Achieving Sustainable Competitive Advantage at Tecumseh

2016 TOCICO International Conference

©2016TOCICO.AllRightsReserved.

Achieving Sustainable Competitive Advantage at

Tecumseh September20,2016

JackWarchalowskiJenniferMcIntosh

2016 TOCICO International Conference


Agenda•  TecumsehProductsCompanyOverview•  FlowManagementSystem(FMS)ImplementaIon•  Tupelo,MSFMSproject•  TupeloPOOGIresults•  BrazilFMSproject•  Brazilprojectresults•  Nextsteps


2016TOCICOInternaIonalConference

Tecumseh Products Company (TPC) Overview

« AnnArbor,Michigan

CompanySnapshot

GlobalManufacturingFootprint« HeadquartersManufacturingandAssemblyFaciliCes

§  Founded:1934

§  Headquarters:AnnArbor,MI

§  Employees:~6,000

§  1,600+customersforcompressors&condensingunits

§  Productsaresoldinapprox.100countries§  Brands:Tecumseh,L’UniteHermeIque,

Masterflux,Silensys,Celseon,Vector&others

TecumsehisaLeadingIndependentGlobalManufacturerofHermeCcallySealedCompressors&CondensingUnits

ProductsOverview

Reciproca)ngCompressors

RotaryCompressors

ScrollCompressors

CondensingUnits

EndMarkets

CommercialRefrigera)on(Commercial)

HouseholdRefrigerators&Freezers(R&F)

Residen)alandSpecialtyAC&HeatPumps(AC)

SelectCustomers



Aylmer,Ontario,Canada

Paris,Tennessee

Tupelo,Mississippi

Monterrey,Mexico

SaoCarlos,Brazil

BarenCn,France

Ballabgarh,India

Selangor,Malaysia

Hyderabad,India

CTEJVShanghai,China

Brazil

NorthAmerica

India

Europe

China&Malaysia

TPC Overview- Global Manufacturing Footprint

TecumsehManufacturesCompressorsintheU.S.,Brazil,FranceandIndiaandOperatesSeveralAssemblyFacili)esWorldwide

TotalofNineManufacturingFacili)esCompressorsareAssembled&DistributedBasedonLocalMarketNeedsandRegionalSpecial)es

Cessieu,France LaMure,France



•  CMSMonteraprovidesConsulIngandSo`waretoenableGrowththroughProducIvity

AboutCMSMontera



Flow Management System Objectives – Supply Chain

Push–forecastdriven Pull–demanddriven

Forecast,incombinaIonwithfirmorders,drivesproducIonofcomponentsandfinishedgoods,capacityandworkingcapitalplanning,aswellaspurchasingofrawmaterials

Forecast,incombinaIonwithfirmorders,drivescapacityandworkingcapitalplanningStockBuffertargetsdrivepurchasedparts,manufacturedcomponentsandfinishedgoodsbuyandmakedecisions

Inventoryisanoutcomeofforecasterror,customerschangingtheir“firm”ordersandoverproducIon

InventorytargetsareplannedandcontrolledforeachSKU–purchasedandmanufactured-raw,componentsandfinishedgoods

InventorytargetsaredynamicallyadjustedbasedonactualconsumpIonandforecasttrends

LeadImesarehighlyvariableStandardleadImesareQuadrantspecific-determinedbyrawmaterial,componentandfinishedgoodsstockbufferreplenishmentpolicies

Current FMSSoluCon



ProducIonflowcontrolledbylotsofmanualintervenIonandspreadsheets

ProducIonflowcontrolledbyestablishingacontrolpoint/Drumineachvaluestream

Mostorderspromisedbasedonforecastedarrivalofmaterialsandunconstrainedcapacity

MTOsalesorderspromisedoncontrolpoint/Drumcapacityloadandmaterialavailability

Primarymeasureisefficiencyandunitsproducedpershi`orday

Primarymeasuresareadherencetothecontrolpoint/DrumscheduleandacIvaIon–producingtherightpartattherightIme

MaterialnotsynchronizedtoproducIonschedule–mostmaterialpushedtotheplantbasedonforecast

Materialsynchronizedtocontrolpoint/Drumschedule–basedonpull

ConInuousimprovementdrivenbycostreducIon

ConInuousimprovementdrivenbyissuesthatmosto`enhinderflowacrosseachvaluestream–FIR

