CIPS Furness Branch Event Siemens Subsea Speaker... · Slide 17 March 2015 Author. S Postlethwaite...

Leading global excellence in procurement and supply

CIPS Furness Branch Event

Siemens Subsea 19th March 2015


17:00 Registration

17:30 Opening Remarks Jeannette Medati

Congress North West Introduction Rick Green

17:45 Background on Siemens Mike Marklove

18:00 Shopfloor Tour (PPE not required)

18:30 International Procurement – Poland Steve Postlethwaite

18:50 Refreshments / Networking

19:05 Sustainable Pulp Project at Innovia Films Ian Robinson

19:35 Close Jeannette Medati

19:40 Networking

Agenda


• Welcome & Introductions

• The Branch – Next meeting – AGM – 15th April 2015 – Venue – TBC

– Ethics

– Marketing material

– Events

• North West Congress Introduction

Chairman’s Opening


Siemens – Mike Marklove

© Siemens AG 2014 All rights reserved. siemens.com/subsea/energy

Siemens Subsea Enabling complex Subsea developments Enabling Subsea Processing by Connecting Innovation with Experience

© Siemens AG 2014 All rights reserved.

Siemens Subsea

Our Vision

“Enabling our customers to deliver best in class

subsea solutions with the provision of the

highest quality subsea power and distribution

systems, products and services.”

Siemens Subsea offers a suite of systems for power,

control and surveillance and a wide portfolio of

products and services for the subsea distribution of

electrical power, electrical signal, hydraulic power,

and optical communication for applications primarily

focused in the Energy Sector.

Acquired Tronic in Ulverston May 2012 to provide

enabling technology to fulfil this vision


Typical North Sea offshore platform


Subsea Connection Systems (Tronic Ltd)

Subsea Excellence Centre, Ulverston, Cumbria

Headquarters

Design – 40+ Engineers

Manufacturing (116,000sq ft)

Test

R&D

Procurement

Sales

Operations

Finance

HSE

IT


Local presence – Global reach

Siemens Subsea has a global footprint to serve and co-operate with subsea operators

Siemens Subsea locations

Brazil

USA

Norway 6 locations and HQ

Asia Pacific 2 locations

UK 2 locations

Angola Core customers


Slide 10

DigiTRON+

The next generation subsea connector

The industry’s most advanced and reliable

subsea electrical connector

• Fully qualified for 30yrs design life

• Fully qualified to operate at 4000m (13,120ft)

• depth pressure (max differential if required)

• High factors of safety in both the mechanical

and electrical design

• MTBF in excess of 414,120yrs

• Super Duplex stainless steel

• Qualified to numerous industry standards

• Modular design (many parts configurable)

DigiTRON+


What do we want from our supply chain?

High integrity

High reliability

Specialist parts

Low to medium volume

Acceptable lead time

Precision machining

Traceability

Ability to trial new concepts

Low rejection rate

Competitive price

Stocking policies

QHSE accreditations


International Procurement – Poland

Steve Postlethwaite

Protection notice / Copyright notice © Siemens AG 2010. All rights reserved.

Poland

Supply Chain

Initiative 2004

Steve Postlethwaite

Resource Manager

Oil & Gas

© Siemens AG 2010

March 2015 Author. S Postlethwaite Slide 14

Topics

Reasons to implement

Obstacles & Hurdles

Implementation story

Outcomes

Pros & Cons

Lessons learned

Facts & Figures

Oil & Gas

© Siemens AG 2010


Reasons to Implement

Business Expansion

Family of machined parts with sufficient volume

Potential for large savings

Poland had recently joined EU

ISO accredited – good quality machinists

Acceptable to our customers

Oil & Gas

© Siemens AG 2010


Obstacles & Hurdles

Support from raw material supplier

Siemens specifications

Partnership with in-country agent

Perception of others - QC/Technical/Purchasing

It will not work.......

Relationship with current UK Suppliers

Oil & Gas

© Siemens AG 2010


Implementation

Set up & worked with in-country agent -

Agreed raw material prices & delivery

Chose & audited potential suppliers, inc courier

Agreed currency (€), terms, pick-up frequency

Reciprocal visit to Siemens UK and ‘Supplier Days’

Gold samples – Poland procurement specification

Oil & Gas

© Siemens AG 2010


Implementation – cont’d

Design freeze with Siemens Technical

Developed packaging

Sample orders (outside Production demand) with FAIR

Feedback

QC Inspector released initial batches

Regular meetings

Met with UK suppliers

Oil & Gas

© Siemens AG 2010


Initial quality issues – mainly cosmetic

QC pleasantly surprised by quality

Set up new QA/QC Manager

Increased scope over 3 suppliers

UK suppliers spend increased

Options for other commodities

Supplier of the Year Award 2013

SAVINGS!

