Global Competitiveness Ford
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1 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
A benchmarking study of the SA auto component industry’s competitiveness relative to a set of Asian Pacific firms
Firm-level competitiveness findings from the South African Automotive Benchmarking Club database Compiled by Dr Justin Barnes (BA Hons, MSocSci, PhD [Natal]) Benchmarking & Manufacturing Analysts SA (Pty) Ltd 7th October 2005 For Ford Motor Company of Southern Africa
2 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Report outline 1. Introduction: Latest global & SA automotive trends & the importance of firm-level benchmarking 2. Overview of B&M Analysts’ ‘Market Driver’ methodology used for SAABC benchmarks 3. Profile of benchmarked South African & Asian Pacific firms 4. Analysis of benchmark findings: – –
Financial performance Operational competitiveness: Cost control, quality, value chain flexibility, value chain reliability, human resource development, product development
5. Summary of major findings 6. Detailed statistical indicators
3 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
3. Profile of benchmark comparator groups included in this report: SA auto component manufacturers (n=71) versus Asian Pacific auto component manufacturers (n=21)
Profile Indicator
South African firms
Asian Pacific firms
KZN: 32.4%, E. Cape: 36.6%, Gauteng: 31.0%
India: 52.4%, Malaysia/Thailand/China: 28.6%, Australia: 19.0%
Local: 67.6%, Multinational: 32.4%
Local: 61.9%, Multinational: 38.1%
1–150: 31.4%, 151–250: 22.9%, 251+: 45.7%
1–150: 38.1%, 151–250: 14.3%, 251+: 47.6%
0-30m: 8.8%, 30–100m: 30.9%, 100250m: 41.2%, 250m+: 19.1%
0–30m: 47.1%, 30–100m: 23.5%, 100– 250m: 5.9%, 250m+: 23.5%
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%, Heat Transfer: 5.6%: Other (paint & rubber): 5.6%
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%, Heat Transfer: 9.5%: Other (paint & rubber): 0.0%
241.03
284.47
Shifts per day
2.01
2.11
Hours per shift
8.32
8.16
Primary market
OEM: 52.1%, Aftermarket: 23.9%, Other: 23.9%
OEM: 76.2%, Aftermarket: 14.3% Other: 9.5%
Present quality accreditations
ISO9001/2: 66.2%, QS9000: 45.1%, ISO14001: 42.3%, ISO/TS: 66.2%
ISO9001/2: 38.1%, QS9000: 61.9%, ISO14001: 33.3%, ISO/TS: 47.6%
Exports as turnover %
23.04%
6.88%
Imports as purchase %
37.07%
24.67%
Workforce unionisation
62.79%
49.10%
Summary profile of benchmarked firms (2004)
Location Ownership No. of employees Turnover (in Rands)
Sub-sector breakdown
Operating days/year
5 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
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 2001 to 2004 – Asian Pacific firms’ average, upper & lower quartile performance for 2004
6 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
4. Value chain benchmark findings • Financial performance review • Operational competitiveness • Cost Control • Quality • Value Chain Flexibility • Value Chain Reliability • Human Resource Development • Product Development Capacity
7 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Inflation adjusted turnover trend, indexed in domestic currency to 2001 figures 260
Turnover index
240 220 200 180 160 140 120 100 80
2001
2002
2003
2004
SA
100.00
114.65
122.97
121.27
SA 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
Year
8 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Total employment trend (including contractees on payroll), using an index based on 2001 figures 280 260
Employment index
240 220 200 180 160 140 120 100 80
2001
2002
2003
2004
SA
100.00
108.17
115.05
119.77
SA upper quartile
100.00
110.91
120.50
119.76
SA lower quartile
100.00
95.94
93.51
92.78
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
Year
9 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Proportional breakdown of new capital equipment expediture 100%
Percent
80%
60%
40%
20%
0%
SA
Asia Pacific
Machinery
80.13
55.90
IT software/hardware
6.41
22.17
Buildings/fixtures
8.55
19.70
Other
5.13
2.29
10 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Operating profit levels as a percentage of total sales 16 14
Percent
12 10 8 6 4 2 0
2001
2002
2003
2004
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
SA lower quartile
0.74
3.30
4.90
4.90
Year
