Wärtsilä: Supply Chain Collaboration

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The two companies anticipate high performance in all aspects of their newly combined supply chain that will keep materials and production costs low, help improve economies of scale, support an ever-expanding scope in production and procurement, and allow both companies' operations to evolve efficiently.  

Wärtsilä is a global company that is seeking to expand its global capabilities. Key to that mission is regularly developing new manufacturing and sourcing relationships and thereby keeping costs reasonable while addressing new market opportunities.

This "global manufacturing improvement" priority is particularly important to Wärtsilä Italia, which recently set out to explore sourcing/manufacturing opportunities and joint venture arrangements with companies in the Far East. One highlight is a joint venture with Hyundai—a division of the Hyundai Kia Automotive Group and the world's sixth-largest automaker—to produce and assemble engines in South Korea. Key objectives of the project include raising production capacity, reducing workforce cost, and identifying/engaging lower-cost suppliers. It also is an excellent chance for Wärtsilä to expand its Asian customer base and preempt the entry of current and potential competitors.

Wärtsilä Italia asked Accenture to help design the venture's supply chain organization; help ensure and improve materials availability of Korean plant suppliers, manage a localization sourcing plan and develop a production model. Accenture was the ideal choice, given our extensive global, manufacturing and materials management experience, and our lengthy and successful track record on previous Wärtsilä engagements.

Accenture professionals from the Accenture Supply Chain service line are working with Wärtsilä Italia's sourcing, planning, manufacturing and engineering organizations to develop and implement an agile, end-to-end joint-venture supply chain. This effort also encompasses organizational design, extensive knowledge-transfer programs, and detailed performance metrics for guiding and accelerating continuous improvement.

Key components of the effort include:

• Supply chain planning—improving cost efficiency and creating synergies and collaboration across companies. With Accenture's assistance, the Wärtsilä/Hyundai operation will exemplify customer-driven manufacturing operations.
  
  
• Sourcing and procurement—developing a reliable, economical and efficient materials supply chain that will allow the plant to operate independently by 2010. Up to that date, Wärtsilä Italia will act as procurement and logistics departments of the Korean plant. Concurrently, Accenture is helping develop the best possible lineup of innovative, low-cost and collaboration-oriented suppliers across the region. In addition, an integrated procurement plan is being developed.
  
  
• Manufacturing—instilling the South Korean plant with the "right manufacturing" know-how, strategies, processes and principles in order to enable the plant to be aligned to Wärtsilä's quality level. Accenture is also helping Wärtsilä Italia develop an appropriate logistics department that can manage the capacity requested of the Korean plant.
  
  
• Fulfillment—maximizing service and minimizing operating costs by responding quickly, efficiently and securely to customer requests. Toward this end, Wärtsilä, Hyundai and Accenture are focusing on high performance in four key areas: fulfillment operating model, network/flow-path modeling, global trade, and transportation and distribution center operations.

 

This is a long-term initiative that will significantly affect the joint fortunes of Wärtsilä and Hyundai. Upon completion of the engagement, the two companies anticipate high performance in all aspects of their newly combined supply chain: integrated, end-to-end coordination of materials management, supplier management and order-management; planning and forecasting; manufacturing; storage and distribution; transportation; and customer service.

Some indicators are already showing that Accenture is delivering results at Wärtsilä: At the Korean plants, all bills of materials for engines slated for production in the third and fourth quarters of 2008 have been created with a 97 percent completion rate. Vendors’ capacity has been reserved in advance and 100 percent of the purchase orders for Korean engines have been planned. In addition, agreements coverage is now above 96 percent versus the 70 percent achieved only 12 months ago.

The achievement will meet key criteria for high performance—the ability to outperform competitors profitably over time—because of its cost, revenue and corporate-growth implications. Wärtsilä and Hyundai's emerging, integrated supply chain will keep materials and production costs low; help improve economies of scale; support an ever-expanding scope in production and procurement; and allow both companies' operations to evolve efficiently as market and customer needs change. Plus, the new base of operations will help them profitably tap emerging markets across East Asia—a region that few competitors now address.