ascci quarterly review

ASCCI was launched in December 2013 to coordinate supply chain

development activities in the South African automotive industry.

Welcome to the first issue of ASCCI Quarterly, a quarterly update that

highlights what ASCCI is doing to support the competitiveness of the

automotive supply chain.

What is ASCCI?

ASCCI Quarterly

ASCCI Quarterly July – September 2014

ASCCI Quarterly: July - September 2014 2

TABLE OF CONTENTS 1. Editorial ........................................................................................................................................................... 3

2. What is ASCCI? ................................................................................................................................................. 4

3. Leadership, governance ................................................................................................................................... 5

4. Activities .......................................................................................................................................................... 5

5. First quarter activites ....................................................................................................................................... 6

1. Establishing ASCCI ........................................................................................................................................ 6

2. Project activities ........................................................................................................................................... 7

Supplier capability ............................................................................................................................................ 7

Localisation ...................................................................................................................................................... 8

Strategic insight ............................................................................................................................................... 8

6. Going forward .................................................................................................................................................. 9

7. Contact information ....................................................................................................................................... 10

ASCCI Quarterly: August 2014 3

1. EDITORIAL

Welcome to this first edition of ASCCI Quarterly.

The Automotive Supply Chain Competitiveness Initiative (ASCCI) was established in December 2013 to coordinate supply chain development activities in the South African Automotive Industry.

Initiated jointly by the dti, OEMs, suppliers and labour, ASCCI represents the first in respect of such broad and deep collaboration in developing a successful and sustainable local automotive industry.

This first quarterly report will give you key insights into what ASCCI is all about. You’ll get an understanding of the factors that motivated ASCCI’s development, what it sets out to accomplish in the coming months and years, and how it plans to make its goals and objectives an industry reality.

ASCCI sees the industry set out on a new journey in the interests of enhancing automotive supply chain competitiveness through coordinated efforts with value chain stakeholders. With a core focus on increasing Manufacturing Value Addition this initiative will support the common interests of the dti, OEMS, suppliers and labour by developing supplier capability, increasing localisation, and determining industry strategy.

VISION

Establish and coordinate a strategy to enable competitiveness growth, employment creation and transformation in the South African automotive industry.

MISSION

To enhance the strategy, planning and coordination of supply chain competitiveness improvement activities and initiatives.

OBJECTIVE

Increase supplier Manufacturing Value Add (MVA) in support of producing 1.2m vehicles by 2020, increasing employment, enabling local supply chain capabilities, increasing local content, and advancing transformation.


2. WHAT IS ASCCI?

Born out of a need for a national initiative to drive supplier competitiveness improvement in the local automotive industry, the ASCCI business plan was developed in collaboration with the dti, NAAMSA and NAACAM. The initiative has been established as a partnership with representatives from industry, government and labour: an industry-first in terms of collaboration, with the right representation in place to drive the Initiative’s strategic objectives through practically oriented projects and interventions.

ASCCI has a mandate to coordinate, initiate and implement strategically aligned activities that will drive supplier development and competitiveness improvement throughout the industry. The key objectives of ASCCI include improving component supplier operational capabilities, increasing local content, encouraging employment growth and transformation and growing manufacturing value addition in South Africa.

The programme of activity that is included in ASCCI’s initial three year business plan will become the blueprint for coordinating and aligning automotive supply chain development initiatives in South Africa. Accordingly, three strategic priorities were identified:

Supplier capability – activities

focused on bolstering supplier

production capabilities

Localisation – activities to increase

local content, spanning competitive

local material inputs through to

investment in new supplier process

technologies

Strategy – activities to develop

insight into critical policy, regulatory

& related issues that influence

growth in supplier MVA

Based on the deployment of projects and initiatives aligned to one or more of these strategic thrusts, ASCCI intends to address constraints and impediments to competitiveness and enable supply chain capabilities, thereby enabling supplier growth. The achievement of these specified objectives will assist the industry in addressing the broader economic challenges of growing industry employment, while at the same time advancing industry transformation.

The national automotive industry has been, and remains, the beneficiary of significant contributions of development support from a range of agencies, including government (national, provincial, and municipal), and local and international donor organisations.

Given its national influence, a key role of ASCCI will be to encourage and facilitate alignment of these projects with the broader industry supply chain development strategy.


3. LEADERSHIP,

GOVERNANCE The structure of ASCCI’s Executive Committee reflects a partnership between government, industry, automotive and component manufacturing support organisations, with the involvement of labour. Well represented by industry stakeholders, government and labour, the executive committee is accountable for strategic planning and direction, as well as effective oversight of identified projects, plans and policies.

