THE MACH INITIATIVE: A TOOL FOR ENHANCING QUÉBEC'S SUPPLY CHAIN COMPETITIVENESS Aerospace...
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Transcript of THE MACH INITIATIVE: A TOOL FOR ENHANCING QUÉBEC'S SUPPLY CHAIN COMPETITIVENESS Aerospace...
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THE MACH INITIATIVE:A TOOL FOR ENHANCING QUÉBEC'S
SUPPLY CHAIN COMPETITIVENESS
Aerospace Innovation Forum 2011
Workshop #6: Harmonization of innovation initiatives
December 6th, 2011
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The Quebec Aerospace ClusterThe heart of the Canadian aerospace industry
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• Revenues of $11 billion in 2010 (12,4 B$ in 2009)
• Ranked sixth in the world in sales
One of the top 3 aerospace centres in the world
3
Other European Countries 5%
Brazil 2%
Spain 2%Italy 2%
Rest of Canada 2%
Québec 3%
Japan 4%
U.K. 8%
Germany 8%
France 13%
United States 51%
Aerospace sector world revenue in 2008
Source: MDEIE 2009
Aerospace centres in the world
ToulouseSeattle
Montréal
Source: Secor 2010
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• 234 companies
• Third biggest manufacturing industry in Québec• Accounts for 8% of sales in the manufacturing sector
• 80% of Quebec aerospace products are exported• The sector is the number one exporter of manufactured products in Quebec
(13,7 % of $58 billion);• The U.S is the number one export destination with 65% of sales ($ 5.3 billion).
The heart of the Canadian aerospace industry
4
Source: MDEIE 2010
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• 39,500 jobs, and 9,000 engineers• One of the highest employment densities in the world
• 1/200 in Quebec• 1/95 in the Greater Montreal region
• 55 % of total Canadian aerospace production in 2010
• 50 % of the Canadian workforce
• 70 % of Canadian aerospace R&D spending
• One of the only places in the world where all the components of an aircraft are made within a 30 km radius
The heart of the Canadian aerospace industry
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Sources: MDEIE, Institut de la statistique du Québec 2009 etCanadian’s Perceptions of the Aeronautical/Aerospace Sector, November, 2010, NATIONAL and Harrisdecima.
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Aéro Montréal: Québec's aerospace cluster
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• A strategic think tank which brings together all the major decision makers in Quebec’s aerospace sector to unite them around shared objectives and concerted actions in order to:
• enhance cohesion
• optimize competitiveness and growth
• Strategic Committees
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Quebec’s aerospace sector challenge
The need to evolve towards a world class supply chain
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• Access to markets becomes key
• Competition from developing countries is stronger then ever
• Supply chain globalization OEMs reduce their supplier base by selecting those who:
• Offer integrated solutions• Can manage the complexity of the supply chain• Accept to share technical and financial risks
• Many foreign governments support the development of their aerospace industry with non-refundable grants (i.e. Poland, Italy, France, etc.)
Industry trends and context
8
The global aerospace supply chain is shifting in favour of performing Tier 1 integrators responsible for design, manufacturing and assembly of complete systems
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• The Embraer ERJ-170/190 illustrates the adoption of a product development strategy based on :• Risk-sharing partners (16 partners taking 36 % of total value of contracts)
• Reduction of total number of supplierso From 400 suppliers (ERJ-145) to 40 suppliers (ERJ 170/190), 98 %
based outside of Brazil
• Stunning results :• Reduced development cycle : 4 years (1998 to 2002)
o Same cycle length than the ERJ 145 but with a much greater technological complexity
• Development costs contained : 900 M$
• Commercial success :• 1 540 orders (861 firm orders & 679 options) - 625 planes delivered in March 2010
Tier 1 integrators are key in the development of all new platforms: the ERJ-170/190 business case
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Source: Transfer Technology for Successful Integration into the Global Economy, A case study of Embraer in Brazil, United Nations, 2002; SECOR Analysis
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Tier 1 integrators are key in the development of all new platforms: the Boeing 787 business case
10Source: McKinsey & Company
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These trends affect the Quebec aerospace sector performance
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• Industry turnover has progressed in the last 20 years but has stagnated since 2000
Quebec aerospace sector turnoverIn billions$; 1990-2008
8,0
6,0
4,0
2,0
12,0
10,0
0,0
Aerospace industry annual employment and gross output growth in current dollars*Quebec and G7 countries, %, 2000 - 2006
Québec
-1,7%Great-
Britain**
0,6%
Italy
2,3%
USA
3,1%
Germany
5,2%
France
5,3%
Japan
9,8%
4,8%
0,3% 0,5%
-0,8%
0,9%
-0,4%
Production
EmploymentCAGR 2000 – 08
+1%
CAGR1990 – 00+15%
Sources: MDEIE, Institut de la statistique du Québec, Stats Canada *NAICS codes 3364 and SIC 353, **Employment info unavailable
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Between 2002 and 2009, exports and trade balance have slipped
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Relative decrease in Quebec’s content input over the last 10 years
Since 2000, Quebec opportunity cost is an
estimated $11.3 billion**
Source: Institut de la statistique du Québec
20062005 2007 2008 20092002 2003 2004
Aerospace industry exports and trade balance (NAICS 3364)Quebec, 2002 – 2009, millions current $
Exports, CAGR: -3%
Trade balance, CAGR: -7%
40,4
42%
100%
Manufacturing value-added
Intermediate consumption
75,7
52%
11,3 billions $
Aerospace industry sales and local value-added percentage (NAICS 3364)Quebec, 1990-1999 / 2000 - 2008, billions $
