Increasing efficiency and reduce costs in Personal Protective Equipment (PPE) Category at Avery Dennison EU plants

EXECUTIVE SUMMARY

Avery Dennison Corporation (NYSE: AVY) is a global material science and manufacturing company. They specialize in designing and manufacturing a wide variety of labeling and functional materials. The company is well-known for its position in Business-to-Business services and has grown to be one of the global Fortune 500® corporations that continues to advance quality and innovation in materials science.

 

As the company continues to align and leverage its business every day for long-term growth. Every category and department and division will need to develop suitable strategies to contribute to its success. Indirect procurement and the major spend categories as MRO (Maintenance, Repairs, and Operations), Travel, Utilities, Facilities, Professional Services in the European region are also in scope. However, last year the managers had witnessed a surge in the cost of purchasing PPE (Personal protective equipment); which is a sub-category in MRO.

The costs increased more than 70% from the fiscal year (2017 Sep – 2018 Aug &  2018 Sep -2019 Aug).

 

The issue occurred in the Planning Process. FMEA analysis was used to find the root cause of the problem. And the researcher had found out that the main issue within the PPE purchasing process is Failure in Stock management control. There were 3 solutions posed to tackle the problem:

1. Software for annual planning for stock management, training employees.
2. Suppliers Consolidation: Collaborating with a few big suppliers.
3. Industrial Vending Machines and purchasing associated Software

After comparing the alternative solutions and their potentials benefits from both financial and non-financial perspectives; the researcher has come to the conclusion that solution 3: Implemented Vending Machines and purchasing associated software is the best fit.

• Annual Savings on quantities will be € 191,114.97
• ROI is high (58.05%)
• Payback Period is relatively short, approximately 2 years
• NPV after 5 years is positive: €196,619.22

In a nutshell, implemented this solution will help Avery Dennison to cut costs on PPE items whilst still having a good grip on the stock management. This will make sure that the safety aspects are still in scope, minimizing the issue in the purchasing process; cutting costs; having better control on the PPE stock management process.

Tables of figures	Page
Figure 1: Avery Dennison’s 2018 revenue in billion	5
Figure 2: Avery Dennison’s Procurement department’s organisational chart (EU headquarter)	6
Figure 3: An overview of basic PPE equipment	14
Figure 4: Avery Dennison’s Dutch and Belgian plants location	15
Figure 5: Avery Dennison’s PPE Purchasing process flowchart 1	17
Figure 6: Avery Dennison’s PPE Purchasing process flowchart 2	17
Figure 7: PPE expenditure per worker per year	18
Figure 8: PPE expenditure per industries’ sectors	18
Figure 9: Avery Dennison’s PPE expenditure per worker per year by plants	19
Figure 10: Delivery Cycle time concept	19
Figure 11: Average suppliers delivery time (days)	20
Figure 12: Value of the PPE market worldwide from 2018-2025	23
Figure 13: Baseline to calculate suppliers’ responsiveness (days)	24
Figure 14: Top 15 suppliers performance (by days and percentages)	25
Figure 15: Purchases Orders placed at Alphen plant – by month	26
Figure 16: Purchases Orders placed at Turnhout plant – by month	26
Figure 17: Purchases Orders placed at Soignies plant – by month	26
Figure 18: PPE expenditure at 3 plants from Sep 2017 – Aug 2018	27
Figure 19: PPE expenditure at 3 plants from Sep 2018 – Aug 2019	27
Figure 20: PPE expenditure estimated for full year 2020 at Alphen plant	29
Figure 21: PPE expenditure estimated for full year 2020 at Soignies plant	30
Figure 22: PPE expenditure estimated for full year 2020 at Turnhout plant	31
Figure 23:FMEA analysis of PPE items purchasing process	32
Figure 24:Advantages and disadvantages of the three alternative solutions	34
Figure 25: Investment list details	34
Figure 26: Investment list (CAPEX, OPEX)	35
Figure 27: Number of Vending Machines needed	37
Figure 28: List of Investment unit prices	37
Figure 29: Investment analysis of Vending Machines project (period 5 years)	38
Figure 30: Investment analysis : ROI, Payback Period, NPV	38
Figure 31: Implementation plan	43