11 FMCSA Benchmarking Report (2005)
www.bmanalysts.com Total cost of sales breakdown
100%
Percent
80%
60%
40%
20%
0%
SA firms
Asia Pacific firms
Overhead costs
22.85
22.96
Labour
12.37
13.78
Materials
64.78
63.26
12 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
4.2. Operational Competitiveness Findings The measurements presented in this section are grouped under particular “market drivers” as operational performance & hence measures thereof should be closely tied to market demands. The sequencing structure of this part of the report follows the market driver methodology employed. For any clarification pertaining to the measures used please read the explanations below each market driver heading
13 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Market Driver 1 Cost control The measurement of inventory provides a good proxy for the measure of cost control at manufacturing firms. Firms with good inventory control are usually in control of their manufacturing costs, with raw material, work in progress & finished goods stock all contributing directly & indirectly to production costs. Inventory measures are therefore a critical part of comparative benchmarking exercises
14 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Total inventory holding levels in operating days 55 50 45
No. of days
40 35 30 25 20 15 10 5 0
2001
2002
2003
2004
Asia Pacific
21.83
Asia Pacific upper quartile
4.06
Asia Pacific lower quartile
33.63
SA
42.61
39.51
36.36
37.83
SA upper quartile
25.25
22.44
18.50
20.24
SA lower quartile
52.20
51.50
47.00
42.75
Year
15 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Raw material inventory holding levels in operating days 35 30
No. of days
25 20 15 10 5 0
2001
2002
2003
2004
Asia Pacific
13.67
Asia Pacific upper quartile
2.25
Asia Pacific lower quartile
20.13
SA
23.26
22.32
19.76
20.50
SA upper quartile
10.00
10.60
8.50
9.40
SA lower quartile
30.08
33.50
27.00
28.35
Year
Imports as % of raw materials purchased SA firms
37.17%
Asia Pacific firms
24.67%
16 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Work in progress inventory holding levels in operating days 12
No. of days
10 8 6 4 2 0
2001
2002
2003
2004
Asia Pacific
3.27
Asia Pacific upper quartile
1.00
Asia Pacific lower quartile
5.75
SA
7.10
6.50
7.08
6.92
SA upper quartile
1.75
1.50
1.00
1.42
SA lower quartile
10.10
9.27
7.90
7.55
Year
17 FMCSA Benchmarking Report (2005)
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Finished goods inventory holding levels in operating days 18 16
No. of days
14 12 10 8 6 4 2 0
2001
2002
2003
2004
Asia Pacific
4.89
Asia Pacific upper quartile
0.31
Asia Pacific lower quartile
8.88
SA
12.25
10.69
9.52
10.41
SA upper quartile
3.09
3.90
2.00
2.00
SA lower quartile
16.50
13.17
10.05
13.02
Year
Exports as a % of sales SA firms
23.04%
Asia Pacific firms
6.88%
18 FMCSA Benchmarking Report (2005)
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Market Driver 2 Quality Three quality measures are important to firms: customer returns, internal defect rates (rejects, reworks, scrap) & supplier quality. Customer returns reveal customer quality satisfaction, but offer insufficient indication of internal quality performance. A firm may have a poor internal production system, but provide quality products by following stringent checks at the end of its production process. Quality is thus generated at a cost. Low customer return rates need to be complemented by low internal defect rates & perfect supplier quality. Only then is it possible to manufacture high quality products at low cost
19 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Average automotive customer return rate (0km failures returned by customers) 9,000
Parts per million
8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
2001
2002
2003
2004
Asia Pacific
293
Asia Pacific upper quartile
54
Asia Pacific lower quartile
425 8,064
3,431
1,739
613
SA upper quartile
163
53
35
0
SA lower quartile
2,242
857
701
555
SA
Year
20 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Internal reject rate average (goods rejected as a percentage of output) 6
Percent
5 4 3 2 1 0
2001
2002
2003
2004
Asia Pacific
1.29
Asia Pacific upper quartile
0.20
Asia Pacific lower quartile
2.13
SA
3.87
3.98
3.68
3.26
SA upper quartile
0.61
0.60
0.40
0.50
