Operating excellence at Schneider Electric : real potential for improving the gross margin
Schneider Electric launched its new company program in March 2002, New Electric World (NEW2004) intended to help the Group succeed by defining specific goals : Be more customer centric, Be committed to quality, Be more global, Increase our people’s commitment, Think innovation, Develop corporate community responsibility. The Group also set some performance targets : achieve a gross margin of 43.5% and an operating margin of 14% in 2004.
Within this framework, Schneider Electric presented today its four key action plans to improve the gross margin : Six Sigma, Purchasing, Manufacturing, Quality and Value Analysis. The aim of these plans is to generate productivity of 5% per year, representing the main vehicle for achieving the performance goals of NEW2004.
Schneider Electric has used the Six Sigma method in 120 projects, representing EUR 61 million for the Group, including EUR 14 million in potential savings and profits of EUR 47 million in terms of reduced risk for the company. The Six Sigma method requires training for Group employees conducting these projects. By the end of the NEW2004 program, Schneider Electric target is to deploy 2,500 projects.
The Purchasing action plan also involves some significant challenges since it concerns 100% of the Group’s purchasing, or EUR 4.2 billion per year, and aims to double purchasing productivity. The plan sets down new priorities : globalization, internationalization, organization and process review. This has resulted in new purchasing rules and greater efficiency within the function, which should result in savings of EUR 230 million per year by the end of 2004.
The Manufacturing Excellence action plan aims to generate accumulated productivity gains of 20% in direct labor and manufacturing base costs by the end of 2004, representing EUR 110 million per year, by the implementation of a « lean manufacturing » program. The Manufacturing Excellence plan was deployed in 17 manufacturing sites in 2002. The aim is to deploy it in 100 plants by the year 2004, representing more than 80% of all the Group’s direct labor and manufacturing base costs.
The Quality & Value Analysis plan aims to cut the production cost of products by improving their quality and value as perceived by the customers. In order to do this, Schneider Electric has developed a method for auditing the cost of products and their components, which can pinpoint irregularities and set up corrective measures. Schneider Electric will devote 25% of its Research & Development expenditure on this method. The target of the Quality & Value Analysis plan is to achieve productivity of EUR 60 million per year by the end of 2004.
To reach this presentation click on the link below