Processes and information technology
As part of our strategy and 'fit to compete' pillar, we continued the optimisation of our supply chain and operations at group level. This approach includes all our business processes, such as procurement, planning, logistics and manufacturing (assembly). In 2019, we appointed a Global Quality Assurance and Compliance Director to further optimise and professionalise quality and compliance.
Minimising the environmental footprint of our operations
Corporate social responsibility is in the heart of everything we do and for our processes this means full attention to minimising the environmental footprint of our operations, including our footprint due to energy use and single-use plastic, waste generated and carbon emissions generated. We contribute to the global efforts to combat climate change by reducing our carbon footprint. We take measures to contribute to the Paris Agreement’s goal of limiting the global average temperature increase to well below 2 degrees Celsius above pre-industrial levels.
Within the carbon footprint programme, we focus on optimising our supply chain, transport (for example by transferring production to Europe and reducing air transportation), energy use and on realising our ambition towards sustainable energy of our premises by 2030.
As we aim to minimise our environmental footprint, we also focus on eliminating single-use (SU) plastics in our operations, both upstream from our suppliers and downstream to our dealers and consumers. To underline our ambitions, we have defined a new set of sustainability targets for 2025:
- Reduction of carbon footprint:
- A 20% reduction in energy use, compared to base year 2018, in terajoules relative to turnover;
- With 60% of all our owned premises to run on sustainable energy towards close to 100% in 2030.
- Reduction of single-use (SU) plastics, with special attention devoted to eliminating fossil-based plastics:
- 100% SU plastic-free packaging of Accell bicycles, parts & accessories;
- 50% reduction of SU plastics in transport packaging from our suppliers;
- Banning the use of SU plastics in our offices and organisation;
- Sustainability to be fully integrated in our New Product Initiation process.
In addition to our ambitions on the sustainability front, we are targeting more than € 60 million savings in our supply chain over five years (from 2017). The key drivers of this initiative are:
- Complexity reduction in models, components and stock-keeping units;
- Standardisation of product platforms;
- Rationalisation of manufacturing footprint;
- Increased manufacturing and logistics efficiency;
- Procurement – category management.
Sales and operational planning (S&OP)
In 2019, the S&OP process was in place in all five regions. The regional S&OP meeting is headed by the Regional Director with teams from sales, marketing, supply chain, finance and research & development. The teams at the meeting review demand, supply plans, new product introductions, product availability and complexity reduction programmes.
As part of the S&OP process, last year we continued to expand the supplier collaboration programme to include more intensive information exchange with suppliers on planning. The aim of this programme is to increase delivery reliability, reduce lead times and lower the stocks of components. The number of suppliers participating in the programme quadrupled, with particularly intensive involvement from our largest suppliers and suppliers with the highest delivery risks. In more concrete terms, this translated into the following results for 2019:
- An improvement of over 10% in the reliability of deliveries from our main suppliers to our factories.
- The implementation of various new collaborative planning initiatives, with a marked shift in supplier mindsets from reactive (issue solving) to pro-active (issue avoidance).
- Increased forecast sharing, which cut lead times with our main frame-suppliers.
- Increased use of pre-production agreements with our main suppliers to ensure on-time deliveries in peak season.
- A significant (65%) reduction in the stocks of obsolete components.
We believe there is ample room for further improvement. In 2020, we will continue to improve our S&OP, focusing on the top 20 models per brand and per region. The objective of the regional S&OP meetings is to improve the availability of the right products by reducing complexity and by optimising sales forecasting by reducing bias and errors. On a group level, we still see opportunities to improve on:
- Forecasting with a strong focus on our top models;
- Reduction of Sales Forecast bias and error;
- (Re-) Allocation of volumes across regions, in particular for our international brands.
New product initiation (NPI)
In 2019, we continued with the introduction and management of the NPI process. This process is now applied at all three of our innovation centres – Sports, Lifestyle and Cargo. The NPI process has four phases, Ideation, Feasibility, Capability and Launch. We use this primarily for our more complex products with a high proportion of components developed in house and that requires intensive cooperation between the various specialist teams.
The NPI process is supervised by the Innovation Board headed by the Director of Innovation and Technology. This board decides on new initiatives and research & development projects on a monthly basis. The prioritisation and allocation of people and resources to the NPI projects is based primarily on commercial considerations.