SA lower quartile
5.26
5.19
5.00
4.00
Year
21 FMCSA Benchmarking Report (2005)
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Internal scrap rate average (scrap value as a percentage of material costs) 4.0 3.5
Percent
3.0 2.5 2.0 1.5 1.0 0.5 0.0
2001
2002
2003
2004
Asia Pacific
2.24
Asia Pacific upper quartile
0.25
Asia Pacific lower quartile
4.00
SA
1.98
2.21
1.96
1.74
SA upper quartile
0.30
0.50
0.30
0.15
SA lower quartile
2.40
2.95
2.14
2.33
Year
22 FMCSA Benchmarking Report (2005)
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Average supplier return rate (0km failures returned to suppliers) 30,000
Parts per million
25,000 20,000 15,000 10,000 5,000 0
2001
2002
2003
2004 7,658
Asia Pacific Asia 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
Year
23 FMCSA Benchmarking Report (2005)
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Market Driver 3 Value chain flexibility Value chain flexibility is determined by the speed at which a firm accepts a customer order & converts this to product delivery. Key variables are the firm’s logistics system, the efficiency of its suppliers, & the flexibility of its own production system. Given the complexity of associated reliability issues these 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. Key indicators include customer lead time performance, delivery frequencies, manufacturing throughput times, production changeover capabilities & supplier lead time performance
24 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Most recent value chain flexibility indicators Lead time indicator (measured in days) a. Out of finished goods stock
b. Out of production
c. Supplier lead times
d. Value chain flexibility (b+c)
SA firms (domestic)
2.59
12.07
20.67
32.74
SA firms (international)
23.84
45.10
65.85
110.95
SA firms upper quartile (domestic)
1.00
1.10
7.00
8.10
SA firms lower quartile (domestic)
2.00
14.00
30.00
44.00
SA firms upper quartile (international)
5.00
22.50
40.00
62.50
SA firms lower quartile (international)
35.00
52.50
90.00
142.50
Asia Pacific firms (domestic)
2.11
4.14
20.06
24.20
Asia Pacific firms (international)
37.13
40.63
33.38
74.01
Asia Pacific firms upper quartile (domestic)
0.25
1.00
6.25
7.25
Asia Pacific firms lower quartile (domestic)
5.00
7.00
30.00
37.00
Asia Pacific firms upper quartile (international)
7.38
15.00
26.25
41.25
Asia Pacific firms lower quartile (international)
75.00
75.63
43.75
119.38
Indicator
25 FMCSA Benchmarking Report (2005)
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Delivery frequency performance to major customers: 2004 Percent 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
SA firms
Asia Pacific firms
Daily+
Daily
Every 2/3 days
Weekly
Fort-nightly
Other
100%
26 FMCSA Benchmarking Report (2005)
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Percentage of total production time lost to machine/tool changeovers 14 12
Percent
10 8 6 4 2 0
2001
2002
2003
2004
Asia Pacific
3.34
Asia Pacific upper quartile
1.00
Asia Pacific lower quartile
2.69
SA
8.03
8.58
8.48
7.86
SA upper quartile
2.48
1.92
4.41
2.40
SA lower quartile
11.46
12.52
11.87
12.84
Year
27 FMCSA Benchmarking Report (2005)
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Market Driver 5 Human resource development The only certainty about auto industry requirements is that they will become more onerous. Goal posts are shifting & new demands emerging. Whether firms fail, or grasp the opportunities afforded by these demands is dependent on their effective use of resources, with the most important of these being human resources. Unless firms adapt to change, they will fall behind their competitors, with four dimensions to this: manpower, machines, materials & methods. Whilst the dimensions are related, the 1st 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 employee efficiencies
28 FMCSA Benchmarking Report (2005)
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Basic education levels Numeracy & literacy levels* SA firms
80.17%
Asia Pacific firms
99.24%
* Workers presently at ABET level 3 (equivalent to Grade 4-6) or higher
29 FMCSA Benchmarking Report (2005)
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Training investment as a percentage of the total remuneration bill (wages & salaries) 16 14
Percent
