Competitive Supply Chains Visits CLAAS
Having loved my Process Operations Management (POM) class, it was a no-brainer that I would take its logical follow-up: Competitive Supply Chains (CSC). The objective of the course is to use the building blocks we got in POM to look at how an effective supply chain strategy can allow a company to differentiate itself from its competition and gain a competitive advantage over them.
To complement our cases and in-class discussion, Guillaume Roels, our professor organised a visit to CLAAS Tractor near Le Mans. CLAAS was founded in 1913 and is a world leader in agriculture engineering equipment. It is the European market leader in combine harvester and the world leader in self-propelled forage harvesters and turns over 3.8 billion €, spreads over 12 facilities with 11,000 employees. We visited its tractor plant in Le Mans.
I would first like to thank all the staff from CLAAS tractors for the time they took to take us through their business model, production and current challenges. In particular Alister Lamb (Sales, Marketing and OEM Director), Agnes Pokorny (Communication Manager), Pierre Grondin (Directeur General Industriel), Bastien De Marcé (Head of Logistics Engineering), and Olivier Leffray (Supplier Qualification & Logistics New Project Coordinator).
In Le Mans, CLAAS produces 10,000 tractors a year with 1,000 employees.
The factory has been on-going a couple of significant modernisation projects, from going Lean to adding new production lines, a test centre as well as automated storage of parts. 'CLAAS Forth' was on-going and aiming at creating a new assembly line with optimised processes, better working conditions and better tools.
CLAAS assembles over 10,000 components into various types of tractors that their customers want all over the world. I was quite surprised to discover the massive variety in tractors that exist. Different companies, and different industries require different tractors. CLAAS offers several thousands of different combinations.
CLAAS’ major challenge lies in how to manage:
- 300 suppliers who deliver with different lead times and at different frequencies (from 8x a day to once a month). CLAAS tries to give them 45 months visibility
- their production line that consumes these different parts in a build-to-order model
- demand from clients that expect shorter lead times (currently 12 weeks) and guarantees on deliveries
CLAAS Tractors uses SAP as its ERP to monitor all its logistics chain. The tool enables them to have clear visibility on everything going on in the company. They use it to interface via EDI (where possible) with suppliers and also enables its suppliers to access their orders via a web portal. The latter is very common given that their supplier base is heavily fragmented and not necessarily tech-savvy.
The production line was what surprised me the most.
When you think production line and chain work, you tend to imagine a long line producing repetitively the same item over and over. Given CLAAS’ product variety, they identified that this can’t work and hence rather than multiply the lines for different products, they introduced flexibility into their production. Hence no two tractors following each other are the same. Before the 'Forth project', depending on the task to execute, the operators would have to select through various items the one that they need to install, and then proceed to its installation. This introduced regular mistakes into the production process and rework would then need to be carried out at the end of the chain. To change this, a separate operator identifies all the parts that need to be mounted on a tractor. These would then be placed on racks that would follow the tractor module being assembled along the line. A different operator is now in charge of executing the installation. Splitting these two tasks has enabled CLAAS to reduce errors by specialising and focusing the operators on parts of the process. Nevertheless, because each tractor is different, there is variety in the operator’s job hence giving him a more varied work post. CLAAS has also built quality into its production line. There are several quality controls that are carried out along the line. In case of any problems, they have a mobile team in charge of correcting errors where they are identified rather than wait for the reworking phase (as was done in the past).
CLAAS aggregates demand from its different sales teams and after having adjusted it based on historical trends, it then matches its supplier orders and production cycle to fulfil the orders. Given the high seasonality of their business (linked to seasonality of agriculture) and short lead times, in periods lower demand CLAAS builds some tractors to stock. It chooses which models to stock via interactions with its sales teams as well as historical data.
This visit was generally a very interesting one that I think was a good reminder of what production looks like in a real-life setting.
As MBA students we tend to remain very theoretical on the issues we tackle and work on. One of our strengths is identifying when a process/company/project is not run efficiently. We are good identifying a gap and coming up with recommendations to optimise or re-organise them.
I just had a Private Equity class where we would easily identify that a target business had too many brands, a production process that was too scattered and fragmented and lacked focus. Recommending modifications and optimisations is an easier part of driving change. It is important to keep an eye on the real-life impact and feasibility of implementation as these involve juggling staff, real-life on-going production, costs and market evolutions.
As future company leaders, consultants and entrepreneurs, I strongly recommend always keeping in mind and verifying what happens on the ground so that we ensure we take decisions that make business sense and can be implemented in our organisations.