1. INTRODUCTION

1.1. COMPANY PARTICULARS

Avery Dennison Corporation is a global material science and manufacturing company specializing in the design and manufacture of a wide variety of labeling and functional materials. The company produces products such as pressure-sensitive adhesive materials, apparel branding labels, and tags, RFID inlays, and specialty medical products.^[1]

Corporate headquartered in Glendale, California with over 170 manufacturing and distribution facilities in more than 50 countries with more than 30,000 employees worldwide. With a sale of $7.2 billion in 2018; ranked 427 on the 2018 Fortune 500® list of the largest U.S. industrial and service companies.

There are 3 key businesses of the company, which are as follows:

• Label and Graphic Materials (LGM) accounted for $4.851 billion in revenue.
• Retail Branding and Information Solutions accounted for $1.613 billion in revenue.
• Industrial and Healthcare Materials, accounted for $695 million in revenue.

Figure 1: Avery Dennison’s 2018 revenue in billion

The researcher is currently working at the Indirect Procurement department, LGM division, located at EU Headquarter. With the organizational chart as below:

Figure 2: Avery Dennison’s Procurement department’s organisational chart (EU headquarter)

The Indirect Procurement department is in charge of purchasing services and supplies to keep the day to day business running: Facilities, Utilities, MRO, Travel, etc..

1.2. PROJECT BACKGROUND

The researcher is a final year student at HAN, and this report is coached by Mr. Erik Eijrond. After 6 months of doing the internship at Avery Dennison, the researcher has finished this graduation thesis.

Graduation thesis at the HAN university of Applied Sciences is the final test to show that the student meets all the competencies on a bachelor level. This report contains the relevant information that needed for completing the project. From the introduction of what was the problem to the methodology; research findings to conclusions and recommendations.

1.2.1. PROBLEM ORIENTATION

Safety at the workplace is taken much more seriously than ever. As many other companies, Avery Dennison is continuously putting efforts into ensuring that they could organise the health and safety support for its employees. The incidence rate in 2018 was recorded at 0.25/100 (work-related injuries rate per 100 employees), far surpassing the industry average of 3.5(the most recently available industry average). On top of that, 84% of 181 facilities worldwide were free of recordable injuries.^[2] According to the CEO, their goal for 2025 is to maintain world class safety  by keeping incidents low and awareness high. The safety culture will be continually reinforced through ongoing education and communication.

https://sustainability.averydennison.com/en/home/sustainability-at-avery-dennison/our-game-plan.html

According to the leader teams, Avery Dennison is constantly looking for opportunities to reduce risk in processes and procedures at plants. One of the methods taken is using Personal Protective Equipment (PPE) items. This is recognised by the managers as one of the most efficient and fastest solutions available. ^[3]

However, currently the company is said to be facing problem regarding the mentioned topic. The researcher had been informed by Mr. Abdi Musse -Maintenance, Repair, and Operating Supplies (MRO) manager that there was a surcharge in total spend in the PPE category in Dutch (Alphen aan den Rijn) and Belgian plants (Turnhout and Soignies).

This problem led to the increase in cost and conflicted with the aims of the Indirect Procurement team, which are to identify and share category opportunities; help manage compliance; and drive results to exceed budgeted savings targets for each division.

https://sites.google.com/a/averydennison.com/ourworld/materials-group/news-announcements/performance-tapes/organizational-announcements/oa-global-indirect-procurement-leadership-team

1.2.2. PROBLEM DEFINITION

During the first meeting with the company coach, the researcher was informed about the problems lying within the category.

According to Avery Dennison MRO category manager, the discrepancy between this year and last year PPE purchasing costs was almost two folds. The costs went up dramatically due to the fact that purchase orders were abruptly placed by local buyers whenever needed; so the managers have no control over the whole process: quantity, types, diversity, price, etc.

The problem existed in 3 plants: Alphen aan den Rijn (the Netherlands), Turnhout and Soignies (Belgium). This caused an increase in cost within PPE sub-category which conflicted with the ultimate goal of Indirect Procurement.

