global competitiveness ford

8/14/2019 Global Competitiveness FORD

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FMCSA Benchmarking Report (2005) www.bmanalysts.com

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A benchmarking study of the SA auto

component industrys competitivenessrelative to a set of Asian Pacific firms

Firm-level competitiveness findings from the SouthAfrican Automotive Benchmarking Club database

Compiled by Dr Justin Barnes (BA Hons, MSocSci, PhD [Natal])Benchmarking & Manufacturing Analysts SA (Pty) Ltd

7 th October 2005For Ford Motor Company of Southern Africa


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Report outline1. Introduction: Latest global & SA automotive trends & the

importance of firm-level benchmarking2. Overview of B&M Analysts Market Driver methodology

used for SAABC benchmarks3. Profile of benchmarked South African & Asian Pacific

firms4. Analysis of benchmark findings:

Financial performance Operational competitiveness: Cost control, quality, value

chain flexibility, value chain reliability, human resourcedevelopment, product development

5. Summary of major findings

6. Detailed statistical indicators


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3. P rofile of benchmarkcomparator groups included

in this report:

SA auto component manufacturers (n=71)versusAsian P acific auto component manufacturers (n=21)


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S u m m a r y p r o

f i l e o

f b e n

c h m a r k e

d f i r m s

( 2 0 0 4 )

Trim: 19.0%, Harnesses: 14.3%,Electronics: 14.3%, Foundry/forge: 14.3%,

JIT assembly: 28.6%, Metal form/press:4.8%, Metal fabrication: 23.8%,

Components: 19.0%, Glass: 4.8%, HeatTransfer: 9.5%: Other (paint & rubber):

0.0%

Trim: 15.5%, Harnesses: 7.0%,Electronics: 5.6%, Foundry/forge: 12.7%,JIT assembly: 15.5%, Metal form/press:

15.5%, Metal fabrication: 23.9%,Components: 15.5%, Glass: 4.2%, HeatTransfer: 5.6%: Other (paint & rubber):

5.6%

Sub-sector breakdown

Asian Pacific firms

49.10%

24.67%

6.88%

ISO9001/2: 38.1%, QS9000: 61.9%,ISO14001: 33.3%, ISO/TS: 47.6%

OEM: 76.2%, Aftermarket: 14.3%

Other: 9.5%

8.16

2.11

284.47

030m: 47.1%, 30100m: 23.5%, 100 250m: 5.9%, 250m+: 23.5%

1150: 38.1%, 151250: 14.3%, 251+:47.6%

Local: 61.9%, Multinational: 38.1%

India: 52.4%, Malaysia/Thailand/China:28.6%, Australia: 19.0%

37.07%Imports as purchase %

23.04%Exports as turnover %

62.79%Workforce unionisation

ISO9001/2: 66.2%, QS9000: 45.1%,ISO14001: 42.3%, ISO/TS: 66.2%

Present qualityaccreditations

OEM: 52.1%, Aftermarket: 23.9%,

Other: 23.9%Primary market

8.32Hours per shift

2.01Shifts per day

241.03Operating days/year

0-30m: 8.8%, 30100m: 30.9%, 100-250m: 41.2%, 250m+: 19.1%Turnover (in Rands)

1150: 31.4%, 151250: 22.9%, 251+:45.7%No. of employees

Local: 67.6%, Multinational: 32.4%Ownership

KZN: 32.4%, E. Cape: 36.6%, Gauteng:31.0%Location

South African firmsProfile Indicator


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Explanation of tables & graphs presented The various tables & graphs presented in this report comprise

the following:

SA firms average (mean) performance for the period 2001 to 2004(wherever longitudinal information is available) SA firms upper quartile performance (meaning the point separating the

top 25% of firms from the rest of the SA dataset) for the period 2001 to

2004 SA firms lower quartile performance (meaning the point separating the

bottom 25% of firms from the rest of the SA dataset) for the period 2001to 2004

Asian Pacific firms average, upper & lower quartile performance for2004


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4. Value chain benchmarkfindings

Financial performance review Operational competitiveness

Cost Control Quality Value Chain Flexibility Value Chain Reliability Human Resource Development

Product Development Capacity


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Inflation adjusted turnover trend, indexed in domestic currency to 2001 figures

80

100

120

140

160

180

200

220

240

260

Year

T u r n o v e r

i n d e x

SA 100.00 114.65 122.97 121.27SA upper quartile 100.00 121.74 138.55 146.42

SA lower quartile 100.00 101.41 97.33 102.69

Asia Pacific 100.00 187.39 194.70 233.16

Asia Pacific upper quartile 100.00 136.00 169.52 248.00

Asia Pacific lower quartile 100.00 131.43 128.57 117.75

2001 2002 2003 2004


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Total employment trend (including contractees on payroll),using an index based on 2001 figures