We implemented the NPI process in 2019 and delivered a total of 30 projects to market through this process. Major innovation projects delivered included: Haibike Trekking with a Bosch Generation 4 engine, Haibike Flyon, Batavus Finez Powertube, Pack’d and V-light (a new rear light that projects a V-shape onto the ground), Lapierre Overvolt AM, E-Sensium and Zesty TR, Ghost Lector and the Superfit concept. Unfortunately, we continued to experience delays in the delivery of innovations in 2019. We have therefore made a more rigorous execution of our revised innovation process a key priority for 2020.
In 2019, we took the first steps toward the introduction of common platforms, including our common frame platforms, which improve efficiencies and lower our cost base. We launched the first standardised platforms and will follow with several more in 2020.
In the years ahead, our design team and the Innovation Board will be devoting more attention to sustainability. This will cover a wide range of topics, from design and materials used to reduce our carbon footprint, to more circular business models. Our ambition is to have sustainable elements in every newly launched innovation by 2025.
In 2019, we continued the roll-out of our category strategies for the various component groups. In addition to reducing the number of components we use on the basis of total cost of ownership criteria and the utilisation of benefits of scale by operating as a group, we see supplier collaboration as an ever more important key driver of our performance. Sharing demand forecasts and securing production capacity is especially important for (e-bike) frames, as production capacity is not available in abundance.
In 2019, we stepped up the alignment with our own Asian procurement team in Taipei, in particular for order management efficiency and supplier performance management. Pro-actively managing suppliers in terms of delivery performance is key, as we are seeing clear geo-political shifts with suppliers increasingly relocating production from China to other Southeast Asian countries like Vietnam and Cambodia. To deal with these uncertainties and to contribute to the reduction of our carbon footprint, we continued our initiatives to source closer to our production locations in Europe.
One example is the strategic cooperation we now have with Belgium-based innovator REIN4CED for the automated production of high-end carbon fibre bicycle frames. Working with REIN4CED has enabled us to produce carbon frames commercially in Europe for the first time, giving us significant logistic and sustainability advantages and increased supply chain flexibility and efficiency.
Other efforts, like those on the indirect procurement front, have focused primarily on supporting our IT team on various projects, as well as on packaging, also aimed at reducing the amount of single-use plastics, and travel initiatives. These efforts have resulted in improved transparency on costs and spending in these particular categories. This approach also resulted in immediate savings and the further professionalisation of our relationships with our suppliers.
In 2019, we generated supply chain savings of € 13 million, including € 7 million cost avoidance savings.
As of 2019, we manage our group logistics centrally, in close collaboration with our local logistics operations. Our aim is to create a synchronised network of distribution centres, which will make it possible to maximise availability to the market and minimise operational costs by optimising all transport routes and by making use of best practices in our warehouses.
Sustainability and efficient logistics go hand in hand. The optimisation of our packaging and direct shipments from our factories to our distribution warehouses will enables us to cut as much as 50%-80% on costs/CO2 emissions on certain routes. Connecting our distribution warehouses in a network will enable us to create cross-regional availability for our products within agreed lead times.
The consolidation of our spend on inbound logistics enables us to negotiate better rates, higher service levels and to maximise our use of existing transport space. This includes modes of transport, whether truck, rail, air or sea. We aim to transport our products in the most sustainable way possible. In 2019, we put out our first tenders and signed the first deals.
In 2019, we created the Operational Manufacturing Team, with the aim of aligning supply chain and manufacturing standards across all our factories to increase efficiency and manufacturing quality. Every factory has its own operational excellence programme with set KPI targets, which we monitor and discuss on a monthly basis. We took a number of significant steps to increase safety and efficiency (on average 10%) and manufacturing compliance to plan. The improvement in the compliance to plan led to a significant increase in product availability, while also improving end-of-the-line quality across all our factories.
Based on the production footprint analysis we performed in 2018, last year we made major progress in in terms of closing and/or selling businesses in 2019. We sold our frame factory in China – Delta Metal –to one of our partners for frame production. A large part of the workforce was transferred to the new owner.
Other business sold or closed included Protanium (the Netherlands) and Brasseur (Belgium). We also completed the demolition of our vacated Andrézieux factory and warehouses in France. The land is planned to be sold in 2020.
In 2019, we started to build up production facilities for Babboe in Heerenveen and transferred the assembly of Babboe from Asia to Heerenveen. We moved the production of Babboe steel frames to our factory in Turkey.
In 2020, we will continue with the rationalisation of our production footprint. We will also transfer the painting of frames and components from Asia to our production locations in Europe. This will also make our products more sustainable, as all of our European plants work exclusively with 100% water-based paints and all paint residues are filtered out of the water from our paint shops. Our water purification installations ensure all the water used is returned to the environment in a clean state.
