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Committed to sustainable productivity. The Atlas Copco Group, 2011. Content The Atlas Copco Group Industrial Air Purchasing strategy within Atlas Copco. Purchasing Industrial Air Division 2011. Atlas Copco in a snapshot .

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committed to sustainable productivity

Committed to sustainable productivity

The Atlas Copco Group, 2011

slide2

Content

  • The Atlas Copco Group
  • Industrial Air
  • Purchasing strategy within Atlas Copco

Purchasing Industrial Air Division

2011

Atlas Copco Group Presentation 2011

atlas copco in a snapshot
Atlas Copco in a snapshot

An industrial group with world-leading positions in compressors, expanders and air treatment systems, construction and mining equipment, power tools and assembly systems.

Provider of solutions for sustainable productivity through innovative products and services in four business areas.

Worldwide presence, customer diversification, and strong and stable aftermarket business.

Headquartered in Sweden, the Group’s global reach spans more than 170 markets.

In 2010 Atlas Copco had 33 000 employees and annual revenues of approximately BSEK 70 (BEUR 7.3).

Atlas Copco Group Presentation 2011

a leading industrial provider
A leading industrial provider

Sales per customer category

Others

6%

Services

6%

Construction

24%

28%

Mining

25%

Manufacturing

11%

Process industry

Atlas Copco Group Presentation 2011

innovative solutions
Innovative solutions

Knowledge

Products

Services

Atlas Copco Group Presentation 2011

products
Products

Industrial tools

Aftermarket and rental

Construction equipment

Compressors

Mining and rock excavation

Atlas Copco Group Presentation 2011

knowledge
Knowledge

Competence centers

Applications

Product design

Atlas Copco Group Presentation 2011

long term relationships through service
Long-term relationships through service

Atlas Copco Group Presentation 2011

a strong brand portfolio
A strong brand portfolio

Atlas Copco Group Presentation 2011

customers in 178 countries
Customers in 178 countries

Revenues per geographic area

NorthAmerica

18%

Asia/Australia

28%

SouthAmerica

11%

Africa/MiddleEast

11%

32%

Europe

Atlas Copco Group Presentation 2011

supporting a wide variety of industries
Supporting a wide variety of industries

Revenues per business area

ConstructionTechnique

16%

CompressorTechnique

43%

32%

Mining and Rock ExcavationTechnique

9%

Industrial Technique

Atlas Copco Group Presentation 2011

four business areas
Four business areas

April 20, 2011

efficient organization
Efficient organization

Board of Directors

President and CEO

Executive Group Management and corporate functions

CompressorTechnique

IndustrialTechnique

Mining and Rock Excavation Technique

ConstructionTechnique

Oil-free Air

Industrial Air

Specialty Rental

Gas and Process

Compressor Technique Service

Airtec

Atlas Copco Tools and Assembly SystemsMotor Vehicle Industry

Atlas Copco Toolsand Assembly Systems General Industry

Chicago Pneumatic Tools

Tooltec

Underground RockExcavation

Surface DrillingEquipment

Drilling Solutions

Secoroc

Geotechnical Drillingand Exploration

Mining and Rock Excavation TechniqueService

Rocktec

Construction Tools

Road Construction Equipment

Portable Energy

ConstructionTechnique Service

Customer centers and service providers

Atlas Copco Group Presentation 2011

shared services across businesses
Shared services across businesses

Financing

Engineering support

Administration

Atlas Copco Group Presentation 2011

2010 results
2010 results

Atlas Copco Group Presentation 2011

first in mind first in choice

First in Mind—First in Choice ®

Atlas Copco has a clear vision

core values
Core values

Atlas Copco Group Presentation 2011

strategic directions
Strategic directions

Growth:Organic and through acquisitions

Innovations and continuous improvements

Aftermarket –parts and service

Atlas Copco Group Presentation 2011

driving innovation
Driving innovation

Energy recovery unit forrotary screw compressors

Dynapacasphalt paver

Controller for electricnutrunner and screwdriver

Minetruck

Atlas Copco Group Presentation 2011

competence development
Competence development

Atlas Copco Group Presentation 2011

community engagement
Community engagement

Water for All

Disaster relief

Education

Atlas Copco Group Presentation 2011

goals for sustainable profitable development
Goals for sustainable, profitable development

Atlas Copco Group Presentation 2011

world leader in the compressed air business
World leader in the compressed air business