A deep dive into the current situation is requested by the manager to understand what is happening with that sub-category as well as to pose a solution to cut costs and increase efficiency. This has given the cause for the researcher to conduct this research to figure out the possible underlying problems.

Ultimate goal for client, in this case, Avery Dennison’s MRO category manager is to find out a solution to cut costs at the workplace through gathering and analysing related data to have an in-depth analysis of the total costs for PPE items at NL and Belgium plants.

1.2.3. RESEARCH OBJECTIVE

The purpose of the report is to give an insight of the issue along with recommendations on how to optimize total costs for PPE sections at Netherlands and Belgium plants to Avery Dennison’s category managers before the end of February 2020; through gathering and analysing theoretical models and company’s data with respect to:

• Responsiveness (Order Fulfillment Cycle Time)
• Cost-based management (Total Costs to Serve)
• Asset management (NPV)

By then, the recommendations of this project should be able to help the clients have an overview on how to optimize total costs for PPE sections in desired plants. Through that they will be able to make a decision on which direction they should pursue.

1.2.4. MAIN -SUB QUESTIONS

How to increase efficiency and reduce costs in PPE category at Avery Dennison’s Dutch and Belgian plants before the end of February 2020?

1. What is the desired situation of a company’s PPE category at optimum costs?
2. What are the current trends in the PPE market?
3. What is the current situation of PPE category at Avery Dennison’s Dutch and Belgian

plants?

4. What are the company’s requirements for PPE items in terms of: quality, costs, safety,

access, etc.?

5. What are the differences between the desired situation and the current situation?
6. What are the alternative solutions that are available?
7. What are the costs/benefits analysis?

Note: sub-question “Who are the potential suppliers for the company?’’ was initially sub question 3 in Research Proposal, however, during analysing phase, the researcher was informed by the Category manager that Avery Dennison has no intention to choose other potential outside from the incumbent suppliers list which they have on hand.

1.2.5. RESEARCH FRAMEWORK

Fishbone Diagram

1.2.6. METHODOLOGY

Literature: The topic of this report can be split into 2 parts: Efficiency and costs.

The ‘Efficiency’ is to measure overall efficiency improvement of the process through choosing the right products, suppliers, combinations and optimize costs.

‘Costs’ can be covered and identified by total costs to serve and asset management efficiency. Those 2 themes could provide all the aspects of costs related to this plan which the company ought to have interest in.

For desk research: Ariba databases, Oracle databases, Suppliers risk assessments. All data is extracted from Avery Dennison’s databases, so relevance and reliability are relatively accurate.

For field research: Interview with MRO category manager, emails exchange with plants’ managers.

Data analysis: Secondary data analysis(1); Theories analysis(2); Online desk research(3); Thematic Coding(4); Primary data analysis(5)

 

Sub Questions	Research Variable	Internal desk research	External desk research	Internal field research (Interview/emails)	Data analysis
T1 (S1)	Responsiveness		X		(1), (2)
	Safety Compliance		X		(1), (2), (3)
	Total costs to serve		X		(1), (2)
	Asset management		X		(1), (2)
T2 (S2)	Responsiveness		X		(1), (2)
	Safety Compliance		X		(1), (2), (3)
	Total costs to serve		X		(1), (2)
	Asset Management		X		(1), (2)
T3 (S3)	Responsiveness		X		(1), (2)
	Safety Compliance		X		(1), (2), (3)
	Total costs to serve		X		(1), (2)
	Asset Management		X		(1), (2)
E1 (S4)	Responsiveness	X	X	X	(1), (3), (4), (5)
	Safety Compliance	X	X		(1), (2), (3)
	Total costs to serve	X	X	X	(1), (3), (4), (5)
	Asset Management	X	X	X	(1), (3), (4), (5)
E2 (S5)	Responsiveness	X		X	(1), (4), (5)
	Safety Compliance	X	X	X	(1), (2), (3)
	Total costs to serve	X		X	(1), (4), (5)
	Asset Management	X		X	(1), (4), (5)
A1 (S6)	Responsiveness	X	X		(1), (3), (5)
	Safety Compliance	X	X		(1), (2), (3)
	Total costs to serve	X	X		(1), (3), (5)
	Asset Management	X	X		(1), (3), (5)
A2 (S7)	Responsiveness	X	X	X	(1), (3), (4), (5)
	Safety Compliance	X	X		(1), (2), (3)
	Total costs to serve	X	X	X	(1), (3), (4), (5)
	Asset Management	X	X	X	(1), (3), (4), (5)
A3 (S8)	Responsiveness	X	X		(1), (3), (5)
	Safety Compliance	X	X		(1), (2), (3)
	Total costs to serve	X	X		(1), (3), (5)
	Asset Management	x	X		(1), (3), (5)