Most of our energy consumption is related to our main production facilities in Netherlands, Turkey and Hungary, where we assemble and paint our products. We use ISO 14001 (environmental management) to monitor and improve the environmental performance of our plants. Our production plants in Turkey and Hungary have already been certificated and our Dutch facility has started the certification process, which we expect to finalise in 2020.
In 2019, we completed our research into the benefits of installing solar panels on the roof of our production plant in Heerenveen and we will sign the contract in early 2020. This is a major step towards our ambition to reduce our carbon footprint. We expect the changes to the construction of the roof and the installation of the solar panels to take one year. In 2020, we will also start investigating the possibility of installing solar panels on our Hungarian production facility.
In addition to transition to the use of energy from renewable sources, our goal is to reduce our energy consumption by 20% by 2025. To help us achieve this goal, we perform energy audits, we replace old equipment and use LED lighting and motion sensors to reduce energy wastage. The Environment Health and Safety (EHS) team uses the energy audits to define and initiate improvement measures and then monitors the progress during the year. We report annually at group level. The EHS team also plays an important role in reducing the impact of our waste on the environment.
The table below outlines all the energy sources our organisation uses, including natural gas and other fuels and fuel used to transport people and products, including the percentage of sustainable electricity consumed.
Our energy consumption declined in 2019 and the percentage of sustainable electricity increased because some of our companies have switched to purchasing sustainable electricity.
We measure and report the results of our energy use and CO2 emissions in accordance with the Global Reporting Initiative (GRI) Standards and the Greenhouse Gas (GHG) protocol. These Standards divide emissions into three groups; scope 1 for all direct emissions due to fuel consumption by company-owned facilities and vehicles; scope 2 for purchased electricity, steam, heating and cooling for own use and; scope 3 for all other indirect emissions created by upstream and downstream activities such as business travel by car, lease car and use of packaging material.
Single-use plastics, packaging and waste
Accell Group has been targeting the reduction of the impact of waste and packaging for many years, as an integral part of its sustainability drive. Following the Life Cycle Analysis (LCA) of our products that we performed in 2012 and 2017, we identified reducing the impact of our packaging as the next major issue we need to address, besides the reduction of the materials and energy we use to create and transport our bicycles. Due to new insights into the impact of (single-use) plastics in packaging on our environment, we decided to switch our focus from a general reduction to the elimination of plastics in our packaging by 2025.
In 2019, we redesigned our bicycle packaging for e-bikes for the brands Haibike, Winora, Ghost and Lapierre produced in Germany and Hungary. Our new, innovative smaller bike transportation box is 100% SU plastic-free. This results in higher transport loading volumes due to the smaller volume of the boxes themselves, while it also improves logistics handling due to a special compartment for additional parts and the manual. The box also provides better bicycle protection, which in turn reduces the costs incurred due to damage. In 2020, we will extend the new design and lessons learned from this project to packaging for other bicycles. In 2019, we also made a start on the switch from plastic tape to paper tape for sealing our packaging, plus reducing the plastic in our XLC brand packaging and replacing plastic bags with transparent and biodegradable glassine bags.
As part of our effort to reduce the amount of plastics in the packaging we receive from our suppliers, we have put this subject on the agenda of the procurement team meetings with our suppliers. Step by step, we will start projects with our suppliers to reduce the use of fossil-based plastics in their transport packaging aimed at achieving a 50% reduction in 2025. We will monitor progress by measuring the amount of plastic waste coming from our three major production hubs.
Monitoring and reporting on the waste streams within the group will remain on the agenda of our EHS team. In addition to reducing waste, we see the separation of waste as equally important to the creation of a circular economy. The only way to become truly circular is to maximise the separation of waste into different waste streams, so materials can be reused for new products. In addition to the EHS team, the senior management at our production hubs and local organisations also play an important role in eliminating SU plastics. With the support of our CSR and change experts, we have launched workshops to develop local CSR programmes to contribute to our goals, and to make sustainability an integral part of our daily business.
The table below outlines the processing of our waste. Our primary aim is to reduce the amount of residual waste. This waste stream is either incinerated or goes to landfill and does not contribute the creation of a circular economy.
Creating a circular economy is not something we can do in isolation. To create real impact on this vital subject, we need to team up with industry partners and our peers. As one of the significant players in the market, and one that accepts its responsibility, we will take a leadership role in the industry on this topic, just as we have in the past on other sustainability topics like the end-of-life of batteries and the development of the social audit platform for the bicycle industry.
