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Committed to sustainable productivity The Atlas Copco Group, 2011.

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Presentation on theme: "Committed to sustainable productivity The Atlas Copco Group, 2011."— Presentation transcript:

1 Committed to sustainable productivity The Atlas Copco Group, 2011

2 Content The Atlas Copco Group Industrial Air Purchasing strategy within Atlas Copco Atlas Copco Group Presentation 2011 Purchasing Industrial Air Division 2011

3 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 Groups 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

4 A leading industrial provider Atlas Copco Group Presentation 2011 Construction 24% Manufacturing 25% Mining 6% Others Sales per customer category 11% 28% Services Process industry

5 Innovative solutions Atlas Copco Group Presentation 2011 Services Products Knowledge

6 Products Atlas Copco Group Presentation 2011 Industrial toolsConstruction equipment CompressorsMining and rock excavation Aftermarket and rental

7 Knowledge Atlas Copco Group Presentation 2011 Competence centers Product design Applications

8 Long-term relationships through service Atlas Copco Group Presentation 2011

9 A strong brand portfolio Atlas Copco Group Presentation 2011

10 Customers in 178 countries Atlas Copco Group Presentation 2011 North America 18% Europe 32% Africa/ Middle East 11% 28% 11% Asia/ Australia South America Revenues per geographic area

11 Supporting a wide variety of industries Atlas Copco Group Presentation 2011 Compressor Technique 43% Industrial Technique 9% Construction Technique 32% Revenues per business area Mining and Rock Excavation Technique 16%

12 Four business areas Compressor Technique Industrial Technique Mining and Rock Excavation Technique Construction Technique Industrial compressors Gas and process compressors Air and gas treatment Service Industrial tools Assembly systems Service Rock drilling equipment - underground and surface Loaders and trucks Mobile crushing Exploration drilling and ground engineering Rock drilling tools Service Light construction equipment Road development equipment Portable compressors and generators Service 2010 figures pro-forma Revenues BSEK 30.0 Operating margin ~25% 2010 figures reported Revenues BSEK 6.5 Operating margin 19.5% 2010 figures pro-forma Revenues BSEK 22.5 Operating margin ~22% 2010 figures pro-forma Revenues BSEK 11.2 Operating margin ~10% April 20, 2011 12

13 Industrial Technique Atlas Copco Tools and Assembly Systems Motor Vehicle Industry Atlas Copco Tools and Assembly Systems General Industry Chicago Pneumatic Tools Tooltec Efficient organization Atlas Copco Group Presentation 2011 Executive Group Management and corporate functions Oil-free Air Industrial Air Specialty Rental Gas and Process Compressor Technique Service Airtec Compressor Technique Mining and Rock Excavation Technique Underground Rock Excavation Surface Drilling Equipment Drilling Solutions Secoroc Geotechnical Drilling and Exploration Mining and Rock Excavation Technique Service Rocktec Customer centers and service providers President and CEO Board of Directors Construction Technique Construction Tools Road Construction Equipment Portable Energy Construction Technique Service

14 Shared services across businesses Atlas Copco Group Presentation 2011 FinancingEngineering support Administration

15 2010 results Atlas Copco Group Presentation 2011

16 First in MindFirst in Choice ® Atlas Copco has a clear vision

17 Core values Atlas Copco Group Presentation 2011

18 Strategic directions Atlas Copco Group Presentation 2011 Growth: Organic and through acquisitions Innovations and continuous improvements Aftermarket – parts and service

19 Driving innovation Atlas Copco Group Presentation 2011 Minetruck Energy recovery unit for rotary screw compressors Controller for electric nutrunner and screwdriver Dynapac asphalt paver

