lely operational excellence 20140402

www.lely.com

Peter Smit

Lely Introduction

Corporate Movie

VISION A sustainable, profitable and enjoyable future in farming

MISSION

We inspire people to create innovative

solutions that help our customers excel in

sustainable milk production, forage

harvesting and energy sourcing.

Sales level € 570 mln. (2013)

Number of employees 2.000 fte

Investments in R&D from

our product turnover

6%

Number of living patents 2.550

Number of R&D units 7

Number of production units 6

Number of markets > 60

COMPANY PROFILE

Turnover Lely Group (in million EUR)

2013: the next step in

business management

• At the end of 2013, Lely moved to the Greenest Innovation Campus.

• The Campus is housing the employees of the Lely Group headquarters

and the two production locations.

The Lely Campus

Lely Astronaut Automated milking system

Lely Vector Automated feeding system

Lely Juno Feed pusher

Lely Discovery Mobile barn cleaner

Dairy products

Lely Splendimo Mowers

Lely Lotus Tedders

Lely Hibiscus Rakes

Lely Tigo Loader wagons

Lely Welger Balers

Forage products

From Grass to Glass…

The cow is always the starting point for each and every product!

Focus

Warranty :

• Improving warranty procedures

• Optimization of our product development process

• Alignment of warranty conditions

Quality :

• Improving our reliability of delivery

• Extra end control of whole goods

www.lely.com

Erik Nijssen, Plant Manager

Dairy Operations

Operational Excellence & Quality

Content

1. Dairy Operations Products

2. Factory lay-out and relocation

3. Quality

4. Specifics Operations

Lely Astronaut Automated milking system

Lely Vector Automated feeding system

Lely Juno Feed pusher

Lely Discovery Mobile barn cleaner

Dairy products

Movie Austronaut Production

Lay out and relocation

Layout en verhuizing Uitgangspunten

• 15% meer oppervlakte en 60% meer capaciteit (!)

• Flow: • Achterwaarts laden en lossen

• Optimalisatie goederen ontvangst

• Minimaliseren magazijn ruimte

• Veiligheid • Reductie reach- en heftruck treintje

• Duidelijke transport- en bezoekerspaden en onderscheid pallets en kleine dragers

• Efficiency / flexibliliteit • Minimaliseren van materiaal handling, one touch

• Geen bovenloop kranen

• Administratieve herindeling

Lay-out development

Final Master layout………

Preparation

• Rapid Experiment with relocation company

• Over 100 learnings

Preparation

Verhuizing

• 14,000 m2 in 18 dagen

• Equivalent aan 3 voetbalvelden of 6,5 woning (per dag)

• 70 eigen mensen

Relocation

Quality

Quality can only be maintained and improved

there were it is made

Reject rate long term positive

The general development of the reject rate has been positive for

the last couple of years.

Reject rate long term positive, but…..

Reject rate of 0.8% sounds good (?), but

Would you put you family on a plane with a 99,2% success

ratio?

0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x

0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x

0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x

0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x

0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x

0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x

0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x

0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x,992x0,992x0,992x0,992x0,

992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,

992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,

992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992

…

Reject rate long term positive, but….. …0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,992x0,9

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An Austronaut has 600 purchased parts (excl. screws, bolts, etc) chance of getting it right

is 0,8%.

What is Lely doing to improve?

IPC (In process control)

IPC is all about putting responsibility back at the

source; the production cells.

Each cell sign off a product which is stated by

them to live up to expectations for the clients (final

customers AND next cell). Each next cell sign for

acceptance of a good semi-product.

LQI (Lely Quality Index)

A4 RU

Product Catagorie Zijde/onderdeel Omschrijving Artikel nr. Norm (NC) Weging Low score High score Low fouten High fouten Totaal

A4 RU Visueel Voorzijde(Links) Las verkleuring onder 30 5 20 1 150

A4 CU Visueel Voorzijde (Rechts) Vlekken aanwezig 5.1004.1375.0 30 5 20 1 150

A4 RU Visueel Voerbakzijde Plaat niet goed gemonteerd 5.1004.5384.0 30 5 20 1 600

LQI defines the quality delivered by our factories,

departments and assembly groups in a value

based on the quality level of our products

(SQR) Supplier Quality

Requirements

SQR further defines the quality expectations of

suppliers for Lely. Expectations on

management systems, continuous

improvement, quality control, AQL, preventive

and corrective measures are included.

What is Lely doing to improve?

Welding standards on technical drawing

Suppliers Day

Specifics Operations

Specifics

Specifics

Specifics

www.lely.com

Peter Smit

Supplier Cooperation

• 2010 - Make shift from operational to strategic

• 2011 - DMO Strong focus on cost reductions

• 2012 - Alignment of organization to NPI

• 2013 - Operational excellence

• 2014 - “Back to the basics”

“ To develop and manage a supplier base that will give Lely a competitive edge in terms of quality, operational excellence, total costs and innovation”

Lely purchasing

Direct Spend 2013 Overview

Suppliers by BU Spend € M % in Total Spend # Suppliers

Electronics € 180 52% 212

Steel € 120 38% 778

Other € 35 10% 239

TOTALS € 335 1.229

Supplier Relationship

Supplier

performance

2

3

1

Supplier

monitoring

Reactive supplier

relationship

Professional supplier

relationship (Win-Win)

Journey to

World-class

Value Sourcing (QLTC)

Aim to have a close cooperation with supplier to:

improve Quality

optimize Logistics

make use of Technology and Innovation

lower total Cost

by:

Setting up teams with people from: Quality, Logistics, Planning,

Engineering, Purchasing supported by Legal, Finance, and other

stakeholders from both Lely and supplier.

And monitoring progress through mutually agreed KPI’s.

Purchasing Reports & KPI’s

Existing reports

• On time delivery > 95%

• Reject rate < 0,4%

• TCO improvement 3.5%

Future reports

• Inventory @Lely per supplier 45% less than 2013 avg

• Warranty costs > 50%

• Quote + lead-time for new item < 3 weeks

Digital dashboard

www.lely.com

Questions & answers