We are currently in the process of initiating an expert group on Corporate Social Responsibility (CSR) under the umbrella of European industry organisations CONEBI and CIE. Within this industry-wide group of experts, we will discuss the fundamental issues of the circular economy and find solutions to make our industry even more sustainable.
Quality and compliance
In 2019, we appointed a Group Director Quality and Compliance. All our regional operations and production facilities have their ‘own’ quality teams overseen by a small group-level quality team headed by the Group Director Quality and Compliance. We have developed a comprehensive approach and roadmap to align and improve the standards related to quality and compliance across the group for all our products and activities.
Audits of chemical substances
We conduct internal audits at our local companies on chemical substances from our suppliers. These substances are used to paint parts such as frames and front forks. They are also used in plastic components such as saddles and handlebar grips. In 2019, our REACH laboratory tested a total of 108 components, on which the lab conducted a total of 648 analyses. The products are selected on the basis of the risk profile of the product. Deviations were found in 6.5% of cases. In all these instances, we worked with the supplier to find a solution.
In 2020, we will continue to implement our quality road map and invest in our test facilities.
Responsibility in the supply chain
Under the umbrella of the World Federation of Sporting Goods Industry (WFSGI), Accell Group was one of the founding members of the Responsible Sport Initiative (RSI). Through the RSI, we cooperate with other companies in the bicycle industry to share social audits and have the same standards, which helps us to prevent audit fatigue among our suppliers.
The content of the social audits is based on the WFSGI Code of Conduct and includes general international standards for labour rights, and work and building safety.
We select the supplier locations we audit on the basis of country risk and risk to the continuity of our business. We assess countries every year on the basis of the BSCI Country Risk Classification, CPI, ITUC global rights index and the SA8000 risk assessment.
Audits are conducted by external auditing companies and our suppliers are always given advance notice. The auditor drafts a report, and if they identify issues these are captured in the Corrective Action Plan (CAP). We manage the follow-up on the CAP directly.
To achieve our goal of ensuring international social & safety standards, we gradually audit and re-audit all of our key risk suppliers. To accomplish this, we plan to audit at least 20 facilities per year. In 2019, we achieved this target, as we completed 20 audits. For 2020, we are aiming to increase the number of audits to 30, to ensure we can achieve our ambition to have all our key suppliers in risk countries audited every three to four years by 2025.
The results of the social and environmental audits were comparable to those in recent years. As in the previous year, the most common issues related to emergency safety of buildings, personnel administration, working hours and personal protective equipment for workers. The audits did not reveal any critical issues (such as child labour) that were not resolved immediately by the suppliers. Together with the other companies in the Responsible Sport Initiative (RSI), we are working on Corrective Action Plans to resolve these issues.
The RSI audits are additional to the Accell ‘Code of Conduct for suppliers’, which we ask all our suppliers to sign and comply with. In 2019, we asked our key component suppliers to renew their commitment to this Code of Conduct and all these suppliers confirmed their commitment.
In 2019, we continued with our strategy to streamline and centralise our application portfolio. We used the Accell Group holding company as a pilot for a new group Enterprise Resource Planning (ERP) system. Lessons learned from this pilot will be taken on board in the roll-out of our future CRM and ERP programme. An important part of this programme will be to facilitate our 'Lead Global. Win Local' strategy and the mitigation of risks in our current systems.
We also made progress in the professionalisation of the dependencies between our applications by centralising the management of the integration between these applications. This increases transparency, reduces complexity and supports further roll-outs, both for ERP, but also for other applications such as our digital portfolio.
Our strengthened data team has defined our group data strategy and has set standards and procedures for data use and processing. Driving data harmonisation and defining key processes across the group will be the foundation of our future IT and digital strategy. Meanwhile, from an internal control point of view, we strengthened the ‘segregation of duties’ set-up in our legacy systems. In addition, we implemented numerous business initiatives, including voice picking in various warehouses, our bicycle lease functionality for the Netherlands and the support of internal sales transfers.
We also continued the roll-out of our central platform for cooperation and communication - the so-called Accell@Work platform.
From a GDPR point of view, we further strengthened our governance, among other things by assigning local data protection officers, by implementing our internal and external data processing agreements and by reviewing and updating our external websites.
On the customer-facing side, we implemented a new platform for Customer Relationship Management (CRM) for Business to Consumers in all our regions. We also successfully delivered a brand new e-commerce platform for our Haibike brand.