Outcomes

Oil & Gas

© Siemens AG 2010

February 2010 Author Slide 20

Typical Defects

Oil & Gas

© Siemens AG 2010


Pros & Cons

Pros

Savings

Excellent quality

Latest M/C, EU Grants

Settled supply chain

Skilled workforce

Willingness to succeed

Cons

Longer leadtimes

Language barrier

30 day payment terms

Large QC batches

Initial regular meetings

Oil & Gas

© Siemens AG 2010


Lessons learnt

Business relationship B&W

Bad news

Face to Face meetings

Friction with original Agent company

Leeway due to cost justification

Make sure specifications are 100%

correct – They will argue. Conversely

they do exactly what it says on the tin

Discuss in person

Memos get lost in translation. Watch

body language

Consider dedicated manager

Difficult to later re-align with UK

Oil & Gas

© Siemens AG 2010


Facts & Figures 2005-2015

Number of Suppliers - 3

Current portfolio of parts - 105

Number of parts delivered – 600,000

Spend £15m

Savings £4m

Saving range 10-74%. Average 26%. Current 28%


Sustainable Pulp Project

Ian Robinson – Innovia Films

Copyright © 2014 Innovia Films – All rights reserved Copyright © 2012 Innovia Films – All rights reserved

An Example of Sustainable Procurement

Ian Robinson

19 March 2015

FCIPS MSc MIEMA CEnv

Copyright © 2014 Innovia Films – All rights reserved

Innovia Films

26

Speciality Films Producer; 120kt/year

Manufacturing sites; EU, US & Australia

Headquarters; Wigton, Cumbria, UK

“We only win when we do things differently”


Background; Cellulose Films

4 possibly interesting facts:

1. Made from wood pulp! ‐ Not a thermoplastic

2. CellophaneTM

‐ Innovia Trademark

3. >100 years old ‐ Patented 1912

4. Made in Barrow until 1990s

Global market declined by 90% ‐ Sustitution

Innovia ‐ Last producer in Europe

‐ Last producer in USA

‐ But it’s not an end game…

27

Copyright © 2014 Innovia Films – All rights reserved 28 Copyright © 2014 Innovia Films – All rights reserved

What do we mean by sustainability? ‐ “Sustainable development is development that meets the needs of the present without

compromising the ability of future generations to meet their own needs….” Brundtland Report

1987?

‐ 3 Rs of sustainability; Reduce, Reuse, Recycle… +2; Reimagine and Redesign?

‐ Climate change, CO2 footprint, carbon taxes?

‐ Beards and sandals… tree huggers?

What do we mean by sustainable procurement? ‐ BS8903 Principles & Framework for procuring sustainably BSI 2010?

‐ “A process whereby organisations meet their needs in a way that achieves value for money on a

whole-life basis in terms of generating benefits not only to the organisation, but also to society

and the economy.” CIPS 2013?

50 Shades of Green

Sustainability; the ability to continue

operating indefinitely

Sustainable procurement; a means to

that end


What Do These 3 Have In Common?

b) They all gave lectures on how sustainable they were

29

a) They no longer exist…


Has Understanding Improved?

“It’s about creating value for stakeholders

and society – you can’t do one in isolation...”

30

Nestlé Annual Report 2010

2010


Risk

Sustainability Opportunity

How We Define Value

Service

Performance

Innovation

Quality

Support

Continuity

Cost

Communication

Safety

Relationship

Cash

Reputation

Optimisation

Liability

Compliance

31

Procurement Priorities 2015

CSR


Innovation

NatureFlexTM

‐ Reformulated

‐ New product

‐ New attributes

Renewable raw material

• Manufacturing ‐ GWP reduced by 55%

End of life ‐ Industrial compostable

‐ Home compostable

‐ Anaerobic digestion

‐ Marine biodegradable

‐ Incinerate

Sounds great but… ‐ How sustainable is it?

32


It’s All About Wood Pulp

Supply Base 2011

Transactional Spot Purchases


Regulatory Compliance

EU Timber Regulation

In Force March 2013

Impacts all imports of timber into EU

Intended to stop imports of illegally

logged wood

Severe penalties for braking the law

Regulation applies to timber products ‐ e.g. wood pulp

Regulation applies to the importer ‐ i.e. Innovia Films

New approach to due diligence ‐ Information

‐ Risk Assessment

‐ Risk Mitigation

High cost of “individual” compliance ‐ One obvious answer


Reputational Risk

Deforestation ‐ Greenpeace is adamant it still continues

‐ Evidence is compelling

‐ SE Asia currently in the spotlight

Pulp mills deny it, or promise change ‐ Pledges made and policies issued

‐ But how effective are they?

Greenpeace is a highly effective

campaigner ‐ Target of choice today is brand equity

‐ Not the pulp producer’s…

‐ Not the paper mill’s…

‐ But the end user’s reputation

If we source from the wrong supplier ‐ Our customers could be targeted

‐ We would rapidly lose business

One obvious answer


Soft Target?