LeadImeslengthenedduetoWIPbuildupandmaterialshortagesandunnecessarychangeovers

LeadImesminimizedandresourceuIlizaIonopImized

Current FMSSoluCon

Flow Management System Objectives - Operations



FMS Synchronization Vision

StockBuffer

TimeBuffer

DDR

DBR

CompanywideFlowManagementSystem(FMS)u)lizingStockBuffers(DDR)andTimeBuffers(DBR)withKeyControlPointsateachmanufacturingloca)ondrivenbyCMSRoadRunnersoSware

Tupelo

Canada Mexico

Paris

NorthAmerica

HyderabadBalagarh

DCs

INDIA

Cessieu LaMure

BarenCn

Vaulx-Milieu

EUROPE

SaoCarlos

Foundry Motors

BRAZIL

BusinessInter-dependencecreatedamajorchallengeforcustomerresponsiveness



FMS Implementation – Tupelo, MS

StockBuffer

TimeBuffer

DDR

DBR


Tupelo

Canada Mexico

Paris

NorthAmerica

HyderabadBalagarh

DCs

INDIA

Cessieu LaMure

BarenCn

Vaulx-Milieu

EUROPE

SaoCarlos

Foundry Motors

BRAZIL




FMS Implementation - Tupelo, MS Plant

Dehydrate/Weld/Paint OilLine

Kit-Machine,Assemble,Finish

HousingBrazing

TerminalAssemblyLine

FinishingComponents



Dehydrate/Weld/Paint OilLine

Rotor&Stator(Paris)

Kits(fromIndia)

Kit-Machine,Assemble,Finish

HousingBrazing

FinishingComponents

Housings

CrankshaZ,Crankcase,Head,

Pistonetal,

Components

1.  Stock-outs 2.  % BR

1.  Schedule Adherence / Activation 2.  Flow Issue Reporting (FIR) Pareto DPS

1.  Red Zone Holes 2. FIR Pareto

MTSMTO

TerminalAssemblyLine

FinishingComponents

•  ImplementedDrum-Buffer-Rope(DBR)andDemandDrivenReplenishment(DDR)•  Decoupledfromtheoutsidesuppliers(India,France,Paris,TN)•  Protectedfrominternalvariability•  CreatedaPOOGIprocessandanewscorecard

FMS Implementation - Tupelo, MS Plant



HighVolume:(40%volume)

(15%ofFGskus)

Lowvolume:Keycustomers(54%volume)

(30%ofFGskus)

LowVolume:Othercustomer(4%volume)

(42%ofFGskus)

MaketoStock

MaketoOrder

PurchasetoStock

PurchasetoOrder/Forecast

1 LT=1–2days

2 LT=2weeks

3 LT=1–2days

1

2 4

PurchasedCompressors(2%volume)

(1%ofFGskus)

3

4 LT=3months

•  LeadTimeMatrixusedformarketsegmentaIon•  42%ofcompressorvolumetobeshippedwithin2days•  96%ofcompressorvolumetobeshippedwithin2weeks•  42%ofFinishedCompressorSKUshavealongLeadTime(approx.3months)•  AsimilarmatrixwasdevelopedforCondensingUnits

•  AllleadImesaredependentoncomponent/compressorbufferstatusØ  IfbufferisemptytheleadAmeextends

Compressors

FMS Implementation - Tupelo, MS Customer Lead Time Matrix



CondensingUnits

HighVolume

Lowvolume

LowVolume

1

2 4

PurchasedCompressors3

MTO

MTS

PTS PTO

Compressors

CommercialRefrigera)on

Refrigerators&Freezers(R&F)

Components

Compressors(Make)Q1–279Q2–615

Total-2022

Units(Make)Q1–69Q2–29Total543

Components(Buy)2100Replenished

3300NonReplenishedTotal-5400

ImplicaCons:•  Manycomponentsareneededtoassembleafinishedgood(compressororunit)•  BuffersizingofonefinishedgoodhasanimplicaIononmanysub-components•  Neededaso`waretooltoaligncomponentswithfinishedgoodsandsizebuffers

FMS Implementation - Tupelo, MS Customer Lead Time Matrix



#ofacCveFinishedGoodsforthisitem(MTO&MTS)