Compressor Technique

Sales per customer category

Others

Construction

8%

8%

Services

11%

Mining

5%

40%

Manufacturing

28%

Process

Atlas Copco Group Presentation 2011

industrial compressors
Industrial compressors

Compressor Technique

Atlas Copco Group Presentation 2011

gas and process compressors and expanders
Gas and process compressors and expanders

Compressor Technique

Atlas Copco Group Presentation 2011

quality air solutions
Quality Air Solutions™

Compressor Technique

Atlas Copco Group Presentation 2011

specialty rental
Specialty rental

Compressor Technique

Atlas Copco Group Presentation 2011

create customer loyalty through service
Create customer loyalty through service

Compressor Technique

Atlas Copco Group Presentation 2011

innovative industrial tools and assembly systems
Innovative industrial tools and assembly systems

Industrial Technique

Sales per customer category

Construction

Other

2%

12%

Services

2%

Process

2%

82%

Manufacturing

Atlas Copco Group Presentation 2011

industrial power tools
Industrial power tools

Industrial Technique

Atlas Copco Group Presentation 2011

assembly systems
Assembly systems

Industrial Technique

Atlas Copco Group Presentation 2011

vehicle service power tools
Vehicle service power tools

Industrial Technique

Atlas Copco Group Presentation 2011

strong focus on productivity
Strong focus on productivity

Mining and Rock Excavation Technique

Sales per customer category

Others

3%

Services

1%

36%

Construction

60%

Mining

Atlas Copco Group Presentation 2011

underground rock drilling loaders and mine trucks
Underground rock drilling, loaders and mine trucks

Mining and Rock Excavation Technique

Atlas Copco Group Presentation 2011

surface drilling equipment
Surface drilling equipment

Mining and Rock Excavation Technique

Atlas Copco Group Presentation 2011

blasthole water well oil and gas
Blasthole, water well, oil and gas

Mining and Rock Excavation Technique

Atlas Copco Group Presentation 2011

rock drilling tools
Rock drilling tools

Mining and Rock Excavation Technique

Atlas Copco Group Presentation 2011

exploration and ground engineering
Exploration and ground engineering

Mining and Rock Excavation Technique

Atlas Copco Group Presentation 2011

increasing productivity through service
Increasing productivity through service

Mining and Rock Excavation Technique

Atlas Copco Group Presentation 2011

construction tools
Construction tools

Construction Technique

Atlas Copco Group Presentation 2011

road construction equipment
Road construction equipment

Construction Technique

Atlas Copco Group Presentation 2011

portable compressors and generators
Portable compressors and generators

Construction Technique

Atlas Copco Group Presentation 2011

global local service
Global, local service

Construction Technique

Atlas Copco Group Presentation 2011

slide49

Board of Directors

President and CEO

Executive Group Management and corporate functions

CompressorTechnique

IndustrialTechnique

Mining and Rock Excavation Technique

ConstructionTechnique

Oil-free Air

Industrial Air

Specialty Rental

Gas and Process

Compressor Technique Service

Airtec

Atlas Copco Tools and Assembly SystemsMotor Vehicle Industry

Atlas Copco Toolsand Assembly Systems General Industry

Chicago Pneumatic Tools

Tooltec

Underground RockExcavation

Surface DrillingEquipment

Drilling Solutions

Secoroc

Geotechnical Drillingand Exploration

Mining and Rock Excavation TechniqueService

Rocktec

Construction Tools

Road Construction Equipment

Portable Energy

ConstructionTechnique Service

Customer centers and service providers

Atlas Copco Group Presentation 2011

product overview of industrial air division

Oil-Injected screw compressors5-90 kW

Oil-Free tooth compressors

Oil-Free Piston

Oil-Injected piston

Oil-Free Water-injected

screw compressors

Dessicant dryers

Refrigerant dryers

Membrane dryers

Filters

Air Treatment Ancillaries

Product Overview of Industrial Air Division
slide51

Focus On Value Products

Variable Speed Drive Technology

Energy Savings

up to 35 %

  • The EnvironmentWINS
  • The Customer WINS
  • Atlas Copco WINS
industries where do we compete to win
Industries - Where do we compete to win?

