CLUSTERS SETTING UP LINKAGE PROGRAMMES John Varney Nottingham Business School1 Czech Republic...

CLUSTERS

John Varney Nottingham Business School 1

SETTING UP LINKAGE PROGRAMMESSETTING UP LINKAGE PROGRAMMES

Czech Republic Supplier Czech Republic Supplier Development Development

ProgrammesProgrammes

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What is success in a supplier development programme?

Traditional Measures

Increased local content in manufacturing by FDI’s and others.

Supply chain position improvement

Higher innovation and product development

Less traditional measures

Culture change/Attitudinal change

Collaborations

Active participation by MNCs

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LOCAL CONTENTLOCAL CONTENT::as a percentage of value of goods producedas a percentage of value of goods produced

2001/2 2002/3

ABB EJF 20 15Alps 5 20Celestica 10 17Flextronics 7 12Matsushita Plzeň 9 10Schneider El. 40 60Siemens Automotive 1,5 2,5TRW Benešov 21 30

Average (not weighted) 14% 21%

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83%

63%

45%

44%

7%

0% 20% 40% 60% 80% 100%

Latest developments on investment incentives

Latest developments on the Supplier DevelopmentProgramme

AfterCare Programme

Latest developments on sites

Other

Base: All respondents who answered (N=150)

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Inherent problems with supply chain improvement

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INDUSTRY SUPPLY CHAIN MANAGEMENT

Other

- PACKAGING MATERIALS

- AUTOMATION

Electronic Industry

Components Engineering Supply

- SEMI-CONDUCTOR

- TV TUBE

- PCBs

- PCB ASSEMBLIES

- CABLES

- CABLE HARNESSES

- POWER SUPPLIES

- METAL: STAMPING,

PRESSING, EXTRUSIONS

- ENCLOSURES: METAL,

PLASTIC

- FINISHING: PLATING,

PAINTING, HEAT

TREATMENT

- TOOLING: PRESS TOOLS,

INJECTION MOLDS,

SPECIAL PURPOSE JIGS

AND FIXTURES

- MACHINERY

- CASTING, DIE

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Multi Nationals

First tier Second tier Third tier

Nature of relationship

Close family

Partner

Inter dependency

High trust

Relationship based


Cousin

Provider

Dependency

Medium trust

Specification based


No ties

Servant

dominated

No trust

Price based

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How can movement be achieved in this linear How can movement be achieved in this linear system ?system ?

CollaborationCollaboration: :

Innovation:Innovation:

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Examples of Innovation and product developmentLUX

One off robotics, PERA, etc.,

TANEX

From constituent part to sub assembly

ISOLIT BRAVO

Move from complete products to components to aid workload balance. Using distinctive competence for tool making

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CEOs of multi national involved in directing the programme

Support for active matching / partnershipBuild on mutual interestInvolvement in workshops and programme

HOWHigh level focus group,Meet the buyer eventsWorkshop attendanceCreation of Purchasing Directors group

Involvement of MNCs is essential if suppliers are to improve their position.

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

Strategic Planning

Marketing

Manufacturing processes

Export advice

Quality Management

Motivation

Customer Contacts

Inventory Management

Feasibility/Capital

Human resources

Finance and MIS

Market Research

Employment Law

Tax Planning

Grant aid

Study Visits

IS /IT

Auto industry expert

Technology exploitation

Companies’ view

Consultants’ view

Areas for improvement

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The MNCs’ experience with the suppliersThe MNCs’ experience with the suppliers

Experience with suppliers

0,0

1,0

2,0

3,0

4,0

5,0

Co

mm

un

ica

tion

Un

de

rsta

nd

ing

cust

om

er

ne

ed

s

Re

spo

nse

to

en

qu

iry

De

live

ryre

liab

ility

Fle

xib

ility

Pro

ble

mso

lvin

g a

bili

ty

De

sig

n a

nd

de

velo

lme

nt

Qu

alit

y

Sa

tis

fati

on

(fro

m 1

to 5

)

Selected Non selected Others

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Supplier Buyer Value CzK thousands

Lux spol s.r.o Tokai Rika 20,000

Okula Nyrsko a,s ABE 8,000

Okula Nyrsko Schefenacker a.g 15,000

Okula Nyrsko Panasonic Pilsen 60,000

Ronas Tokai Rika 500

Ronas Paucaplast (France) 1000

Tanex Plasty Matsushita 460

104,960,000.00 Czech Korun of additional business attributed to the programme by the four of the best performing SMEs Period from close of phase one to September this year (9 months)

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Supplier No.