ItemAvg.DailyConsumpConusedforbuffersizing

BlendedforecastfromMTOandMTSrequirements

•  KeepingALLcomponentsinstockiskey•  Neededtodefineamonthlyre-sizingprocesstoensuremaximumavailability

•  Unitsfirst,thencompressors,andthenothercomponents•  HavingforecastvisibilityreducedourforecasIngerrorJ

FMS Implementation - Tupelo, MS Component / Finished Goods Alignment



•  POOGIprocessedfocusedontheControlPoint/Drum

•  AKkitquality•  Noiseissuevariousfamilies•  Massspectrometerthroughput

FMS Implementation - Tupelo, MS Plant Flow Issue Reporting (FIR)



•  POOGIprocessedfocusedonallflowstreamworkcentres

Latesupplyonthrustpate

•  SmallrunsincreaseonTermLinecreatedfocusonfasterchangeovers

•  IncreasedprocessingCmeofAKfamilyduetokitqualityissue

FMS Implementation - Tupelo, MS Plant Flow Issue Reporting (FIR)



•  TerminalAssemblylineSetupreducIon•  Kitqualityimprovement•  Slowdownofthecompressorflowstream

FMS Implementation - Tupelo, MS Plant Flow Issue Reporting (FIR) - Actions



WIP

TerminalAssembly

De-Hydrate

Weld

WeldTest

PaintLine

CoolDown

FinalTest

Pack

Pack

SinglePack

FinalTest

OilLine

FMS Implementation - Tupelo, MS Compressor Flow Stream Improvement



WIP

TerminalAssembly(24s)

•  2separateOilLines(FinalTestandPack)•  1“Off-line”SinglePackarea

•  “WeldTest”requires3operatorstosupportthe12slinespeedcreaIng24secwaitIme•  ExisIngprocessrequirescompressorstobestagedat“WIP”tocooldown(12h

duraIon)•  Thispreventscompressorsfrombeingoiledandtesteddirectlyfromthepaintline

becauseofinsufficientcoolingImetoresetinternaloverloadmechanism•  SinglePackprocessrequiresaddiIonalmanpowerandWIPatpaintdropstagingarea

De-Hydrate(24s)

Weld

(21s)

WeldTest(12s)

PaintLine(12s)

CoolDown(12h)

FinalTest(16s)

Pack

Pack

SinglePack

FinalTest(16s)

OilLine

3operators24swait)me

30minconveyortravelCme




TerminalAssembly(24s)

HadtoSLOWDOWNthea`er“Weld”processesinorderto:•  EliminateoneoftwoFinalTestlinesandCombinePacklines•  Shutdownonecureoven(inPaintLine)•  Increase“CoolDown”conveyortravelImefrom1hto3h(byslowingdown)•  Reducemanpower–35%inPackand50%inWeldTest(30%total)•  ReduceWIP•  IncreasethroughputanddecreaseoverallleadTime(bydetecIngsmallquality

problemsearlier)•  ReduceOE(energyusageandpackagingmaterial)–12%gasconsumpIon

savings

De-Hydrate(24s)

Weld

(21s)

WeldTest(24s)

PaintLine(24s)

CoolDown(24s)

FinalTest(24s)

Pack

OilLine

Slowercycle)me1operator

NOwait)me

3hrconveyortravelCme




•  12%inventoryreducIon(6montha`erimplementaIon–target30%)•  OTDIncreaseto95%atthesameIme•  T/OEproducIvity-verystabledespitesignificantmarketchallenges

77%82%

64%

81%

62%

77%

54%

65%

80%

95%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

3

3.5

4

4.5

5

5.5

6

6.5

7Jan,14

Feb,14

Mar,1

4Ap

r,14

May,1

4Jun,14

Jul,1

4Au

g,14

Sep,14

Oct,14

Nov,14

Dec,14

Jan,15

Feb,15

Mar,1

5Ap

r,15

May,1

5Jun,15

Jul,1

5Au

g,15

Sep,15

Oct,15

Nov,15

Dec,15

Jan,16

Feb,16

Mar,1

6Ap

r,16

Inventory&OTD

Inventory OTD

FMS Implementation - Tupelo, MS Results



FMS Implementation – Brazil

StockBuffer

TimeBuffer

DDR

DBR


Tupelo

Canada Mexico

Paris

NorthAmerica

HyderabadBalagarh

DCs

INDIA

Cessieu LaMure

BarenCn

Vaulx-Milieu

EUROPE

SaoCarlos

Foundry Motors

BRAZIL




•  ReduceinventorylevelsofFinishedGoods,WIPandRawMaterials•  EstablishappropriatecustomerleadImesandensureonIme

delivery•  Decouplereplenishmentofrawmaterials,components,and

finishedgoodsfromforecastedsalesandproducIonordersbyestablishingDemandDrivenReplenishment(DDR)

