CONSOlidaTEd FiNaNCial STaTEmENTS >
DIRECTORS’ REPORT
126
| 2012 aNNual rEpOrT prySmiaN grOup
The Supply Chain function manages all the Group’s
intercompany flows both at a budget and everyday operations
level with the aim of satisfying demand in all markets that do
not have a local production source due to lack of capability or
production capacity. The Supply Chain function also manages
short and medium-term production allocations and planning
through Sales & Operations Planning (S&OP), a process which
serves as the link between the demand cycle (sales) and the
supply cycle (manufacturing and procurement). The Group
plans production according to whether a product is classified
as “engineer to order” (ETO), “assembly to order” (ATO),
“make to order” (MTO) or “make to stock” (MTS). The ETO
management model is mainly used in the Submarine and
High Voltage cables businesses, where the Prysmian Group’s
services start with system design and go all the way through
to final cable laying, using the services of the “Giulio Verne”
cable-laying vessel, where required. The ATO approach allows
a fast response to demand for articles that use standard
components but differ only at the final stages of production
or packaging. This approach has the dual objective of
responding rapidly to market demand while at the same time
keeping inventories of finished goods to a minimum. Under
the MTO approach, production is activated and goods shipped
only after receipt of a customer order, significantly reducing
unused inventory levels and the time that raw materials and
finished goods remain in stock. In contrast, under the MTS
approach, generally used for more standardised products,
inventory management focuses on producing items for stock
to allow a fast response to demand. The Group continues
to follow its policy of prioritising customer service, with the
ultimate objective of improving flexibility, reliability, and time
to market.
The concept of “Factory Reliability” introduced since 2010
has improved the reliability of planning and the execution of
manufacturing output, in terms of both mix and volumes in
ever faster response times, as well as allowing stricter control
of every type of inventory: raw materials, semi-finished
products and finished goods; this has allowed the Group to
respond efficiently and effectively to the general reduction in
sales volumes and accompanying decline in manufacturing
output by promptly adjusting inventory levels.
In addition to the Customer Centricity and Factory Reliability
projects, Prysmian Group has also started Supply Chain
Integration projects with some of its most important global
customers with the goal of improving process effectiveness
and efficiency throughout the supply chain, from the
producers of raw materials and semi-finished products used
in production to the end cable user.
Prysmian Group has also carried on rolling out the “SAP
Consolidation” project, which aims to harmonise and
standardise all IT processes worldwide, including for the
new Draka operating units. In particular, once this project is
implemented in all the Group’s countries, the supply chain,
from procurement to physical distribution, will benefit from
ever greater visibility, process integration and centralisation
of decision-making and operations, allowing more efficient
use of resources, greater sharing of information and a big
reduction in market response times.
Following the acquisition of Draka, actions have been taken
to achieve synergies between the Draka and Prysmian
distribution networks, including warehouses and distribution
centres. Important rationalisation and consolidation projects
were started during 2012 in the field of road transport in
Europe and North America that will allow the Group to
achieve significant benefits in terms of costs and service
levels.
In addition, all Group operating units have continued to focus,
in partnership with customers and suppliers, on actions to
recycle, recondition and reuse packaging in order to minimise
environmental impact.
LOGISTICS
Planning differs according to whether a product is classified as “engineer to order”
(ETO), “assembly to order” (ATO), “make to order” (MTO) or “make to stock” (MTS).