Manufacturing

Transport

Mobile snow guns

Marine

Automotive

Instrument air

Chemical

Food & Beverage

Petrol stations

Paper

And much more…

Textile

Pharmaceuticals

Oil & Gas

Electronics

53

slide56

Group level :Purchasing Coordination meeting (quarterly)

CompressorTechnique

IndustrialTechnique

Mining and Rock Excavation Technique

ConstructionTechnique

Oil-free Air

Industrial Air

Specialty Rental

Gas and Process

Compressor Technique Service

Airtec

Atlas Copco Tools and Assembly SystemsMotor Vehicle Industry

Atlas Copco Toolsand Assembly Systems General Industry

Chicago Pneumatic Tools

Tooltec

Underground RockExcavation

Surface DrillingEquipment

Drilling Solutions

Secoroc

Geotechnical Drillingand Exploration

Mining and Rock Excavation TechniqueService

Rocktec

Construction Tools

Road Construction Equipment

Portable Energy

ConstructionTechnique Service

Customer centers and service providers

Division level : Purchase council (monthly)

Atlas Copco Group Presentation 2011

purchasing organization industrial air division
Purchasing organization Industrial Air Division
  • In every factory we have a local purchasing team :
  • Local purchasing responsibility for local projects and manufacturing
  • Development of a local suppliers base that meets the Atlas Copco requirements
  • Reports monthly to the division for :
    • Cost reduction programs
    • Commodity strategies
    • Organization changes
    • Development of common suppliers
purchasing team antwerp factory
Purchasing team Antwerp factory
  • 4 commodity teams
    • Mechanical team
    • Electrical team
    • Team Electronics & Instrumentation
    • Team Cooling and Air Treatment
  • Quality assurance :
    • 4 SQA engineers integrated in the teams
    • 2 quality auditors (inspection area production)
  • Project leader logistics : supplier development projects
  • Project leader purchasing : interaction with product development teams
  • Global sourcing team
purchasing within atlas copco1
Purchasing within Atlas Copco
  • Why do we need Sourcing – Purchasing ?
  • Purchasing Mission – Vision – Strategy
  • Purchasing Strategy – Application
  • Sourcing process versus Design process
why sourcing what do they do
Why SOURCING? What do they do?
  • More than 70% of the cost of our machines is sourced
    • We need suppliers , so we better take care of them
    • How to become a Customer of Choice ?
    • What can they do to improve our development, efficiency and profit ?
  • If we want to cut the total cost , we need to understand our supplier
    • Know their costs, work together to reduce their costs
  • Technology is also driven by competence of suppliers
  • Sustainable contracts
  • Managing supply to managing relationships
purchasing strategy mission
Purchasing Strategy - Mission
  • The mission of the Purchasing Function is to enable and to contribute to the group business targets through improvement of our product development process

and

through the development and improvement of

our supply chainin order to continuously and consistently

lower the total cost.

purchasing strategy mission 2
Purchasing Strategy – Mission (2)
  • To define, develop and manage co-operation with our suppliers
  • To safeguard and continuously improve product and process quality
  • To optimise the supply chain processes
  • To search for product and process innovation
  • To realise continuous total cost reduction
  •  “CC7” we have to reduce our product cost price with 7% over a cycle of 2 years

Atlas Copco Group Presentation 2011

purchasing strategy vision
Purchasing Strategy - Vision
  • To establish and manage a profitable, stable and preferably

long-term co-operation with suppliers, based on:

    • a professional relationship in an ethical and respectful business environment
    • common commitment to achieve measurable and quantifiable targetsbased on the Purchasing Strategy
      • Example : Quality : 250 PPM maximum rejection level
    • actions by suppliers and continuous interaction with suppliers that will contribute to the business development of the Group in order to remain First in Mind, First in Choice with it’s customers
    • continuous innovation in products and processes that will allow the Group to remain the Leader in Innovation of it’s market.
purchasing strategy the four pillar model
Purchasing Strategy : the four pillar model
  • Build a best supplier base, help the suppliers to improve, co-develop them into our new product and search for efficiency with our operations.
  • The Four Pillars around a stable foundation enabling us to reach our targets are:

Technical Competence /

Product and Process

Development

Logistics

Financial Stability

Company Profile

Quality

Total Cost

purchasing strategy
Purchasing Strategy
  • Innovation and Innovation culture
    • Product and technological know-how
    • Access to technology of tomorrow
  • Co-development
    • Early supplier involvement will shorten development time and reduce cost
  • Organization :
    • R & D organization and facilities
    • Development Process
    • Project handling procedures
  • Production and process know-how

