Processes and information technology
Over the past few years, we have worked on the introduction of a new approach to supply chain management and the introduction of the centralised management at group level. This centralised management covers planning, procurement and logistics. In early 2018, we also added all production companies, quality assurance and product compliance.
Based on the revised strategy and the implementation of the new regional structure, our focus has shifted to boosting and streamlining a number of core processes, such as 'Sales & Operational Planning' (S&OP) and ‘New Product Initiation’ (NPI). An added challenge in this context is the evolution of the bicycle and how it is used. E-bikes in particular are becoming an ever-more complex and advanced product, driven in part by aspects such as component integration and the application of connectivity. We will have to adapt and streamline quality assurance and compliance continuously in line with these developments, to safeguard aspects such as the safety of the products themselves and how they are used.
This centralised management of the supply chain is aimed at:
- Improving availability and reducing delivery times;
- Improving quality assurance and product compliance;
- Taking greater advantage of benefits of scale and procurement;
- Reducing working capital utilisation;
- Reducing the complexity of the supply chain and the organisation as a whole.
SALES AND OPERATIONAL PLANNING (S&OP)
In 2018, we continued to work, at regional level, on the introduction of the S&OP process. This process has a monthly cycle and comprises current demand planning and a product development plan that enables rapid adjustments to production and inventory planning. We also use the production planning to calculate material requirements planning, which we can then fine-tune with our suppliers.
As part of the S&OP process, in 2018 we continued to expand the programme for more intensive information exchange with suppliers about planning (collaborative planning). Our main focus on this front was on our largest suppliers and those with the highest delivery risks. In some specific instances, where at some point we had faced limited availability of critical components for our e-bikes and our regular bikes, this more intensive cooperation ensured that suppliers gave us priority on the delivery front.
In 2019, we will continue to streamline the S&OP process to arrive at an integrated operational management system, with the aim of continued improvements to the supply chain performance, in particular in terms of availability, working capital and the link to the financial planning process. Continued improvements in these areas will also enable us to expand and deepen the supplier programme for collaborative planning, using limited additional resources.
NEW PRODUCT INITIATION (NPI)
In 2018, with the introduction of a centrally managed Innovation & Technology team, we also started setting up an NPI process. This process comprises four phases (‘Ideation, Feasibility, Capability and Launch’), which structures and facilitates the product development from idea and concept, via production to the market launch of the end product. This process is primarily intended for our complex products with a high proportion of in-house-developed components that require intensive cooperation between the various specialist teams (Innovation & Technology, Supply Chain, Marketing) and the regional operations.
The NPI process is supervised by the Innovation Board headed by the Chief Commercial Officer. This Board decides on new initiatives and research & development projects on a monthly basis. Prioritisation and allocation of people and resources to the NPI projects is based primarily on commercial considerations.
Following the structuring of our central procurement organisation on the basis of category management, in 2018 we began a more detailed structuring of the supply chain roadmap and the implementation of same. Key elements in this context are the reduction of the number of suppliers on the basis of total cost of ownership criteria and the utilisation of benefits of scale by operating as a group. In the year under review, this approach resulted in immediate savings and the professionalisation of our relationships with our suppliers.
As from early 2018, all production locations report to the Group Director Manufacturing. This director has introduced a renewed production vision in which the production locations (primarily assembly) are considered a network. This enables us to allocate production volumes more effectively within the available capacity to realise efficiency benefits.
Accell Group has a number of centrally managed and ongoing programmes aimed at increasing the sustainability of our production processes, such as efficient energy consumption, waste reduction and the use of environment-friendly packaging. Subjects such as lifespan, reuse, recycling and end-of-life are also important aspects that receive attention across the organisation. All initiatives and the progress made on same are coordinated by our Corporate Social Responsibility (CSR) Manager.
In 2018, our production facility in Turkey received ISO 14001 certification and we launched a process to gain the same certification at our production facility in Hungary. We have a certified Environment, Health & Safety (EHS) Manager at our production facility in the Netherlands and their tasks include conducting energy audits.
In 2018, we used a footprint analysis to determine how many of our own production facilities we need for assembly and what we can outsource to external assembly partners. As a result of this analysis, we have decided to reduce the number of production facilities. For instance, the production of bicycle frames in China will be transferred from our company Delta Metal Technology to one of our existing suppliers; the activities of the Belgian company Brasseur will be integrated in Accell Benelux; and we will scale down the seat production activities at Lepper in the Netherlands. In 2019, we will implement additional optimisations in the production network, placing the emphasis increasingly at our three large assembly companies in the Netherlands, Hungary and Turkey.
Our production facilities account for most of our energy consumption, but our warehouses and offices also affect (to a lesser extent) our energy use. We implemented a number of energy efficiency projects in 2018. For instance, almost all local companies began using LED lighting and we are aiming to complete a full transition to LED lighting in 2020. We have fitted motion sensors in many of our warehouses. In Heerenveen, we are conducting a test that is charting energy use per hour in detail, in part to reduce the energy consumption outside working hours. And also in 2018, we launched a study into alternatives to the use of gas for our paint ovens.
Our objective is to reduce our energy consumption by 1.5% annually. We measure our energy use and CO2 emissions and report the results in accordance with the Global Reporting Initiative (GRI). The table below outlines all the energy sources our organisation uses, as well as natural gas and other fuels, including fuel used to transport people and products.