Discussion of quality criteria

Validity: Validity reflects to which extent the outcome of the report can measure what were intended to measure.  All data which will be analysed is coming from real databases and suppliers. Any other parties will be able to figure out outcomes/results if applying the same method as what will be used in this research.

The theoretical models which will be applied in this research are published and proven-models. The validity of this research can be shown through the operationalisation table and open questionnaires. Hence, findings truly represent the phenomenon which initially said needed to be measured.

Reliability: All relevant financial data will be extracted from the company’s database. The models and theories are taken from reliable sources: HAN databases, journals and books. All the information which will be used and analysed in this report is able to be traced back. It’s safe to say that the data is reliable.

The reliability of this research can be seen in the same results acquired if similar research about this topic in a given population will be carried out even though with different circumstances. The financial analysis will be slightly different if there are any changes in the macroeconomic environment as inflation/deflation or in company’s policies. However, other than that, the remaining parts of the report will stay the same and can be used as an example for similar projects in the future.

Traceability:  The transparency of this research will be shown in every step taken to come to the final conclusion. The outcome/result will be able to be traced back to the very beginning of this research.

Usefulness: The researcher can draw conclusions out of the analysis of how to increase efficiency and reduce costs in PPE category, and in the end, the client can fully make use of this research outcome in decision-making process. Moreover, this can also be used for future projects if they are similar in nature.

 

1.2.7. SCOPES & LIMITATIONS

Scope

Avery Dennison has implemented PPE tools and items but not yet effectively. There are also no fixed suppliers for this field yet. The scopes are as follows:

• Different types of PPE items.
• Standards of industry and requirements in terms of: quantities, costs, diversity.
• Competitors’ performances and benchmarking.
• Avery Dennison’s specific requirements and strategies in terms of: quantities, costs, diversity.
• Suppliers’ management/assessment: price, delivery, quality, etc.
• Safety compliance with EU legislation.
• Requirements for PPE items for different locations.
• Special requirements in materials, sizes, styles, etc.
• Technology implementation.
• Costs/benefit analysis of the implementation.

 

Limitations

Avery Dennison doesn’t have a consolidated database about the case to provide, there shall be a long period of time required to acquire all the data that are relevant for the topic.

Time management is one of the biggest issues that I may face, due to the fact that the company doesn’t have enough databases and resources of the related issues and the time period is quite short. This is a thesis internship, so I don’t need to work much; however, there are many opportunities for learning and experiencing in a professional working environment which I do not want to waste. In the past, there were always other team members who would help me out. For this report, I will be by myself, the pressure is even harder.

Obviously, enough and reliable resources are required in the process of doing research to be able to support the analysis and conclusions. The databases and information from suppliers’ side will be enough to cover for desk research. However, for field research, the only person who could provide the research with relevant data is Mr. Abdi Musse, who is in charge of MRO category at Avery Dennison EU headquarter. The locations of the sites are far away, there could be emails exchanged with plants’ managers. Hence, the representative is quite small. However, it is considered relevant since Mr. Musse belongs to the decision-making group in terms of MRO items, in this case, PPE category.

 

1.2.8. LITERATURE REVIEW

Throughout the report, the 3 themes: Responsiveness (Order Fulfilment Cycle Time) & Safety Compliance; Cost (Total Costs to Serve); Asset management efficiency (NPV) will be used to address the problem that currently Avery Dennison is facing with.