12 10 8 6 4 2 0
2001
2002
2003
2004
Asia Pacific
7.76
Asia Pacific upper quartile
14.25
Asia Pacific lower quartile
1.75
SA
2.06
2.02
1.73
1.95
SA upper quartile
2.54
2.40
2.45
2.90
SA lower quartile
0.87
0.96
1.00
1.00
Year
30 FMCSA Benchmarking Report (2005)
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Market Driver 6 New product development A key determinant of success for any firm is its ability to bring new products into the market. Auto component manufacturers are no different, although the new product development process is complex given the increasingly dominant role played by 1st Tier MNCs in designing products for OEMs & the resulting lead source pressures. It is thus important to analyse new product development performance in relation to spending (an indication of investment in new products) & time to market (speed of response to product opportunities)
31 FMCSA Benchmarking Report (2005)
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Research & Development (R&D) expenditure as a percentage of turnover 4.0 3.5
Percent
3.0 2.5 2.0 1.5 1.0 0.5 0.0
2001
2002
2003
2004
Asia Pacific firms
2.25
Asia 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 quartile
0.00
0.00
0.00
0.00
Year
32 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
In conclusion… • It is equally clear that the SA average is pulled down by weak performing firms. If one focuses on the comparative performance of the upper quartile of SA firms then a different picture emerges. The leading SA firms perform ahead of the Asian Pacific average & often match the leading Asian Pacific firms. • Whilst the SA auto components industry needs to improve its competitiveness if it is to compete effectively with Asian Pacific firms, the strong comparative performance of the leading firms is a clear indication that this is possible. • Improvements recorded over the period 2001 to 2004 are also indicative of the progress made by the SA auto components industry (particularly in respect of quality performance), although the lack of recent investment in both people & capital is a cause for major concern
www.bmanalysts.com
A benchmarking study of the SA auto component industry’s competitiveness relative to a set of Asian Pacific firms
Firm-level competitiveness findings from the South African Automotive Benchmarking Club database Compiled by Dr Justin Barnes (BA Hons, MSocSci, PhD [Natal]) Benchmarking & Manufacturing Analysts SA (Pty) Ltd 7th October 2005 For Ford Motor Company of Southern Africa
2 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Report outline 1. Introduction: Latest global & SA automotive trends & the importance of firm-level benchmarking 2. Overview of B&M Analysts’ ‘Market Driver’ methodology used for SAABC benchmarks 3. Profile of benchmarked South African & Asian Pacific firms 4. Analysis of benchmark findings: – –
Financial performance Operational competitiveness: Cost control, quality, value chain flexibility, value chain reliability, human resource development, product development
5. Summary of major findings 6. Detailed statistical indicators
3 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
3. Profile of benchmark comparator groups included in this report: SA auto component manufacturers (n=71) versus Asian Pacific auto component manufacturers (n=21)
Profile Indicator
South African firms
Asian Pacific firms
KZN: 32.4%, E. Cape: 36.6%, Gauteng: 31.0%
India: 52.4%, Malaysia/Thailand/China: 28.6%, Australia: 19.0%
Local: 67.6%, Multinational: 32.4%
Local: 61.9%, Multinational: 38.1%
1–150: 31.4%, 151–250: 22.9%, 251+: 45.7%
1–150: 38.1%, 151–250: 14.3%, 251+: 47.6%
0-30m: 8.8%, 30–100m: 30.9%, 100250m: 41.2%, 250m+: 19.1%
0–30m: 47.1%, 30–100m: 23.5%, 100– 250m: 5.9%, 250m+: 23.5%
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%, Heat Transfer: 5.6%: Other (paint & rubber): 5.6%
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%, Heat Transfer: 9.5%: Other (paint & rubber): 0.0%
241.03
284.47
Shifts per day
2.01
2.11
Hours per shift
8.32
8.16
Primary market
OEM: 52.1%, Aftermarket: 23.9%, Other: 23.9%
OEM: 76.2%, Aftermarket: 14.3% Other: 9.5%
Present quality accreditations
ISO9001/2: 66.2%, QS9000: 45.1%, ISO14001: 42.3%, ISO/TS: 66.2%
ISO9001/2: 38.1%, QS9000: 61.9%, ISO14001: 33.3%, ISO/TS: 47.6%
