta GDI line Theta MPI line CMM Room Theta BSM line QC office R - BSM line Test Room Office Tau FEMA Oil storage room Shipping & Receiving Area Utility room Utility room Warehouse Warehouse • Building expansion by stages instead of one time • Record rainfall in a short time (over 100mm per hour) • Improper roof draining system Rain water stream Drain hole

  41. Traces 1’st Collapse [Jul 23, 2010]

  42. 2’nd Collapse [Aug 5, 2010]

  43. Fighting against rainfall

  44. Temporary actions for production and keeping machinery

  45. Temporary repair

  46. Main repair

  47. Weather from Aug to Sep 2010 August, 2010 September, 2010 2’nd Collapse Main repair • 27 rainy days • 3 cloudy days • Only one sunny day • 15 rainy days • 8 cloudy days • 7sunny days

  48. Production status in 2010 Line modification & Summer holiday Roof collapse

  49. Overcome Line operation under risky building conditions. Line operation by salaried employees during holidays and day time Lead by example Leadership & Team work Cooperate with HMC No customer line interference No injury related to the employees

  50. Insurance Claim Status Loss summary In thousand Won Claim Payable In thousand Won • Production shortfall  1,419,125 * BI % (22.38%) = 317,600 • A/F Charge = 104,000 470,849 * 51.19% = 241,028 • Temporary roof repair and others = 48,600 • Building reconstruction  292,260 * % of proportional allotment (98.27%) = 287,220 • Machinery  4,740 * % of proportional allotment (62.01%) = 2,939 • Total Loss amount = 531,187

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