20 Competence development Atlas Copco Group Presentation 2011

21 Community engagement Atlas Copco Group Presentation 2011 EducationWater for AllDisaster relief

22 Products, services and solutions First in MindFirst in Choice® for customers and prospects for all brands. Increase customer loyalty. Increase customer energy efficiency by 20% by 2020. Offer safe and reliable products and services. Operations First in MindFirst in Choice® employer for todays and future employees. Competence development to achieve good results and yearly coaching/ appraisals to all employees. Increase diversity in both gender and nationality. Encourage internal mobility. Safe and healthy working environment for all employees. Zero work-related accidents. Sick leave below 2.5%. No corruption or bribes.Work with business partners committed to high ethical, environmental and social standards. Develop new products and services with a life- cycle perspective. Construct Atlas Copco buildings according to sustainable building standards. Decrease CO 2 emissions from operations by 20% in relation to cost of sales by 2020. Decrease CO 2 emissions from transport of goods by 20% in relation to cost of sales by 2020. Keep water consumption at current level. Reuse or recycle waste. Financials Annual revenue growth of 8% over a business cycle. Sustained high return on capital employed. All acquired businesses to contribute to economic value added. Annual dividend distribution about 50% of earnings per share. Goals for sustainable, profitable development Atlas Copco Group Presentation 2011

23 Compressor Technique

24 World leader in the compressed air business Atlas Copco Group Presentation 2011 Compressor Technique Construction Process Services Sales per customer category 40% 8% 11% 5% 28% Manufacturing Mining Others

25 Industrial compressors Atlas Copco Group Presentation 2011 Compressor Technique

26 Gas and process compressors and expanders Atlas Copco Group Presentation 2011 Compressor Technique

27 Quality Air Solutions Atlas Copco Group Presentation 2011 Compressor Technique

28 Specialty rental Atlas Copco Group Presentation 2011 Compressor Technique

29 Create customer loyalty through service Atlas Copco Group Presentation 2011 Compressor Technique

30 Industrial Technique

31 Innovative industrial tools and assembly systems Atlas Copco Group Presentation 2011 Industrial Technique Construction 2% Manufacturing 82% Process 2% Services Sales per customer category 2% 12% Other

32 Industrial power tools Atlas Copco Group Presentation 2011 Industrial Technique

33 Assembly systems Atlas Copco Group Presentation 2011 Industrial Technique

34 Vehicle service power tools Atlas Copco Group Presentation 2011 Industrial Technique

35 Mining and Rock Excavation Technique

36 Strong focus on productivity Atlas Copco Group Presentation 2011 Mining and Rock Excavation Technique Construction 36% Services 1% Mining 60% Sales per customer category 3% Others

37 Underground rock drilling, loaders and mine trucks Atlas Copco Group Presentation 2011 Mining and Rock Excavation Technique

38 Surface drilling equipment Atlas Copco Group Presentation 2011 Mining and Rock Excavation Technique

39 Blasthole, water well, oil and gas Atlas Copco Group Presentation 2011 Mining and Rock Excavation Technique

40 Rock drilling tools Atlas Copco Group Presentation 2011 Mining and Rock Excavation Technique

41 Exploration and ground engineering Atlas Copco Group Presentation 2011 Mining and Rock Excavation Technique

42 Increasing productivity through service Atlas Copco Group Presentation 2011 Mining and Rock Excavation Technique

43 Construction Technique

44 Construction tools Atlas Copco Group Presentation 2011 Construction Technique

45 Road construction equipment Atlas Copco Group Presentation 2011 Construction Technique

46 Portable compressors and generators Atlas Copco Group Presentation 2011 Construction Technique

47 Global, local service Atlas Copco Group Presentation 2011 Construction Technique

48 48 Industrial Air Division

49 Industrial Technique Atlas Copco Tools and Assembly Systems Motor Vehicle Industry Atlas Copco Tools and Assembly Systems General Industry Chicago Pneumatic Tools Tooltec Atlas Copco Group Presentation 2011 Executive Group Management and corporate functions Oil-free Air Industrial Air Specialty Rental Gas and Process Compressor Technique Service Airtec Compressor Technique Mining and Rock Excavation Technique Underground Rock Excavation Surface Drilling Equipment Drilling Solutions Secoroc Geotechnical Drilling and Exploration Mining and Rock Excavation Technique Service Rocktec Customer centers and service providers President and CEO Board of Directors Construction Technique Construction Tools Road Construction Equipment Portable Energy Construction Technique Service

50 50 Product Overview of Industrial Air Division Oil-Injected screw compressors 5-90 kW Oil-Free tooth compressors Oil-Free Water-injected screw compressors Oil-Free Piston Oil-Injected piston Membrane dryers Dessicant dryers Refrigerant dryers Filters Air Treatment Ancillaries