Customer (optional

information)

Year of cooperation

Contracts directly

attributed to Program -

with electronic

MNCs

Information multiplied

by the number of

years

Contracts not-

attributed to program

but with electronic

and related MNCs

Total (mil. CZK) 470 1202.1 302.3

(mil. USD) 18.07 46.2 11.7

Most recent figures new business associated with participation in the programme

FIAS Jan 2004

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Number of companies, whishing Number of companies, whishing to continue in the programme, indicates good to continue in the programme, indicates good

acceptance of the programme among the suppliersacceptance of the programme among the suppliers

Companies Number of

answers

Which would like to continue 18

Which are not sure 1

Th

e S

elec

ted

su

pp

lier

s

Which would not like to continue 1

Which would like to participate in the intensive phase 17

Which are not sure 3

Th

e N

on

sele

cted

su

pp

lier

s

Which would not like to participate in the intensive phase 3

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ConsultantsConsultants

SuppliersSuppliers

UniversitiesUniversities GovernmentGovernment

AgencyAgency

Transnational Transnational CorporationsCorporations

The ActorsThe Actors

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The RolesThe RolesSuppliers

Give resources to the programme. Have commitment to self improvement.

TNCs

To support the programme. Give advice and guidance Place orders with companies in the programme

Universities

Faculties of Engineering, Business & Economics

Provide expertise not normally available to smaller SMEs

Consultants

Provide on going general support to companies and help identify expert assistance required from Universities

GovernmenGovernment Agency t Agency

CoordinateCoordinatess

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A key to success is the leadership of the A key to success is the leadership of the programme and the capabilities of the programme and the capabilities of the people engaged in the delivery.people engaged in the delivery.

Leaders Leaders

Should be entrepreneurial, have a Should be entrepreneurial, have a commercial background, understand the commercial background, understand the needs of the customers and the clients .needs of the customers and the clients .

Ministers should champion programmes this Ministers should champion programmes this ensures that TNCs engage.ensures that TNCs engage.

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STAFFSTAFF

Commercial outlookCommercial outlook

Some technical knowledge or ability to be Some technical knowledge or ability to be trainedtrained

Energy enthusiasmEnergy enthusiasm

Knowledge of sourcing and supply chain Knowledge of sourcing and supply chain managementmanagement

Ability to operate at different levelsAbility to operate at different levels

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PROGRAMME PROGRAMME

Ministry commit to a pilot programmeMinistry commit to a pilot programme

Funding identified (costing to be covered later)Funding identified (costing to be covered later)

Ministry ( steering group) appoint programme leaderMinistry ( steering group) appoint programme leader

Programme leader and ministry identify sectors Programme leader and ministry identify sectors

Programme leader and Ministry agree methodologyProgramme leader and Ministry agree methodology

Concrete plans drawn up for programmeConcrete plans drawn up for programme

Staff selectedStaff selected

Programme pre work is done (selection methods, Programme pre work is done (selection methods, criteria, numbers)criteria, numbers)

Go publicGo public

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Programme outlineProgramme outline