80

100

120140

160

180

200

220

240

260

280

Year

E m p

l o y m e n

t i n d e x

SA 100.00 108.17 115.05 119.77SA upper quartile 100.00 110.91 120.50 119.76


Asia Pacific 100.00 210.18 212.73 238.92

Asia Pacific upper quartile 100.00 232.91 241.16 267.03

Asia Pacific lower quartile 100.00 169.23 160.85 167.11

2001 2002 2003 2004


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Proportional breakdown of new capital equipment expediture

0%

20%

40%

60%

80%

100%

P e r c e n

t

Machinery 80.13 55.90

IT software/hardware 6.41 22.17

Buildings/fixtures 8.55 19.70

Other 5.13 2.29

SA Asia Pacific


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Operating profit levels as a percentage of total sales

0

2

4

6

8

10

12

14

16

Year

P e r c e n t

Asia Pacific 9.45

Asia Pacific upper quartile 14.75

Asia Pacific lower quartile 4.40

SA 6.03 7.55 10.09 9.45

SA upper quartile 10.50 11.00 13.90 12.00


2001 2002 2003 2004


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Total cost of sales breakdown

0%

20%

40%

60%

80%

100%

P e r c e n

t

Overhead costs 22.85 22.96

Labour 12.37 13.78

Materials 64.78 63.26

SA firms Asia Pacific firms


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4.2. OperationalCompetitivenessFindings

The measurements presented in this section are grouped under particularmarket drivers as operational performance & hence measures thereof

should be closely tied to market demands. The sequencing structure of thispart of the report follows the market driver methodology employed. For anyclarification pertaining to the measures used please read the explanations

below each market driver heading


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Market Driver 1Cost control

The measurement of inventory provides a good proxyfor the measure of cost control at manufacturing

firms. Firms with good inventory control are usuallyin control of their manufacturing costs, with raw

material, work in progress & finished goods stockall contributing directly & indirectly to production

costs. Inventory measures are therefore a criticalpart of comparative benchmarking exercises


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Total inventory holding levels in operating days

0

5

1015

20

25

30

35

40

45

50

55

Year

N o .

o f d a y s

Asia Pacific 21.83



SA 42.61 39.51 36.36 37.83



2001 2002 2003 2004


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Imports as % of raw materials purchasedAsia Pacific firms37.17% 24.67%SA firms

Raw material inventory holding levels in operating days

0

5

10

15

20

25

30

35

Year

N o .

o f d a y

s

Asia Pacific 13.67


Asia Pacific lower quartile 20.13SA 23.26 22.32 19.76 20.50



2001 2002 2003 2004


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Work in progress inventory holding levels in operating days

0

2

4

6

8

10

12

Year

N o .

o f d a y s

Asia Pacific 3.27



SA 7.10 6.50 7.08 6.92



2001 2002 2003 2004


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Exports as a % of sales23.04% Asia Pacific firms 6.88%SA firms

Finished goods inventory holding levels in operating days

0

2

4

6

8

1012

14

16

18

Year

N o .

o f d a y s

Asia Pacific 4.89


Asia Pacific lower quartile 8.88SA 12.25 10.69 9.52 10.41



2001 2002 2003 2004


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Market Driver 2Quality

Three quality measures are important to firms: customerreturns, internal defect rates (rejects, reworks, scrap) &

supplier quality. Customer returns reveal customer qualitysatisfaction, but offer insufficient indication of internalquality performance. A firm may have a poor internal

production system, but provide quality products byfollowing stringent checks at the end of its production

process. Quality is thus generated at a cost. Low customerreturn rates need to be complemented by low internaldefect rates & perfect supplier quality. Only then is it

possible to manufacture high quality products at low cost


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Average automotive customer return rate (0km failures returned by customers)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Year

P a r t s p e r m i

l l i o n

Asia Pacific 293

Asia Pacific upper quartile 54

Asia Pacific lower quartile 425

SA 8,064 3,431 1,739 613

SA upper quartile 163 53 35 0

SA lower quartile 2,242 857 701 555

2001 2002 2003 2004


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Internal reject rate average (goods rejected as a percentage of output)

0

1

2

3

4

5

6

Year

P e r c e n

t

Asia Pacific 1.29



SA 3.87 3.98 3.68 3.26



2001 2002 2003 2004


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Internal scrap rate average (scrap value as a percentage of material costs)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Year

P e r c e n t

Asia Pacific 2.24



SA 1.98 2.21 1.96 1.74



2001 2002 2003 2004


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Average supplier return rate (0km failures returned to suppliers)