•  ExploitoutputofmanufacturingfloorbyimplemenIngDrum-Buffer-Rope(DBR)producIonplanningandexecuIon

•  CreateConInuousImprovementprocessbasedonFlowIssuesReporIng(FIR)

•  ImplementCMSRoadRunnerMxtoenabletheabovesoluIons

FMS Implementation – Brazil Objectives



Fundamental Problem to Solve •  TooreliantonthedetailedFORECASTforbuyingandmaking•  WeareincreasingDEPENDANCEbetweendepartments,on

suppliersandoncustomers•  TheprimarymeasureofEFFICIENCYincreasesDEPENDANCE

•  teamdefinedrootcauseproblems•  excellentcommitmentand“compeIIon”betweencountriesJ

•  11flowstreamsvs.3inTupelo•  approx.3000personnel•  Foundry,motors,compressorplants

FMS Implementation – Brazil Objectives



ChangeAgentSkills

ManagingResistance

ImplementaConProjectPlanning&Management

CascadingSponsorship

MoCvaCon Vision

Measures

ExecuCveSponsorship

•  SUSTAINING CHANGE

•  INITIATING CHANGE

•  ChangeManagementFrameworkusedtodirectsteeringcommiree

FMS Implementation – Brazil Prerequisites for Implementing Change



FinalProcessAssembly

AE2

OutsideProcess-Electricals

KitAE2

StampingAE2

WeldingAE2

OBBAE2

PistonMachining

CrankcaseMachiningAE2

Cranksha`MachiningAE2

ValvePlateMachining

CylinderHeadMachiningMBU3

4.5 Days

PP

PP

0.5 day

PPPP

4.5 Days

CompelaPP

PerpetualInventoryinCMSRoadRunner

PP

PP

KITPACKMBU3

PPRotor

Stator

FMS Implementation – Sao Carlos, Brazil Plant



59.5

52.3

45.3

53.2

46.043.9

37.4

43.1 45.142.7 42.4 42.4

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

$60,000

$65,000

$70,000

$75,000

$80,000

$85,000

$90,000

$95,000

Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16

TdBInventoryPerformance

ActualInventory IDO

Dec.2016target=51.3

Sep.2017target=39.5

•  InventoryDollarDays(IDOs)droppedbyapprox.28%fromJune2015–2016targetachieved

•  NeedaddiIonal3-dayreducIontoaccomplishSept.2017objecIve

FMS Implementation – Sao Carlos, Brazil Results



•  FinalizeFMSimplementaIoninNorthAmerica•  IniIateFMSimplementaIoninEuropeandIndia•  DefineprofitablemarketsegmentsusingThroughputEconomicsapproach

•  ImplementCCPMintheNewProductDevelopmentprocess

FMS Implementation – Next Steps



Presenter Bios •  Jack Warchalowski is the President of CMS Montera. •  Prior to CMS, Jack was the head of operations for the High Tech

manufacturer, Ernst & Young management consultant, and a project engineer with Babcock & Wilcox.

•  Jack is a Certified Management Consultant and a Professional Engineer registered in Ontario. He holds an MBA degree from the Wilfrid Laurier University and a Bachelor of Applied Science in Mechanical Engineering from the University of Waterloo in Waterloo, Ontario. In addition, Jack is certified by the TOCICO in all aspects of TOC.

•  Jennifer McIntosh is the Global Director of Sales, Inventory and

Operations Planning for Tecumseh Products Company. She is responsible for global finished good inventory and demand planning.

•  Jennifer is completing her Bachelors of Science Degree in Global Management. She is also a team leader for Tecumseh’s implementation of TOC based Flow Management System globally.

•  Jennifer has worked with Tecumseh for 9 years. She was the Supply Chain and Operations Manager for the Canadian operations before being put in the global position.

Achieving Sustainable Competitive Advantage at Tecumseh

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