Sources: Stats Canada, A/AC **Hypothesis : Québec value-added remained at 58% from 2000 to 2008
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Québec’s industry structure is in inadequacy with the emerging trends
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• The Quebec’s aerospace sector is characterized by a large number of small firms• Only 38 companies have a staff exceeding 100 employees
Source: Statistics Canada
14
14
11
62
54
78
11
8
19
64
57
431 to 4
employees
100 to 199 employees
5 to 19 employees
20 to 99 employees
500 + employees
200 to 499 employees
2003 – TOTAL : 233
2009 – TOTAL : 202
Number of companies from the aerospace sector by number of employees*Québec, 2003 - 2009
*NAICS 3364, 3315, 3336 as defined by the ISQ. From a field study, the MDEIE counted 234 active companies in the Aerospace industry in 2009
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Findings about the Quebec aerospace industry
• Sub-systems procurement in other countries by the local OEMs is negatively impacting the amount of build-to-print parts procured in Quebec
• The Quebec industrial base is fragmented
• Very few local integrators
CONSEQUENTLY:
• Local suppliers are too small when compared to international competition
• Performance gaps in terms of vision, leadership, management succession plans and marketing
• Sub-optimal productivity• Products offering sometimes
inadequate when taking into account core and non-core competencies
• Too dependent on local market (very few customers)
• Financial, innovation and design capabilities are limited
• High risk aversion
Quebec Supply Chain Quebec Suppliers
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Aerospace suppliers challenges
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AerospaceSupplier
Competition from emerging markets:pressure on prices
Access tomarkets
Traditional customer has moved
Capabilitiesimprovement in :• design• manufacturing• systems assembly
Costsreductions
Financing
Demandfluctuation
Losses &inefficiciencies
Design and manufacturing delays
Mandatory to revisit the business strategy and capabilities to improve productivity, innovation and increase exports
COMPETITIVENESS MUST BE IMPROVED
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The MACH initiative
An important step in Quebec’s path towards a world class aerospace supply chain
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1. Create an improved business culture for more openness, collaboration and innovation
2. Improve the supply chain competitiveness, one company at a time
3. Develop new local integration capabilities
• It is a change program for accelerating the aerospace supply chain competitiveness and performance.
• An output of Aero Montréal’s Supply Chain working group which mobilized more than 100 industry professionals over 3 years.
• Strategic goals:
The MACH Initiative : a unifying model to accelerate Quebec’s supply chain transformation
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• 5 years $15 million collaborative private-public program
• support a total of 70 suppliers in strengthening their competitiveness. These suppliers will join the program in 5 yearly cohorts.
• provides SMEs with a common framework of methodologies, tools and techniques and an educational program to improve their capability across key processes and areas.
• provides mentoring from a prime contractor
• provides a recognized certification process
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The MACH Initiative:
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• Supply chains are never static; they continually transform and evolve with regards to customer's requirements efficient collaboration is mandatory
• Therefore, the MACH initiative will encourage the establishment of tight collaborative relations between customer and supplier through mentoring for a more proactive supply chain.
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Better alignment between customer &
supplier=
Higher performance of the supply chain
The MACH Initiative is centered on tight collaborative relations to foster innovation
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• The MACH excellence framework is a management system developed by Aéro Montréal to help suppliers assess their performance, identify gaps and determine the actions necessary to improve and better position themselves within the supply chain.
• It prioritizes three fundamental levers to improve a supplier’s competitiveness:
• excellence in leadership;• operational excellence;• excellence in workforce planning and development.
• The MACH excellence framework has a five-level maturity scale, MACH 1 to MACH 5, that evaluates a supplier’s maturity level for 15 key business processes.
• The MACH excellence framework also includes a performance certification program for supplier visibility.
The MACH Excellence Framework : a tool for becoming a world class supplier
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5 maturity levels
PROCESSES MACH 1 MACH 2 MACH 3 MACH 4 MACH 51.1 - Strategic Planning & Positioning
1.2 - Performance & Management systems
1.3 - Project & Risk Management systems
1.4 - Innovation
1.5 - Corporate Social Responsibility
2.1 - Workforce Planning
2.2 - Hiring, Workforce Mobilization & Retention
2.3 - Workforce Training
2.4 - Individual Performance Evaluation
3.1 - Supply Chain Management
3.2 - Customer Relationship Management
3.3 - Manufacturing Control & Management
3.4 - Continual Improvement
3.5 - Engineering, Methods & New product/program introduction
3.6 - Quality Management
The MACH Excellence Framework
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12 to 14Months cycle
The process:
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The suppliers and mentors of the first cohort
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THANK YOU!
Philippe Hoste
President of the Supply Chain Working Group
Aéro Montréal
380 St. Antoine West, Suite 8000
Montréal (Québec) Canada H2Y 3X7
Telephone: 514-987-9332
www.aeromontreal.ca
Photos: courtoisie de Bombardier Inc. et Pratt & Whitney Canada