0

5,000

10,000

15,000

20,000

25,000

30,000

Year

P a r t s p e r m

i l l i o n

Asia Pacific 7,658Asia Pacific upper quartile 90

Asia Pacific lower quartile 17,500

SA 16,330 15,152 14,309 11,645

SA upper quartile 1,638 2,692 1,013 518

SA lower quartile 27,250 25,000 20,000 13,119

2001 2002 2003 2004


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Market Driver 3Value chain flexibility

Value chain flexibility is determined by the speed at which afirm accepts a customer order & converts this to product

delivery. Key variables are the firms logistics system, theefficiency of its suppliers, & the flexibility of its own productionsystem. Given the complexity of associated reliability issuesthese are dealt with separately as Market Driver 4. Here we

are solely interested in the speed with which firms respond to

customer orders, convert material into finished products &pass these pressures on through their supply chain. Keyindicators include customer lead time performance, delivery

frequencies, manufacturing throughput times, productionchangeover capabilities & supplier lead time performance


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Most recent value chain flexibility indicators

119.3843.7575.6375.00Asia Pacific firms lower quartile(international)

41.2526.2515.007.38Asia Pacific firms upper quartile(international)

37.0030.007.005.00Asia Pacific firms lower quartile (domestic)

7.256.251.000.25Asia Pacific firms upper quartile (domestic)

142.5090.0052.5035.00SA firms lower quartile (international)

62.5040.0022.505.00SA firms upper quartile (international)

44.0030.0014.002.00SA firms lower quartile (domestic)

8.107.001.101.00SA firms upper quartile (domestic)

110.9565.8545.1023.84SA firms (international)

32.7420.6712.072.59SA firms (domestic)

74.0133.3840.6337.13Asia Pacific firms (international)

24.2020.064.142.11Asia Pacific firms (domestic)

d. Value chainflexibility (b+c)

c. Supplierlead times

b. Out ofproduction

a. Out offinished goods

stock

Lead time indicator (measured in days)

Indicator


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Delivery frequency performance to major customers: 2004

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

SA firms

Asia Pacific firms

Percent

Daily+ Daily Every 2/3 days Weekly Fort-nightly Other


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Percentage of total production time lost to machine/tool changeovers

0

2

4

6

8

10

12

14

Year

P e r c e n

t

Asia Pacific 3.34Asia Pacific upper quartile 1.00


SA 8.03 8.58 8.48 7.86



2001 2002 2003 2004

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Market Driver 5Human resource developmentThe only certainty about auto industry requirements is that they

will become more onerous. Goal posts are shifting & newdemands emerging. Whether firms fail, or grasp the

opportunities afforded by these demands is dependent on theireffective use of resources, with the most important of thesebeing human resources . Unless firms adapt to change, theywill fall behind their competitors, with four dimensions to this:

manpower, machines, materials & methods. Whilst thedimensions are related, the 1 st determines capability to deal

with the others. It is thus important to analyse whether firms are(a) investing in their employees, (b) fostering continuous

improvement programmes & (c) increasing employeeefficiencies

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Basic education levels

99.24%Asia Pacific firms

80.17%SA firmsNumeracy & literacy levels*

* Workers presently at ABET level 3 (equivalent to Grade 4-6) or higher

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Training investment as a percentage of the totalremuneration bill (wages & salaries)

0

2

4

6

8

10

12

14

16

Year

P e r c e n

t

Asia Pacific7.76



SA 2.06 2.02 1.73 1.95



2001 2002 2003 2004

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Market Driver 6New product development

A key determinant of success for any firm is its abilityto bring new products into the market. Autocomponent manufacturers are no different, although

the new product development process is complexgiven the increasingly dominant role played by 1 stTier MNCs in designing products for OEMs & the

resulting lead source pressures. It is thus important toanalyse new product development performance inrelation to spending (an indication of investment innew products) & time to market (speed of response

to product opportunities)

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Research & Development (R&D) expenditure as a percentage of turnover

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Year

P e r c e n

t

Asia Pacific firms 2.25Asia Pacific firms upper quartile 4.00

Asia Pacific firms lower quartile 0.00

SA firms 0.95 0.95 0.92 1.01

SA firms upper quartile 1.50 1.30 1.43 1.32

SA firms lower quartile0.00 0.00 0.00 0.00

2001 2002 2003 2004

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In conclusion It is equally clear that the SA average is pulled down by weak performingfirms. If one focuses on the comparative performance of the upperquartile of SA firms then a different picture emerges. The leading SAfirms perform ahead of the Asian Pacific average & often match the

leading Asian Pacific firms.

Whilst the SA auto components industry needs to improve itscompetitiveness if it is to compete effectively with Asian Pacific firms, thestrong comparative performance of the leading firms is a clear indicationthat this is possible.

Improvements recorded over the period 2001 to 2004 are also indicativeof the progress made by the SA auto components industry (particularly inrespect of quality performance), although the lack of recent investment inboth people & capital is a cause for major concern

global competitiveness ford

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