Exports as turnover %
23.04%
6.88%
Imports as purchase %
37.07%
24.67%
Workforce unionisation
62.79%
49.10%
Summary profile of benchmarked firms (2004)
Location Ownership No. of employees Turnover (in Rands)
Sub-sector breakdown
Operating days/year
5 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
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 2001 to 2004 – Asian Pacific firms’ average, upper & lower quartile performance for 2004
6 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
4. Value chain benchmark findings • Financial performance review • Operational competitiveness • Cost Control • Quality • Value Chain Flexibility • Value Chain Reliability • Human Resource Development • Product Development Capacity
7 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Inflation adjusted turnover trend, indexed in domestic currency to 2001 figures 260
Turnover index
240 220 200 180 160 140 120 100 80
2001
2002
2003
2004
SA
100.00
114.65
122.97
121.27
SA 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
Year
8 FMCSA Benchmarking Report (2005)
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Total employment trend (including contractees on payroll), using an index based on 2001 figures 280 260
Employment index
240 220 200 180 160 140 120 100 80
2001
2002
2003
2004
SA
100.00
108.17
115.05
119.77
SA upper quartile
100.00
110.91
120.50
119.76
SA lower quartile
100.00
95.94
93.51
92.78
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
Year
9 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Proportional breakdown of new capital equipment expediture 100%
Percent
80%
60%
40%
20%
0%
SA
Asia Pacific
Machinery
80.13
55.90
IT software/hardware
6.41
22.17
Buildings/fixtures
8.55
19.70
Other
5.13
2.29
10 FMCSA Benchmarking Report (2005)
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Operating profit levels as a percentage of total sales 16 14
Percent
12 10 8 6 4 2 0
2001
2002
2003
2004
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
SA lower quartile
0.74
3.30
4.90
4.90
Year
11 FMCSA Benchmarking Report (2005)
www.bmanalysts.com Total cost of sales breakdown
100%
Percent
80%
60%
40%
20%
0%
SA firms
Asia Pacific firms
Overhead costs
22.85
22.96
Labour
12.37
13.78
Materials
64.78
63.26
12 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
4.2. Operational Competitiveness Findings The measurements presented in this section are grouped under particular “market drivers” as operational performance & hence measures thereof should be closely tied to market demands. The sequencing structure of this part of the report follows the market driver methodology employed. For any clarification pertaining to the measures used please read the explanations below each market driver heading
13 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Market Driver 1 Cost control The measurement of inventory provides a good proxy for the measure of cost control at manufacturing firms. Firms with good inventory control are usually in control of their manufacturing costs, with raw material, work in progress & finished goods stock all contributing directly & indirectly to production costs. Inventory measures are therefore a critical part of comparative benchmarking exercises
14 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Total inventory holding levels in operating days 55 50 45
No. of days
40 35 30 25 20 15 10 5 0
2001
2002
2003
2004
Asia Pacific
21.83
Asia Pacific upper quartile
4.06
Asia Pacific lower quartile
33.63
SA
42.61
39.51
36.36
37.83
SA upper quartile
25.25
22.44
18.50
20.24
SA lower quartile
52.20
51.50
47.00
42.75
Year
15 FMCSA Benchmarking Report (2005)
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Raw material inventory holding levels in operating days 35 30
No. of days
25 20 15 10 5 0
2001
2002
2003
2004
Asia Pacific
13.67
Asia Pacific upper quartile
2.25
Asia Pacific lower quartile
20.13
SA
23.26
22.32
19.76
20.50
SA upper quartile
10.00
10.60
8.50
9.40
SA lower quartile
30.08
33.50
27.00
28.35
Year
Imports as % of raw materials purchased SA firms
37.17%
Asia Pacific firms
24.67%
16 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Work in progress inventory holding levels in operating days 12
No. of days
10 8 6 4 2 0
2001
2002
2003
2004
Asia Pacific
3.27