51 51 Focus On Value Products Variable Speed Drive Technology The Environment WINS The Customer WINS Atlas Copco WINS Energy Savings up to 35 %

52 52

53 53 Industries - Where do we compete to win? Chemical Food & Beverage Instrument air Automotive Marine TransportMobile snow guns Manufacturing Petrol stationsPaper Electronics Pharmaceuticals Textile Oil & Gas And much more…

54 Atlas Copco Group Presentation 2011

55 55 Purchasing within ATLAS COPCO

56 Industrial Technique Atlas Copco Tools and Assembly Systems Motor Vehicle Industry Atlas Copco Tools and Assembly Systems General Industry Chicago Pneumatic Tools Tooltec Atlas Copco Group Presentation 2011 Oil-free Air Industrial Air Specialty Rental Gas and Process Compressor Technique Service Airtec Compressor Technique Mining and Rock Excavation Technique Underground Rock Excavation Surface Drilling Equipment Drilling Solutions Secoroc Geotechnical Drilling and Exploration Mining and Rock Excavation Technique Service Rocktec Customer centers and service providers Construction Technique Construction Tools Road Construction Equipment Portable Energy Construction Technique Service Group level :Purchasing Coordination meeting (quarterly) Division level : Purchase council (monthly)

57 Purchasing organization Industrial Air Division 57 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

58 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 58

59 Purchasing within Atlas Copco Why do we need Sourcing – Purchasing ? Purchasing Mission – Vision – Strategy Purchasing Strategy – Application Sourcing process versus Design process 59

60 60 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

61 61 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 chain in order to continuously and consistently lower the total cost. Purchasing Strategy - Mission

62 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

63 63 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 targets based 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 its customers continuous innovation in products and processes that will allow the Group to remain the Leader in Innovation of its market. Purchasing Strategy - Vision

64 64 Purchasing Strategy : the four pillar model Technical Competence / Product and Process Development Quality Logistics Total Cost Financial Stability Company Profile 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:

65 65 Purchasing Strategy Technical Competence / Product and Process Development Quality Logistics Total Cost Financial stability Mission / Vision / Values of the company Company strategy Market position / market share Company structure & organization Business Code of Practice Commitment of the management Financial Stability / Company Profile

66 66 Purchasing Strategy Quality Logistics Total Cost Financial Stability / Company Profile 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

67 Purchasing role in the product development process feasibility :marketing master specification :marketing functional prototype :engineering production proto t ype:engineering pilot batch :manufacturing introduction & follow up: marketing Feasibility: Orientation preconcept. Pre- development Project master specification Functional prototype Production prototype Pilot batch Manufacturing preparation and engineering Market introductio n and feedback 12345123451234512345 6 Project leadership changes during project Purchasing

68 68 Cost Low High Degree in which specifications are firm Feasibility product concept functional prototype Detailed design production prototype Product preparation pilot batch Time Costs related to engineering changes Degree of freedom for decisions Product development Series Production

69 Project follow-up Divisional level : monthly Product Committee Purchase dept. : monthly project meeting : –Product redesign projects –Purchase projects

70 70 Technical Competence / Product and Process Development Purchasing Strategy QualityTotal Cost Financial Stability / Company Profile 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 Logistics

71 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

72 Logistics Monthly logistical meeting : purchasing + production Delivery performance Analysis 10 worst suppliers + action plan Status Logistical excellence program Atlas Copco Group Presentation 2011

73 73 Technical Competence / Product and Process Development Purchasing Strategy Logistics Total Cost Financial Stability / Company Profile 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 Quality QUALITY of Business ACTIVITIES throughout the entire COLLABORATION

74 Quality Monthly quality meeting : purchasing + production + engineering PPM evolution Analysis 10 worst suppliers + action plan Status Quality Improvement Programs Atlas Copco Group Presentation 2011

75 75 Logistics Technical Competence / Product and Process Development Purchasing Strategy Quality Financial Stability / Company Profile 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 Total Cost

76 76 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 Parts Supplier 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)

77 Committed to sustainable productivity. Atlas Copco Group Presentation 2011

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