Valtra Case Study

Valtra integrates its subcontractor network
In the early 1990s the yard of Valtra tractor factory in Suolahti was full of unsold standard tractors because of the recession. At that time, a strategic decision was taken by the company to switch from production-to-stock to mass customisation, which also increased the importance of subcontractors.

The decision paid off: today Valtra's Suolahti factory is one of the most efficient tractor factories in the world, and not a single unsold tractor stands in the yard.

"Production has been sales-controlled for the last ten years, and all tractors are made to order. During that time the production of the Finnish factory has tripled setting completely new requirements for the control of material flow," says purchaser Marko Ojalehto.

According to him, a particular challenge now is the management of subcontractors.

"We are now exclusively an assembly plant while subcontractors are responsible for actual component manufacture; thus suppliers play a key role in our operations. Our challenge has been to improve the control of the factory in cooperation with our subcontractors with a view to improving their efficiency, also."

An impressive list of references
A few years ago, as production grew rapidly, Valtra started planning a more effective way of transmitting order data received from the sales system throughout the delivery chain.

"We came to the conclusion that it was not worthwhile to build a system for this purpose," says Valtra's IT Manager Juha-Pekka Nenonen.

Consequently, the company set out to find a service provider who would enable data transfer from the factory's ERP-system to subcontractors, either directly to their systems or via the Internet.

"We chose Anilinker's ANI® services on the basis of competitive bidding. The company specialises in subcontractor operations and has an impressive list of references," says Nenonen.

In Valtra's model the seller and the customer first sit down to define the customer's real need of tractors, desired level of accessories and possible special requirements.

"The production schedule, which is based on orders, is decoded into the material needs report, which specifies the completion date of each tractor," says Marko Ojalehto.

Besides the orderstock, production planning also considers sales forecasts. The forecasts pass through the entire subcontractor chain, allowing the suppliers to plan their production based on the forecasts, so that all materials are available when production starts on the agreed day.

For this purpose, queues are computed for queue suppliers and delivery schedules for other suppliers.

About 200,000 variations
Order data are currently transmitted via ANI® services to 30 suppliers, who cover 60 percent of the purchase volume.

Ten suppliers already receive the data directly to their ERP-systems. Other suppliers access orders and forecasts via ANI® SupplierWeb service and, where necessary, can download them to their own system in Excel format. The system became operational last summer.

The extent of Valtra's operations is shown by the fact that there are about 5,400 purchased items, and an average of 1,600 components go into every tractor. As more than 10,000 tractors will be made in 2003, the factory will need about 16,000,000 components from subcontractors this year or 74,000 per day.

"Considering that there are about 200,000 variations of each tractor, it is unlikely that two tractors that are exactly alike will be completed on any given day," Ojalehto states.

Moreover, 80 optional accessories are available for each tractor, such as air conditioning or radio, which are installed either by the supplier or on the assembly line.

The total number of variations of final products is nine to the power of thirty, which means that the requirements we have set for the subcontractor system are quite high.