In 2018, energy consumption declined both in absolute terms (6%) and measured against turnover in euros (9%) compared to 2017. The balance between green and so-called grey energy was less positive (-2%) compared to the previous year.
We expect the integration of our production facilities to enable us to further reduce our energy consumption and CO2 emissions. In the future, we also want to start making the transition towards green energy, and ultimately aim to operate fully on sustainable forms of energy in 2030.
Packaging and waste
Products and parts must be well-protected against damage during transport. This applies to our deliveries to dealers and consumers and to deliveries from our suppliers. In addition to protection, we see increasing the sustainability of our packaging as a priority. In this context, we look at the choice and optimisation of materials, including the reduction of the use of plastics to a minimum, but also at minimising the waste created in the production process and maximising the separation of this waste. Our aim is to reduce our footprint in the organisation’s own packaging and waste by 2-4% per year, calculated per euro in turnover.
In 2018, the total environmental impact as a result of packaging and waste declined by just over 1,000 tonnes of CO2 equivalents. After correction for the percentage of turnover for which data was collected (92%), this results in a reduction of around 8% in CO2 equivalents, calculated per euro of turnover. As of 2018, we also report how our waste is processed.
Effective waste separation and compacting also reduces the number of transport movements and simultaneously contributes to improved recycling.
We consider the collection of discarded e-bike batteries as a key priority. We work with local foundations (such as Stibat and GRS) in Europe for the collection and responsible disposal of discarded batteries. We have made a start on setting up an organisation for the recycling of complete electric bikes.
With the shift from ownership to use, we expect growing numbers of bicycles to eventually find their way back to the manufacturer. We play an active role in working groups that focus on indirect waste flows, environmental legislation and (future) applications that are linked to the creation of a circular economy.
QUALITY AND COMPLIANCE
Product quality requires quality assurance in terms of setting standards, monitoring, control and embedding quality throughout the entire supply chain. This involves aspects such as product development, the suppliers delivering the components, the production facilities and ultimately the delivery to our dealers. In view of the increased complexity of our products, quality requirements and the need to safeguard product safety, in 2018 we initiated a process aimed at structuring our quality assurance and compliance at group level, with the appointment of a Group Director Quality & Compliance.
In 2018, we tightened our test protocols, for both components and finished products. These test protocols go beyond the regular directives in common use or mandatory in the industry, as they also include our own additional test requirements, which depend on the type of component and the type of bike. For instance, the e-MTB models are subjected to a much more stringent test regime. In addition to the more stringent standards, in 2019 we will also boost our monitoring, controls and safeguards.
Our scale and our membership of the World Federation of the Sporting Goods Industry (WFSGI) puts us in a good position to encourage other players in the supply chain to respect human rights, sound labour practices and environment protection. In our talks with suppliers about agreements and purchasing terms, which we now conduct at group level, we also include our terms and guidelines with respect to chain responsibility.
In 2018, we drew up a standard contract which will form the basis of all future supplier contracts. The code of conduct for suppliers is an integral part of this contract and suppliers are obliged to sign this code and be willing to cooperate in any related audits. Our main suppliers have all now signed the improved contracts.
We conduct audits among suppliers under the umbrella of the WFSGI (World Federation of the Sporting Goods Industry). This approach is known as the ‘Responsible Sport Initiative’ (RSI). Accell Group was one of the initiators of this approach. We have set a target of at least 20 audits a year. We also participate in audits conducted at our suppliers by other participants in the RSI. The aim is for our suppliers to be audited once every three years in terms of social and environmental aspects.
In 2018, 22 audits were conducted at our request. The results for 2018 were comparable to previous years. The majority of problems we found were related to the status of buildings (such as escape routes, fire prevention and the storage of chemicals), the handling of the personnel and wage administration and keeping to the correct working hours.
Audits of chemical substances
We conduct internal audits at our local companies on chemical substances from our suppliers. These substances are used to paint parts such as the frame and the front fork, and they are also used in plastic components such as saddles and handlebar grips. At Accell Group, we work exclusively with 100% water-based paints.
In 2018, our REACH laboratory tested a total of 265 components, on which the lab conducted a total of 1320 analyses. The products are selected on the basis of the risk profile of the product. Deviations were found in 9% of cases. In these instances, we worked with the supplier to find a solution.
In 2017, we adapted our Information Technology (IT) policy to bring it fully in line with our corporate strategy and we have since launched various infrastructural, application and digital projects that support our omnichannel and supply chain strategies. In this process, we are increasingly centralising and streamlining the application landscape.
In 2018, this resulted in, among other things, the start of the implementation of a new ERP system in line with an Accell Group template, the central management of data (Master Data Management) and the selection and implementation of a Product Information Management (PIM) system and a CRM system.
PRIVACY AND GENERAL DATA PROTECTION REGULATION (GDPR)
In the context of the new European GDPR privacy legislation coming into force, in 2018 we introduced systems that enable us to register and manage privacy-related matters, such as cookie statements, privacy statements and data processing agreements centrally. We have also taken additional measures to make the payment process more robust. And we are now in much better position to detect issues such as deviations in payment behaviours.
COOPERATION AND COMMUNICATION
In 2018, we introduced a central platform for cooperation and communication - the so-called Accell@Work platform - across a large part of our organisation. The platform enables the staff at a large number of our local companies to cooperate safely and simply with their colleagues and partners, regardless of their location. We will roll out this platform to the rest of our companies in 2019.