Multiple Targets

They expect/need us to substantiate our claims


NatureFlexTM Environmental Attributes

& Substantiations

Environmental Parameter Substantiation

Home Compostable OK Compost Home certification

Industrially Compostable En13432, AS4736, ASTM D6400 certified

Anaerobic Digestion compatible Tested to ASTM D5511, ISO15985

Marine biodegradability Tested to ASTM D7081

LCA & Carbon footprint data Peer-reviewed LCA, GaBi software

High Renewable Raw Material

content

ASTM D6866 testing,

USDA Biobased certification

Managed Forestry sources ????????

38


Obvious Answer

Programme for the Endorsement of

Forest Certification

(PEFC)

Forest Stewardship Council

(FSC)

39


And That’s When It Got Interesting

Five stage process 1. Wood sourcing policy

2. Source certified wood pulp

3. Install Chain of Custody system

4. Audit Chain of Custody

5. Product claim…

4/5 stages relatively easy ‐ Internal procedures and standard audit

The challenge: sourcing certified pulp

Dissolving wood pulp ‐ Speciality grade, not paper pulp

‐ Speciality mills

‐ Speciality producers

None of our suppliers were ready or interested

‐ “not possible today”

‐ “FSC mañana”

‐ “will cost you more”

And there was a reason for this…


Dissolving Pulp End Uses

Cellulose Acetate

Viscose Fibre

Nitrocellulose

Rayon Tyre Cord Sponges 99% of End Uses are currently not

identifying certified wood as a

priority. Predominantly because

consumers don’t realise the

products are made from wood pulp.

Viscose 61%

Filter Tow 20%

Chemicals 13%

Other 5%

Cellophane 1%

6 million tonnes


Situation 2012

Selling a high cost product ‐ on a “green” ticket

Our customers ‐ insisting on certified wood product claim

Our suppliers ‐ Not prepared to achieve certified wood status

The regulators ‐ EU Timber Regulations March 2013

Reputational risk ‐ Existing volume threatened

‐ Growth was threatened

And then it got worse ‐ We hit a commodity price bubble

And that changed everything…


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500

1000

1500

2000

2500

2008

2009

2010

2011

2012

2013

2014

2015

2016

Dissolving Wood Pulp $/tonne CIF China

Mills suffering

Commodity Price Bubble

Suppliers failing,

Continuity risk increasing

43

Risk of further volatility

Cellulose Films

economically unsustainable

Two of our regular suppliers failed

Cash cost to produce


Wake Up!

What we need…

Aligned partners ‐ Strong relationships

‐ Mutually beneficial objectives

Sustainable pricing ‐ Stability

Reputational security ‐ Transparency

‐ Certified material

What we don’t want…

Opportunistic suppliers ‐ Transactional mentality

‐ Seeking advantage

Volatile pricing ‐ Boom and bust

Reputational risk ‐ Uncertified material

Innovia Bridgwater site September 2012

If you can’t fulfil our needs we will source our raw materials

elsewhere, as this is the other option

Sustainable raw materials at sustainable prices


The Result

Not all producers agreed ‐ But some did

Supply base transition ‐ Previously multiple Critical Suppliers

‐ Now two Strategic Partners

Long term contracts ‐ 3 year cap and collar price controls

Pulp producers ‐ “Acceptable” material margin

‐ Guaranteed their survival

Innovia ‐ Value increased

‐ Not the lowest price but…

‐ Ensures continuity of supply

‐ Avoids the need to build safety stocks

‐ Avoids exposure to future price spikes

‐ Shared pain; increased our influence

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2500

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Strategic

Partners

Critical

Suppliers

Tactical

Vendors

Preferred

Suppliers

Influence

Valu

e

Cost & Time TCO

Change! Seek Value

Low Effort Minimal Effort

Maximum Effort High Effort


Two Strategic Partners

They appreciated the “shared pain”

They valued price certainty

They realised alignment was positive

They embraced the common objective

They became FSC/PEFC certified

We made the product claim


Is It Sustainable?

Customers ‐ Reputational risk eliminated

‐ New applications; demand increased

Strategic partners

‐ Additional volume

‐ Price guarantee

‐ Added value to shareholders

‐ Jobs saved

Innovia ‐ Regulatory compliance ensured

‐ Continuity risk reduced

‐ Input cost stabilised

‐ 20% growth

‐ Innovia brand equity increased

Environment ‐ Two more mills in certification schemes

‐ Deforestation less likely

‐ CO2 emissions/kg reduced by 33% versus PET


Close & Networking

CIPS Furness Branch Event Siemens Subsea Speaker... · Slide 17 March 2015 Author. S Postlethwaite...

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