 

Introduction

After analysed the thesis topic, the researcher realized that those 3 elements can be making use of to analyse the root-causes. There are many resources to find literature for them, however, in order to maintain the reliability of this research; only reliable and traceable sources were used. The literature list consists of books, journal articles which were found through Google Scholar and databases from HAN study Centre (Emerald Insight, ResearchGate,etc. )

 

Body

Responsiveness will look at the general Order Fulfilment Cycle time. The delivery aspects will determine at which speed the tasks are performed. (Council, 2012) This is a customer focused attribute; however, it could help the business to analyse which suppliers are currently outstanding performers.

Safety Compliance measures the level to which PPE products conform to EU legislation for PPE. It defines the extent a supplier complies with legal obligations to ensure theirs products/item provides the highest level of protection against risks. (EC, 2019)

Concepts and tools of Cost management will be studied. Total cost to serve is an internal focused attribute describing the costs to operating the process, both indirect and direct costs. (Council, 2012)

Asset management is undoubtedly necessary in the decision-making process. Capital Budgeting Decisions along with Asset Management principles are the mandatory elements for this theme. (Council, 2012)

Total costs management framework; Strategic asset management framework used to support the research purpose. FMEA analysis will also be used to find the root cause.

Responsiveness can be used as one of the most important criteria to determine internal efficiency and supply chain effectiveness. Through this, the company will be able to see which suppliers will have the capabilities to fulfil products, in this case, PPE items, effectively. This can ensure a non-disrupting supply for the mentioned products.

Safety Compliance will illustrate whether the supplier is a fit for Avery Dennison requirement on safety items.

Total costs to serve includes the costs of the actual product and costs requiring/occurring during operations. In this case, Total costs to serve will be the sum of products costs and operating process costs (ordering process, system, etc.).

Asset Management is a set of activities to realize value from assets carried out by an organisation or company. It includes the comparison of current balancing of costs, opportunities, and risks with the desired performance of assets, to achieve the objectives depending on business’ policies and requirements. NPV will be used as a measurement to measure the outcome of capital budgeting and investment planning for future projects.

 

Conclusion

Responsiveness and Safety Compliance will help the company to select the right products, combinations and suppliers. FMEA analysis will indicate which was the actual root cause. Cost management and will help to carry the project out in a manner that satisfies its requirements. On top of that, Asset management will provide the best total solution with optimum costs, which is the bottom line of the problem.

2. PROCESS DESCRIPTION

2.1. PRODUCT DESCRIPTION

 

Figure 3: An overview of basic PPE equipment

 

Personal Protective Equipment (PPE) can be simply understood as any safety equipment workers wear to prevent injury in the workplace when engineering and administrative controls fail to eliminate the hazard.^[4]

There are many types of PPEs that can be used during the operation process.

 

These include: Head wear, Eye wear, Ear & Respiratory accessories, Protective Clothes, Hand and Foot wear.

 

There are several strict requirements for workers to follow due to the fact that this is a health and safety related issue. The most general one is that: the employees should never use PPE that is defective or damaged. On top of that, there is a list of guidances and references according to law and regulations. ^[5] https://www.ingaa.org/File.aspx?id=18190&v=f14bd8e0

 

Employee-owned PPE should meet the general standards requirements and should be

inspected and maintained in the same manner as company-supplied PPE. All the standards and regulations shall be adjusted accordingly to the place where they’re based. ^[6]

 

2.1.1. Criteria for personal protective equipment:

All PPE equipment shall be provided, used, and maintained in a sanitary and reliable condition.^[7]

 

The employer shall be responsible for providing the items to the employee at no costs and assuring its adequacy, including maintenance, and sanitation. The employees have to use the given equipment as instructed to prevent unwanted damages to the equipment^[8]

 

All the provided equipment shall be ensured that they are complied with EU regulation on Safety at workplace, and serve the purposes of the related tasks that the employees are in charge of.^[9]

 

2.1.2. Locations of plants

Figure 4: Avery Dennison’s Dutch and Belgian plants location

Avery Dennison has 1 plant in the Netherlands and 2 located in Belgium – Turnhout and Soignies areas. The one is the Netherlands and Soignies belong to the Label and Graphic Materials (LGM) division and the other in Turnhout is working under the Industrial and Healthcare Materials (IHM) label.