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PILOT PROGRAMME LEARNINGPILOT PROGRAMME LEARNING

• Develop self relianceDevelop self reliance

• Legacy systemsLegacy systems

• Cost reduction Cost reduction

• Embed the conceptEmbed the concept

• Spin off initiativesSpin off initiatives

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Selected Companies

European Union Experts

Multinational Companies

CzechInvestKPMG Team

EU Mentor Czech Consultant

Mentoring Team

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Selected Companies

European Union Experts

Multinational Companies

KPMG Team

CzechInvest Czech Consultant

Business Improvement Team

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Initial Evaluation

Based on self assessment and reference

Selection

CzechInvest

EFQM + self assessment

WORKSHOP

Development plan

Consultants

Progress Assessment

Offer to MNC CzechInvest

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CostsCosts

Pilot programme Pilot programme €3,000,000.00€3,000,000.00

Second Programme Second Programme €3,000,000.00€3,000,000.00

Legacy ProgrammeLegacy Programme € 850,000.00€ 850,000.00

Number of companies in the intensive phase Number of companies in the intensive phase of the programme.of the programme.

PilotPilot 2020

Second ProgrammeSecond Programme 2525

Legacy programme Legacy programme 5050

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Warning these figures could mislead

At first look it appears that 150,000 euros were spent on each company in the first programme and 120,000 in the second. However, it must be remembered that staff development and consultant training was taking place at the same time.

This cost is not applicable to future programmes so the last figure € 17000 is nearer to a true cost.

Even using the full €3,000,000.00 cost of the pilot the return shown so far is 15:1 return on investment

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Spin off programmesSpin off programmes

The competencies developed during The competencies developed during the Pilot and the second programme the Pilot and the second programme amongst CzechInvest staff will be amongst CzechInvest staff will be used to enable a new programme for used to enable a new programme for Innovation assistance for SMEs to be Innovation assistance for SMEs to be started at the end of this year. A started at the end of this year. A further 25 companies will be further 25 companies will be selected for this.selected for this.

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Return on expenditureReturn on expenditure

It is very early to begin true impact It is very early to begin true impact assessment but if we take what we know assessment but if we take what we know from the pilot.from the pilot.

17 companies $46m extra business17 companies $46m extra business

Increases in FDI still ahead of all global Increases in FDI still ahead of all global trendstrends

High degrees of stakeholder satisfactionHigh degrees of stakeholder satisfaction

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ContributioContribution to costn to cost Govt.

Agency

SME

Importance to programmeImportance to programme

Universities

MNCs

High

High

Low

Low

Size of circle represents relative

resource (not financial) implications

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ContributioContribution to costn to cost

Govt. Agency

SME

Importance to programmeImportance to programme

Universities

MNCs

High

High

Low

Low

Size of circle represents relative

resource implications

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The CzechInvest team with the support of The CzechInvest team with the support of Czech Consultants will carry on the work of Czech Consultants will carry on the work of the supplier development programmes in the supplier development programmes in order to:order to:

• Retain existing FDIRetain existing FDI

• Attract new FDIAttract new FDI

• Improve National competitivenessImprove National competitiveness

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THE FUTURETHE FUTURE

For SMEsFor SMEs

Progression from linkages toProgression from linkages to

NetworksNetworks

ClustersClusters

For MNCsFor MNCs

Governance issuesGovernance issues

Ethical approach assured by open practicesEthical approach assured by open practices

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[email protected]

[email protected]

THANK YOU FOR LISTENING

SHOULD YOU NEED MORE DETAILED INFORMATION PLEASE SPEAK TO DURING THE

CONFERENCE OR CONTACT ME BY EMAIL

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Critical success factors for supplier developmentCritical success factors for supplier development

PeoplePeople

The right companiesThe right companies

The right balance of public private actorsThe right balance of public private actors

Tight loose approachTight loose approach

High level of involvement from recipient countryHigh level of involvement from recipient country

Early winsEarly wins

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Interviews with Purchasing managers of MNCs

(11 MNCs interviewed)

Comprehensive data gathering from the suppliers

(43 suppliers visited)

Interviews with the general managers

Improvement measured against the Checklist

Assessment of financial performance

The assessment methodology consisted of two integral The assessment methodology consisted of two integral partsparts

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CLUSTERS SETTING UP LINKAGE PROGRAMMES John Varney Nottingham Business School1 Czech Republic...

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