Asia Pacific upper quartile
1.00
Asia Pacific lower quartile
5.75
SA
7.10
6.50
7.08
6.92
SA upper quartile
1.75
1.50
1.00
1.42
SA lower quartile
10.10
9.27
7.90
7.55
Year
17 FMCSA Benchmarking Report (2005)
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Finished goods inventory holding levels in operating days 18 16
No. of days
14 12 10 8 6 4 2 0
2001
2002
2003
2004
Asia Pacific
4.89
Asia Pacific upper quartile
0.31
Asia Pacific lower quartile
8.88
SA
12.25
10.69
9.52
10.41
SA upper quartile
3.09
3.90
2.00
2.00
SA lower quartile
16.50
13.17
10.05
13.02
Year
Exports as a % of sales SA firms
23.04%
Asia Pacific firms
6.88%
18 FMCSA Benchmarking Report (2005)
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Market Driver 2 Quality Three quality measures are important to firms: customer returns, internal defect rates (rejects, reworks, scrap) & supplier quality. Customer returns reveal customer quality satisfaction, but offer insufficient indication of internal quality performance. A firm may have a poor internal production system, but provide quality products by following stringent checks at the end of its production process. Quality is thus generated at a cost. Low customer return rates need to be complemented by low internal defect rates & perfect supplier quality. Only then is it possible to manufacture high quality products at low cost
19 FMCSA Benchmarking Report (2005)
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Average automotive customer return rate (0km failures returned by customers) 9,000
Parts per million
8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
2001
2002
2003
2004
Asia Pacific
293
Asia Pacific upper quartile
54
Asia Pacific lower quartile
425 8,064
3,431
1,739
613
SA upper quartile
163
53
35
0
SA lower quartile
2,242
857
701
555
SA
Year
20 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Internal reject rate average (goods rejected as a percentage of output) 6
Percent
5 4 3 2 1 0
2001
2002
2003
2004
Asia Pacific
1.29
Asia Pacific upper quartile
0.20
Asia Pacific lower quartile
2.13
SA
3.87
3.98
3.68
3.26
SA upper quartile
0.61
0.60
0.40
0.50
SA lower quartile
5.26
5.19
5.00
4.00
Year
21 FMCSA Benchmarking Report (2005)
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Internal scrap rate average (scrap value as a percentage of material costs) 4.0 3.5
Percent
3.0 2.5 2.0 1.5 1.0 0.5 0.0
2001
2002
2003
2004
Asia Pacific
2.24
Asia Pacific upper quartile
0.25
Asia Pacific lower quartile
4.00
SA
1.98
2.21
1.96
1.74
SA upper quartile
0.30
0.50
0.30
0.15
SA lower quartile
2.40
2.95
2.14
2.33
Year
22 FMCSA Benchmarking Report (2005)
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Average supplier return rate (0km failures returned to suppliers) 30,000
Parts per million
25,000 20,000 15,000 10,000 5,000 0
2001
2002
2003
2004 7,658
Asia Pacific Asia 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
Year
23 FMCSA Benchmarking Report (2005)
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Market Driver 3 Value chain flexibility Value chain flexibility is determined by the speed at which a firm accepts a customer order & converts this to product delivery. Key variables are the firm’s logistics system, the efficiency of its suppliers, & the flexibility of its own production system. Given the complexity of associated reliability issues these 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. Key indicators include customer lead time performance, delivery frequencies, manufacturing throughput times, production changeover capabilities & supplier lead time performance
24 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Most recent value chain flexibility indicators Lead time indicator (measured in days) a. Out of finished goods stock
b. Out of production
c. Supplier lead times
d. Value chain flexibility (b+c)
SA firms (domestic)
2.59
12.07
20.67
32.74
SA firms (international)
23.84
45.10
65.85
110.95
SA firms upper quartile (domestic)
1.00
1.10
7.00
8.10
SA firms lower quartile (domestic)
2.00
14.00
30.00
44.00
SA firms upper quartile (international)
5.00
22.50
40.00
62.50
SA firms lower quartile (international)
35.00
52.50
90.00
142.50
Asia Pacific firms (domestic)
2.11
4.14
20.06
24.20
Asia Pacific firms (international)
37.13
40.63
33.38
74.01