ASCCI Executive Committee

This structure is mandated to perform the following functions:

Formulate a national competitiveness improvement strategy

Monitor and coordinate support to regional industries

Initiate, support and fund localisation research

projects

Engage with local / provincial authorities on the development of local automotive sectors and clusters

The Executive Committee has appointed a service provider, B&M Analysts, to facilitate the activities of the executive function. Accountability for the delivery of projects and decision making, however resides with the Executive Committee.

ASCCI Objective Measure

1. Enable local supply chain capabilities

MVA per rand of employee cost

(measured per firm [intervention]

at an organisational level)

2. Increase local content Local content as % of vehicle value

3. Increase supplier Manufacturing Value Add

MVA = Sales – Materials Costs

4. ACTIVITIES

Each of ASCCI’s 3 strategic priorities or focus areas is made up of a set of activities which directly inform the interventions which ASCCI will deliver on.

Strategic priority 1: Supplier capability

Objective: achieve comparable levels of supplier productivity to leading cost countries (as measured in Rand of MVA per Rand of employee cost)

Activity 1: Base operating standards Establishing TS 16949 as an effective indicator of base standards, especially amongst Tier 2 suppliers.

Activity 2: WCM best practice implementation Implementation of WCM interventions at 120 suppliers.

Activity 3: Shop floor skills Team leader and operator skills programmes that demonstrate sustainable productivity impact and roll-

Stakeholder grouping Capacity Representative

Industry (Suppliers)

KZN Supplier rep Alex Holmes*

EC Supplier Rep Andy Dealtry

GP Supplier Rep Andrea Moz

WC Supplier Rep Simon Ledgerwood

NAACAM Executive

Robert Houdet

Industry (OEMs)

OEM Purchasing Council

John Astbury

OEM Purchasing Council

Theunis Rootman

Government Dti Mkhululi Mlota

Dti Renai Moothilal

Labour NUMSA Tengo Tengela

NUMSA Neo Bodibe

*Chair


out that can be sustained via established funding channels.

Activity 4: Scarce skills Engineering and artisan skills programmes that demonstrate a sustainable impact on skills availability and roll-out that can be sustained via established funding channels.

Strategic priority 2: Localisation

Objective: increase levels of localization as value of vehicle sales ex-factory less all imported content (base condition: average 41% local content in 2013)

Activity 1: Raw materials pricing and beneficiation Develop a cost advantage from utilization of locally available base commodity raw materials.

Activity 2: Tier 1 localisation Identification of Tier 1 technology gaps and associated opportunities. Facilitation of investment in 6 designated technologies.

Activity 3: Tier 2 localisation Identification of Tier 2 technology gaps and associated opportunities. Facilitation of investment in 6 designated technologies.

Activity 4: Investment in updated process technology Interventions to facilitate investment in updated process technology at 30 existing suppliers.

Strategic priority 3: Strategic insight

Objective: increased local content and generation of employment creation opportunities

Activity 1: Blockages and enablers to competitive local supply Develop a comprehensive understanding of blockages and enablers to competitive local supply used to inform coordinated strategy that supports 2020 objectives of 1.2 million vehicles produced locally.

Activity 2: SA market regulatory review Policy recommendations directed at increasing local producer share of domestic vehicle market.

Activity 3: Africa market regulatory review Trade policy recommendations directed at growing a viable, sustainable large scale African automotive market.

Activity 4: Facilitation of buyer-supplier linking Linking of enterprises to domestic localization and export market opportunities.

5. FIRST QUARTER ACTIVITES

In its first 6-months of operation, ASCCI has focused its efforts in two broad areas:

Establishing ASCCI as an entity with funding for activities

Project activities focused on laying the foundation for delivering on the value adding activities defined in the business plan

1. ESTABLISHING ASCCI

ASCCI came into being in December 2013. From the outset, it was important to build a strong institutional structure to govern effective delivery of the initiative’s business plan and ensure meaningful progress is achieved. As a result, the initial activities of the executive function focused on formalizing the institutional structures by establishing the initiative as a not-for-profit company with a constitution and


board of directors, represented by members of the Executive Committee. Additionally, service providers tendered for the provision of comprehensive facilitation services to the executive function. The role was awarded to B&M Analysts, a business specializing in research and cluster facilitation with deep automotive industry experience.

ASCCI has a budget of R63million to deliver on project activities. The executive function is responsible for sourcing the funding to meet this budget. As a result, following B&M Analysts’ appointment the immediate priority was to secure funding to deliver defined projects. Funding has been secured to launch several projects. Obtaining funding to deliver on remaining projects over the life of the business plan will remain an ongoing priority for ASCCI.

2. PROJECT ACTIVITIES

While ASCCI’s business plan defines the activities required to deliver on the strategic priorities at a high level, a good deal of work has been required to advance the concept of these activities to a point where they represent meaningful and clearly defined projects that can be delivered.

The first set of activities for which funding has been secured will kick-off in July. Each of these is touched on below.