Avery Dennison is facing the surcharges in PPE spend for last year in 3 plants. The managers wanted a deep-dive into the issue to understand what was the root cause. This research will focus on the 3 plants as mentioned above (Alphen aan den Rijn -NL, Turnhout and Soignies- Belgium). Therefore, the goal of this research is to figure out an approach to improve efficiency and reduce costs in PPE category in those 3 plants. The internal analysis from the Procurement department will be studied, external aspects as in market trend, macro environment will also be looked at.

2.1.3. Flowchart

Flowcharting is a tool for analysing processes. This helps to break any process down into individual activities and to display the logical relationships between them. A flowchart is a picture of the separate steps of a process in sequential order and use as a common process analysis tool.^[10]

This technique was acquired during G-cluster at the HAN. The researcher believes that constructing flowcharts for the purchasing process of PPE items at Avery Dennison will give a better understanding on what is happening processes. By describing the flow of the activities, the steps that trigger the error will be clearly seen.

The flowchart below showed the purchasing process of PPE items.

In level 0, the general flow of purchasing activity was described. The problem laid in the information transmission from the plants’  managers to the local buyers.

The communication flow was broken down to figure out what went wrong in the between, the result was that the planning process before actual orders placing process was incorrect.

Within the planning process, the actual actions that triggered the issue were: incorrect in assessing and controlling stock management.

When taking a closer look at, the researcher found out that the main issue laid within the assessing and stock management step were: incorrect information about quantities, types, etc. Which led to the incorrect assessment and measurement in the management process.

Figure 5: Avery Dennison’s PPE Purchasing process flowchart 1

 

Figure 6: Avery Dennison’s PPE Purchasing process flowchart 2

2.2. BENCHMARK

Figure 7: PPE expenditure per worker per year

According to recent research conducted by the Institute for Work and Health, an average share of total occupational health and safety expenditures attributed to PPE items was 14 per cent. The research also showed that the average total expenditures the employers in the goods-producing sectors would invest per employee per year is $ 2,417 (equal to 0.89973*2,417= € 2174.64741).^[11]

Figure 8: PPE expenditure per industries’ sectors

On average, a company would spend $362.55 (or €326.20) on PPE items per employee per year.

Avery Dennison overspent on PPE items per person exceeding 150% compared to that of average spend of other companies in the same sectors.

 

Location	Headcounts	2019		Compared to the average
		Total Spend	Yearly spend per employee
ALPHEN AAN DEN RIJN – NETHERLANDS Total	376	€315,366.25	€838.74	+      157.13%
SOIGNIES – BELGIUM Total	436	€265,364.68	€608.63	+      86.58%
TURNHOUT – BELGIUM Total	707	€248,649.09	€351.70	+      7.82%
Grand Total		€829,380.02	€599.69	+      83.84%

Figure 9: Avery Dennison’s PPE expenditure per worker per year by plant

 

3. RESEARCH FINDINGS

3.1. Sub- Question 1:

 

Responsiveness

 

Responsiveness in this case is measured by Delivery Cycle time which is the time span between the acceptance of an order placed from buyers to the final delivery of the product to the customer. ^[12]

Figure 10: Delivery Cycle time concept

Research shows that top performers have an average supplier lead time of four days.

 

American Productivity and Quality Center (APQC) research indicated that top performers have an average supplier lead time of four days. Those that had the average longer than 10 days are considered as bottom performers. On average, an acceptable lead time that companies require is 7-8 days. Top performers need three fewer days whilst the bottom ones will need 4 more days.^[13]

 

Lead time from suppliers can necessitate higher levels of inventory, higher inventory carrying costs and associated logistics costs. Those aspects can show their advantages in preventing the possibilities that the company will run out of needed items.

Figure 11: Average suppliers delivery time (days)

 

In desired situations, a company should have a list of suppliers whose performances need to be at average or above average to avoid the nightmare of delays in delivery and stock out, especially items that are related with safety as PPE.

 

Safety Compliance

 

Personal protective equipment (PPE) are products that the employees wear or hold at workplace to protect themselves against risks or hazards. There is statistical evidence that shows that on fatal and major work accidents, PPE plays an important role.