Technical Competence /

Product and Process

Development

Logistics

Financial Stability /

Company Profile

Quality

Total Cost

purchasing role in the product development process
feasibility : marketing

master specification : marketing

functional prototype : engineering

production prototype: engineering

pilot batch : manufacturing

introduction & follow up: marketing

Purchasing role in the product development process

1 2 3 4 5

6

Project leadership changes during project

Feasibility: Orientation preconcept. Pre-development

Pilot batch Manufacturing preparation andengineering

Project masterspecification

Functional prototype

Productionprototype

Market introduction and feedback

Purchasing

product development
Product development

Cost

Degree in which specifications are firm

High

Costs related to

engineering changes

Degree of freedom for decisions

Low

Series

Production

Product

preparation

pilot batch

Feasibility

product concept

functional prototype

Detailed design

production prototype

Time

project follow up
Project follow-up
  • Divisional level : monthly Product Committee
  • Purchase dept. : monthly project meeting :
    • Product redesign projects
    • Purchase projects
purchasing strategy1
Purchasing Strategy
  • Reliability of delivery performance
    • Reliability
    • Lead-time
    • Minimize inventory
  • Production process :
    • organization / lay-out / capacity / flexibility / elasticity
  • Supply Chain (inbound-outbound) :
    • Agility, just-in-time, kanban
  • Process improvement projects and investments
  • Very short throughput times in administration, production and logistics
  • Quantifiable targets

Technical Competence /

Product and Process

Development

Logistics

Financial Stability /

Company Profile

Quality

Total Cost

logistics
Logistics
  • Very short delivery times : 2-5 working days

(order handeling + transport leadtime)

  • On-line communication : internet platform “Be2Net” for exchange of :
      • Purchase orders and order confirmations
      • Expediting and de-expediting messages
      • Forecast
      • Holiday periods
      • All circular communications to suppliers
      • Procedures, purchasing terms & conditions
      • Etc.
  • Consignment stock
  • Dynamic forecast ing : 6 months ; monthly update

Atlas Copco Group Presentation 2011

logistics1
Logistics
  • Monthly logistical meeting : purchasing + production
  • Delivery performance
  • Analysis 10 worst suppliers + action plan
  • Status Logistical excellence program

Atlas Copco Group Presentation 2011

purchasing strategy2
Purchasing Strategy
  • Quality culture
  • Process quality
  • Product quality
  • Design & Development quality
  • Organization, systems and procedures (ISO / QS)ISO9001; 14001; 18000; OHSAS
  • Zero-defect supply
  • Quantifiable targets per commodity

Technical Competence /

Product and Process

Development

Logistics

QUALITY of Business ACTIVITIES throughout the entire COLLABORATION

Financial Stability /

Company Profile

Quality

Total Cost

quality
Quality
  • Monthly quality meeting : purchasing + production + engineering
  • PPM evolution
  • Analysis 10 worst suppliers + action plan
  • Status Quality Improvement Programs

Atlas Copco Group Presentation 2011

purchasing strategy3
Purchasing Strategy
  • Continuous cost reduction for material and components
  • Total cost of ownership
    • Product cost & cost evolution
    • Process cost: logistic / transport / stock
    • Commercial: payment terms / exchange risks
    • Warranty costs
    • Spare parts
  • Value analysis : open book cost calculations
  • Global sourcing : China, India, Eastern Europe
  • Target costing
  • Cost transparency to identify cost driving factors and to optimize cost structures
  • Quantifiable targets

Technical Competence /

Product and Process

Development

Logistics

Financial Stability /

Company Profile

Quality

Total Cost

4 supplier co operation models
4 supplier co-operation Models
  • Co-development Supplier is developing for/together with project team
        • Co-development, co-design in product development projects, ,common technological development, common process development, Collaborative, target costing with cost transparency, highly integrated logistic process, quality and logistic targets, long-term co-operation agreements
        • Emphasis on innovation – support on product development
        • Example : supplier of electric motors
  • Technical: supplier is delivering according to drawing/specification
        • Delivery of (technical) parts based on AC design or specification, Early supplier involvement in function of production/logistic/quality process, Integrated logistic process, quality and logistic targets, cost management based on cost-break down model, co-operation agreements : multi-year
        • Empasis on product quality and logistic performance
        • Example : castings, canopy
  • Standard PartsSupplier is delivering catalogue (standard) parts
        • Delivery of standard or catalogue products with additional logistic services if feasible, (Highly) integrated logistic process with the purpose of reducing the cost of the supply chain, Quality and logistic targets, Cost management through efficient logistics
        • Empasis on minumum process and supply chain cost
        • Example : hardware (bolts, nuts), standard electrical components
  • (Logistic) Service Provider: Supplier is delivering sub-assemblies, logistic services or transport
        • Delivery of sub-assemblies (not based on own product), logistic services, transport: integrated logistic process, Quality and logistic targets, Cost management through efficient process & logistics, Co-operation agreements : multi-year
        • Example : Katoennatie (cross docking for incoming goods)