SUPPLIER CAPABILITY

Activity 1: Base operating standards

Base operating standards represents the first project approved by the Executive Committee. When the ASCCI business plan was being scoped, it was identified that, while automotive component suppliers are often required to be compliant with TS16949 standards in order to supply OEM value chains, compliance does not necessarily result in consistent standards of operation across suppliers. As such, this project intends to review the application of TS16949 amongst suppliers. The outcome of the

project will be recommendations on how the standard can be better employed by OEMs, Tier 1 and Tier 2 producers and better supported by certification agencies and other institutions to build adherence to expected base standards of operation.

Activity 2: WCM best practice implementation

The WCM best practice implementation is ASCCI’s largest project, and has the objective of delivering WCM interventions at 120 suppliers over the 3 year period of ASCCI’s business plan.

Identifying suppliers to benefit from this intervention has been a priority for ASCCI in its first months of operation, and in this regard the focus has been in identifying supplier beneficiaries that have the potential to have the greatest impact on industry competitiveness by virtue of the commodities that they manufacture and supply to OEMs.

In order to derive the initial list of beneficiaries ASCCI facilitators have worked closely with the OEM Purchasing Council. The process followed entailed asking each OEM:

To identify the product commodities for which there is the largest competitiveness gap when compared to global sourcing benchmarks; and

To provide a list of the top five suppliers by spend in each of these commodity clusters.

The list of suppliers was consolidated and each supplier matched with a lead OEM.

30 suppliers will benefit from the WCM intervention in the first phase, which is due to commence in July 2014. The initial list of Tier 1 suppliers will be complemented with the addition of Tier 2 suppliers from the same value chains as well as both export and aftermarket focused suppliers in due course.

Activity 3: Shop floor skills

ASCCI has recently given its support to a project being driven by two firms in Kwa-Zulu Natal to revise the qualifications for hand assemblers, operators, and machine setters in the production of automotive


components. In collaboration with the Durban Automotive Cluster, suppliers in KwaZulu-Natal determined that the current qualifications are not aligned with the equipment and processes found in the sector. Any training being undertaken in line with the existing qualifications is therefore largely redundant.

The merSETA has allocated budget to fund the writing of the qualifications, and an initial scoping meeting has taken place. The merSETA together with the lead firms are currently looking for support from other automotive component suppliers to contribute subject matter experts to provide input to the new qualifications.

LOCALISATION

The localisation pillar of the ASCCI business plan concerns itself with the identification of value chain opportunities for increased local content. Funding has been secured for selected localisation activities, and it has been agreed that the OEM Purchasing Council should be the initial conduit for identifying potential opportunities. These will be complemented by a supplementary focus on identifying localisation opportunities at the Tier 2 level. B&M Analysts are currently working with OEMs; as the drivers of automotive value chain sourcing activities; to draft a list of potential projects where opportunities for greater manufacturing value addition (MVA) warrants greater investigation and potential support.

STRATEGIC INSIGHT

Given the broad geographic spread of South Africa’s automotive industry, regional support initiatives are an important mechanism to facilitating the delivery of ASCCI’s business plan objectives.

As regional bodies are unable to leverage national support mechanisms such as duties, export incentives and tax incentives, research was commissioned to identify alternate tools for regional economic development support in the automotive sector.

A report detailing the findings, as well as best practice examples from comparator economies was presented to the ASCCI Executive Committee in June. The findings are instructive in relation to infrastructural and non-infrastructural support mechanisms, as well as clustering opportunities, and will form the basis for further discussions and plans regarding how ASCCI can support the development of appropriate regional support mechanisms.

The figure on the next page provides a high-level snap-shot of 9 key lessons for regional automotive industry support emerging from the research.


Nine key lessons for regional industry support:

6. GOING FORWARD

The pace of project activity is due to pick up substantially over the next quarter in line with the projects discussed in chapter 5. Given that these are the first set of projects which ASCCI will be responsible for delivering, the key focus will be on ensuring the sound launch and robust delivery of projects to ensure meaningful results in line with ASCCI and industry stakeholder objectives.

In this respect, a large tract of time will be spent coordinating and matching service providers with supplier beneficiaries for the WCM best practices implementation project, and getting projects underway.

The work on identifying localisation opportunities will continue in collaboration with OEMs through July and August with the objective of having an agreed list of potential localisation opportunities for the next ASCCI steering committee meeting in September.

ASCCI will be presenting at the South African Automotive Week in October. It will also spend time over the next 2 months aligning appropriate regional government departments and support institutions with the findings of the regional support research.


7. CONTACT INFORMATION

For further information pertaining to this document, or for queries related to ASCCI, please contact:

Ms Julia Wedgwood

Tel: +27 (0)11 465 6911

Email: [email protected]

mailto:[email protected]

ascci quarterly review

Documents