Asia Pacific firms upper quartile (domestic)
0.25
1.00
6.25
7.25
Asia Pacific firms lower quartile (domestic)
5.00
7.00
30.00
37.00
Asia Pacific firms upper quartile (international)
7.38
15.00
26.25
41.25
Asia Pacific firms lower quartile (international)
75.00
75.63
43.75
119.38
Indicator
25 FMCSA Benchmarking Report (2005)
www.bmanalysts.com
Delivery frequency performance to major customers: 2004 Percent 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
SA firms
Asia Pacific firms
Daily+
Daily
Every 2/3 days
Weekly
Fort-nightly
Other
100%
26 FMCSA Benchmarking Report (2005)
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Percentage of total production time lost to machine/tool changeovers 14 12
Percent
10 8 6 4 2 0
2001
2002
2003
2004
Asia Pacific
3.34
Asia Pacific upper quartile
1.00
Asia Pacific lower quartile
2.69
SA
8.03
8.58
8.48
7.86
SA upper quartile
2.48
1.92
4.41
2.40
SA lower quartile
11.46
12.52
11.87
12.84
Year
27 FMCSA Benchmarking Report (2005)
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Market Driver 5 Human resource development The only certainty about auto industry requirements is that they will become more onerous. Goal posts are shifting & new demands emerging. Whether firms fail, or grasp the opportunities afforded by these demands is dependent on their effective use of resources, with the most important of these being human resources. Unless firms adapt to change, they will fall behind their competitors, with four dimensions to this: manpower, machines, materials & methods. Whilst the dimensions are related, the 1st 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 employee efficiencies
28 FMCSA Benchmarking Report (2005)
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Basic education levels Numeracy & literacy levels* SA firms
80.17%
Asia Pacific firms
99.24%
* Workers presently at ABET level 3 (equivalent to Grade 4-6) or higher
29 FMCSA Benchmarking Report (2005)
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Training investment as a percentage of the total remuneration bill (wages & salaries) 16 14
Percent
12 10 8 6 4 2 0
2001
2002
2003
2004
Asia Pacific
7.76
Asia Pacific upper quartile
14.25
Asia Pacific lower quartile
1.75
SA
2.06
2.02
1.73
1.95
SA upper quartile
2.54
2.40
2.45
2.90
SA lower quartile
0.87
0.96
1.00
1.00
Year
30 FMCSA Benchmarking Report (2005)
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Market Driver 6 New product development A key determinant of success for any firm is its ability to bring new products into the market. Auto component manufacturers are no different, although the new product development process is complex given the increasingly dominant role played by 1st Tier MNCs in designing products for OEMs & the resulting lead source pressures. It is thus important to analyse new product development performance in relation to spending (an indication of investment in new products) & time to market (speed of response to product opportunities)
31 FMCSA Benchmarking Report (2005)
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Research & Development (R&D) expenditure as a percentage of turnover 4.0 3.5
Percent
3.0 2.5 2.0 1.5 1.0 0.5 0.0
2001
2002
2003
2004
Asia Pacific firms
2.25
Asia 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 quartile
0.00
0.00
0.00
0.00
Year
32 FMCSA Benchmarking Report (2005)
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In conclusion… • It is equally clear that the SA average is pulled down by weak performing firms. If one focuses on the comparative performance of the upper quartile of SA firms then a different picture emerges. The leading SA firms perform ahead of the Asian Pacific average & often match the leading Asian Pacific firms. • Whilst the SA auto components industry needs to improve its competitiveness if it is to compete effectively with Asian Pacific firms, the strong comparative performance of the leading firms is a clear indication that this is possible. • Improvements recorded over the period 2001 to 2004 are also indicative of the progress made by the SA auto components industry (particularly in respect of quality performance), although the lack of recent investment in both people & capital is a cause for major concern
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