Asia Sourcing Update for ISM - FINAL 5-11

NILFISK-ADVANCE
GLOBAL SOURCING UPDATE
A Mid-Size Company Perspective
May 2011
Randy Christoffersen
Vice President of Procurement
Nilfisk-Advance Inc.
1
Nilfisk-Advance, Inc. Confidential

 Company Background
 Global Sourcing Background
 Strategic Approach--Preferred Supplier Report
 Examples of Parts Successfully Sourced in Asia
 Lessons Learned
 Q&A
2
Agenda

 Global leader in professional cleaning equipment
 Member of the NKT Group in Denmark
 $1B in annual sales (NKT sales are $3B)
• North American sales are $300M
 50+ sales offices worldwide
 Major manufacturing locations in US, Mexico, Europe &
China
 Headquarters in Copenhagen, Denmark
 U.S. Headquarters in Plymouth, MN
3
Company Background

North America Plant Locations
4
Seattle, WA
Plymouth, MN
Springdale, ARPhoenix, AZ
Queretaro, MX

5
Core Businesses
Our businesses are
• Industrial and commercial cleaning equipment
• Professional high-pressure cleaning equipment
• Consumer vacuum and high-pressure cleaning equipment
• Services and accessories
Our customers include
• Manufacturers
• Commercial businesses
• Institutions
• Contract cleaners
• Automotive businesses
• Agricultural businesses
• Building & construction companies
• Service companies

6
Net Sales by Product Category
Vacuum cleaners 25%
Other sales 11%
Floor care machines 39%
High pressure cleaners 18%
After-sales market 7%

Nilfisk-Advance’s New Mission Statement
Nilfisk-Advance’s Mission Statement:
“We enable sustainable cleaning worldwide to improve quality of life”
•We provide superior easy to use,
ergonomic products (for the users)
•We ensure a better and healthier life
when our products are used (cleaner
working- and everyday environment)
•We provide the best
equipment – but we do not
perform the cleaning
•We deliver the most efficient
products for our customers
•We work to avoid unnecessary
depletion of natural resources
(water, chemicals, etc.)
•We work against discrimination,
corruption, etc.
•We are a provider
of equipment to
remove any type
of dust, dirt, litter,
waste, debris, etc.
•We are a global organization
•Our products reach every location
on the globe
•We are agile enough to adjust
to all needs – globally
•We embrace the increasing global
need for cleaning
STRATEGIC DIRECTION

Global Sourcing Progress & Targets
GROUP
TARGET
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
% LCC 2008 % LCC 2009 % LCC 2010 YTD % LCC 2011 FC % LCC 2012 FC % LCC 2013 FC
Total North America Floor Care

Global Sourcing Background
 Nilfisk-Advance has been sourcing in Asia for about
15 years.
 We currently utilize our own purchasing office in China
(DGSO) and a trading company in Taiwan (JCD)
 We opened a plant and sourcing office in Mexico in
2009.
9

Locations of DGSO and JCD
10
DGSO
JCD

China & Taiwan Sourcing Offices
 DGSO was set up in 2005 Dongguan, China to facilitate communication with
Chinese speaking factories.
 JCD is a trading company established in the mid-1990’s in Taiwan.
 Primary duties of our Asia offices include:
• Identify potential new suppliers
• Obtain quotes
• Negotiate with our guidance
• Execute tooling & F/A orders (including tooling agreements)
• Schedule and track shipments
• Arrange freight consolidation amongst all the factories
• Follow-up on accounting issues
• Work with factories on quality/delivery issues to determine root cause
11

 2010 imports from Asia:
• 84 Containers
• $8M in spend
• 50+ active suppliers in 2010
 Organization Structures
 Manager
 Tactical buyers
 Quality rep
 Logistics coordinator
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Background: Asia

Background: Mexico/Queretaro
 We have a full time procurement team on the ground at our largest factory in
Queretaro, Mexico.
 Plant was opened in 2009.
 Staff consists of:
• One manager
• One project manager
• Three direct buyers
• One indirect buyer
• One procurement engineer
 Primary duties include:
• Identify potential new suppliers
• Obtain quotes & negotiate pricing
• Execute tooling & F/A orders (including tooling agreements)
• Pay suppliers
• Work with factories on quality/delivery issues to determine root cause
• Lead major supplier performance resolution
13

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Preferred Supplier Strategic Overview
• General Information
Spend/Part Count Data
‘Stoplight’ Category
Growth Indicator
Comments about Factory/Capabilities
# of Visits
We use a R/Y/G approach to manage our sourcing process:

Successful Supplier Examples Suppliers - China
• Power Cords and Cord Sets
• Certifications for all agencies we’ve needed (UL, CSA, TUV, etc.)
• Draws their own wire, extrudes jacket, twists wire, assembles,
molds plugs, etc.
15

• Steel fabricator (punching/stamping/bending/welding/polishing/etc.)
• 1 Robotic Welder
• Small capacity injection mold machines
• Good quality systems
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• Machined parts with tight tolerances
• ISO 9001:2008 Certified
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• Aluminum & Magnesium Die Castings and Machining
• ISO 9001, TS 16949 Certified
• Yellow because of decline in process control in 2010
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Squeegee Frames
Polisher Frames
Brush Decks

• Injection Molding, assemblies, and loose tolerance
machining/stampings
• Parent company also makes terminal blocks, fuse blocks, and
circuit breakers.
• Yellow because of lack of investment in recent years
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Dust Skirt for OBS
Brush Skirt Housing
Gimbal

Successful Supplier Examples Suppliers - Taiwan
• Permanent Mold Aluminum and Machining
• ISO 9002, QS 9000, TS16949 Certifications
• World class supplier
20

• Wire Harnesses, wire assemblies, and printed circuit boards
• ISO 9002, QS 9000, TS16949 Certifications
• Strongest in harnesses
21

• Gear Manufacturing from raw steel to finished product
• ISO 14001, TS16949, QS 9000. Certifications
22

• Molded rubber parts bonded to steel (small)
• ISO 9001-2000 and TS 16949:2002
23

• Push-pull and static cable assemblies
• ISO 9001-2000, ISO 14001 Certifications
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• Ductile and grey iron castings and processing
• ISO 9001-2000, ISO 14001 Certifications
25

Lessons Learned--Overall
 Many commodity categories can be sourced successfully in Asia and Mexico.
 Categorizing suppliers facilitates success.
 Be cautious about suppliers “over-promising.”
 Due diligence processes (such as supplier assessment) need to be the same
worldwide.
 Recognize you will have longer lead times and larger pipelines.
 This can be mitigated with warehousing in some situations.
 Expect occasional air freight will be required.
 Keep quote packages to a few parts if possible.
 Focus on higher volume parts with high labor content.
 Clear technical specifications are a must.
 Low cost tooling is a critical advantage in Asia.
 New products can be developed globally, but timeframes may be extended.
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Lessons Learned—Organization & Structure
 “Feet on the ground” in the region is absolutely critical.
 You cannot manage day-to-day details with Asia suppliers from the U.S.
 Language barriers with smaller suppliers can be significant.
 Central (dedicated) U.S. project management is highly recommended.
 Identify and prioritize projects.
 Track progress regularly and relentlessly.
 Involving other key functions in the process can facilitate faster progress.
 Quality
 Engineering
 Operations Leadership
 Regular visits by U. S. project managers and leadership to key suppliers are
important.
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Q&A
28

Asia Sourcing Update for ISM - FINAL 5-11

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