The Company already merged the medical division’s pro- duction sites in the US and has started to do so in the Netherlands as well. At the end of June 2009, the Danvers site in the US was successfully transferred to Andover, 30 km away, in only three days, placing all monitoring, sys- tems & IT functions under one roof. Prior to the move, all production processes were restructured as part of the ongoing improvement program PRIME (Production Improvement for Excellence). As a result, Dräger has reduced through-put times and required floor space by 35 percent on average, and inventories of the production site in Andover, US, by 22 percent.
After assessing all sites under the turnaround program, Dräger decided to move production and all other divi- sions from the site in Best, Netherlands, to Lübeck. A proj- ect team with members from Lübeck and Best has start- ed transferring the site in December 2009 and will finish this task in the first half of 2010. The move will create economies of scope for production of EUR 1.2 million per year in the long term. However, their full effect will only be seen from 2011 onward.
In the second half of 2009, the materials supply chain and production proved their great adaptability. By introduc- ing variable working time models and closely cooperating with flexible suppliers, Dräger managed to considerably increase the efficiency of the production process within just a few weeks. Although an important supplier became insolvent and closed down, the Company ensured a con- tinuous supply of materials, even though incoming orders had increased significantly, by ordering the affected com - ponents from strategic suppliers instead, and was able to produce all products without interruption.
FTEs as of the balance sheet date FTEs on average
December 31, 2009 December 31, 2008 2009 2008
Medical division 6,097 6,119 6,089 6,061
Safety division 4,174 3,975 4,041 3,874
Drägerwerk AG & Co. KGaA
and other companies 397 356 388 337
Dräger Group total 10,668 10,450 10,518 10,272
Germany 4,474 4,422 4,470 4,338
Other 6,194 6,028 6,048 5,934
*Full-time equivalent’ (basis in Germany: 40 hours) is a relative measurement used to determine resource capacity. It is a metric used to calculate the notional number of full-time employees, involving the conversion of part-time staff to full-time terms.
PROCUREMENT, PRODUCTION AND LOGISTICS| CORPORATE IT 106
At the end of the year, the Company employed an addi- tional 90 employees at the medical division’s production site in Lübeck in response to increased demand.
Employees will continue implementing the PRIME in all production segments. By saving considerable amounts of floor space it was possible to install new production lines in existing buildings.
The medical division reduced its inventories signifi- cantly during the year. The flexible interaction between sales, procurement, production and suppliers ensured that sufficient materials were available at all times despite a booming business in the second half of the year. At the end of 2009, Dräger decided to construct a new building in Lübeck for the infrastructure project division’s production and logistics function in 2010. This will create ideal conditions for improving the flow of materials and workflows.
SAFET Y DIVISION
The capacity of the safety division’s production and logis- tics function has become much more flexible, enabling the division to reduce capacities as necessary during times of low utilization of product lines without having any long-term effects on headcount and without creating any long-term productivity losses.
The sites in Sweden, South Africa and Brazil are producing additional quantities of particle-filtering respiratory protection masks, desperately needed in the market for pro- tection against the H1N1 virus, and have been running at full capacity since April 2009. The safety division increased the capacity of these production lines by 40 percent in the shortest possible space of time into a 24-hour operation. The new certified production site in the Czech Republic has been successfully producing firefighter helmets since 2009.
In May 2009, the third soda lime production plant started operating in Lübeck. The new production plant has a 24- hour operation cycle.
Dräger was the overall winner of the Manufacturing Excellence Award 2009, underlining the performance of the safety division’s production sites. The jury’s reason: “The company gave an excellent performance in all cate- gories.”
SUPPLY CHAIN MANAGEMENT
Central transport and warehouse management has con- solidated Dräger’s global transport service providers and in doing so significantly increased efficiency in all divi- sions. Dräger was able to successfully reduce transport costs by renegotiating specific freight terms and starting new tendering processes in the US and Europe. In addi- tion, transport service providers were integrated into the new “Management Platform for Distribution”. This enhances the transparency of transport volumes, prices and performance as well as the delivery status worldwide. Efficiency was substantially increased by merging ware- house facilities in Lübeck, which helped improve per- sonnel deployment and reduce the volume of local trans- port required. The warehouse process was restructured to a large extent to bring it in line with new production supply strategies. This measure has already proven its worth when processing the medical division’s high order intake.
PROCUREMENT
Procurement played a key role in the Company-wide turnaround program in 2009, exceeding its savings target of EUR 15 million by EUR 0.75 million for the year. Con- tributing factors included constructive changes, the con- tinued globalization of the supplier base and the estab- lishment of the first Company-wide negotiating team. One particular success was hedging raw materials at attrac-
107 POTENTIAL FUNCTIONAL AREAS
BUSINESS PERFORMANCE MARKET ENVIRONMENT
tive terms and conditions. The Company-wide close coop- eration between procurement departments for non-pro- duction materials (including IT) allows additional savings, particularly when it comes to services and software. An organizational realignment of procurement in both divi- sions has given procurement employees even more scope to develop areas of specialization.
In addition to negotiating the best possible terms and conditions, strategic procurement also focuses on integrat- ing suppliers into the development process from an early stage. Suppliers are already identified during the defi- nition phase of development projects. This step facili- tates the transfer of technology from the supplier base to Dräger, fosters shorter development times and improves quality and cost structures. The procurement department also held specially themed “technology days” in 2009, inviting technology leaders from different material groups to attend. The increased use of consignment ware- houses reduced inventory levels of various material groups.
QUALIT Y
2009 also saw Dräger invest in maintaining its high quali- ty standards. To achieve this, both divisions launched a joint project aimed at enhancing the reliability and useful lives of products in the fiscal year 2009. The focus was on identifying suitable methods for improving quality and applying them systematically in the development process, as well as integrating key suppliers in this process. The developed measures will help reduce failure rates and lower the quality management costs of future product generations.
The quality management systems of both divisions success- fully passed the tests of customers and licensing authori- ties alike in 2009. In doing so, they confirmed their effec- tiveness and compliance with regulatory requirements.