 

All the design, manufacture and marketing on PPE items need to follow the Regulation (EU) 2016/425 of 9 March 2016.

 

Every product that comply with the mentioned law should have the CE marking affixed visible. Products in PPE items needed to follow in guideline 89/686/EEC in order to be able to introduce to the market. Beside the CE marking, there are additional presences to identify them:^[14]

 

• The declaration of conformity (EC declaration of conformity) manufacturer/producer
• The certificate for the EC-type examination from the testing agency (notified body) (Cat. II and Cat. III)
• The quality assurance (Cat. III)
• The user manual

 

 

Total Costs to Serve

 

As mentioned in the benchmark chapter, the average costs a company would pay for PPE items per employee per annum is approximately €326.20.

Safety is a statutory obligation for employers. Effective management PPE category not only is beneficial to employees, but also will be equally a factor for business success.

3.2. Sub- Question 2

 

Current trends

 

Eyes protection has become the industry’s solution to meet new standards for OSHA regulation 1910.133(a)(2) . Another trend is that technology has been implemented in the PPE industry, generating more diverse, comfortable options. ^[15]Technology likes anti-fog-resistant, innovations like ‘smart’ equipment: RFID, bluetooth become a must. More and more companies start reassessing their respiratory protection to comply with the OSHA standard.

 

Lighter fabrics and special weaves are being utilized for lighter protective clothing that meets specific standards. Purposes orientated and flexibility along with customization are new requirements from employers. This has proven that can enhance worker satisfaction, and even increase safety compliance^[16].

 

The industry is witnessing new product launches, and strategic mergers & acquisition every moment.

 

Some of the major companies operating in the personal protective equipment market share are adopting strategies such as new product development & launches, strategic partnerships & collaborations, mergers & acquisitions, and supply chain agreements to enhance their market presence and share. The value of the industry is estimated & forecasted to increase dramatically until 2025.^[17]

 

Responsiveness

 

Delivery Cycle Time is a critical process measurement in supplier selection criteria since being able to process an order within the minimum possible amount of time is one of the characteristics of suppliers that every company will look at..^[18]

 

As e-commerce is booming, the standard of requirements associated with shipping products after purchasing online are also lifted up. The future is fast, faster and free-shipping. Especially if it’s a B2B purchasing process. ^[19]

 

Safety Compliance

 

The body regulation current in forced for PPE usage in EU is Regulation (EU) 2016/425 of the European Parliament and of the Council of 9 March 2016 on personal protective equipment and repealing Council Directive 89/686/EEC^[20]. This is valid throughout the European Union as well as the EEA EFTA states (Liechtenstein, Iceland, Norway), Switzerland and Turkey due to specific agreements.

 

The regulation clearly stated that every PPE item is considered as qualified and certified to be released to market only if these requirements are met: ^[21]

• Have valid EU Type- examination certificates (validity of 5 years). After 5 years, the product needs to be reevaluated and adapted to changes if needed.
• Technical documentation: description, assessment, lists of requirements, drawings and schemes of components; etc. These documents need to cover all aspects which are listed in the law itself.

 

The revised version included: protection against the minimal risks, exclusively serious consequences risks.

Roles and responsibilities of the suppliers are now defined more precisely. The manufacturers now are obligated to^[22]:

• Carry out sample testing
• Ensure to provide correct identified and required information
• Declare conformity including instructions and information sets

 

These additional requirements have set the bars for a qualified manufacturer and PP products much higher.

 

Making the workplace safe includes providing instructions, procedures, training and supervision can encourage employees to work safely and responsibly, which will ultimately increase productivity and reduce the possible hazards^[23]. PPE is used to protect the user against health or safety risk at work, it is mandatory that the items should be adequately controlled in the correct manner.

 

Costs and Asset

 

PPE industry has continuously been growing in the last few years. According to research done by Liam O’Connell, value of the global PPE market 2018 alone was almost  $5 billions worldwide and it will reach a value at about 79.66 billion U.S. dollars in 2025.

 

Figure 12: Value of the PPE market worldwide from 2018-2025

Published by Liam O’Connell, Oct 22, 2019

https://www-1statista-1com-100019fdx0086.stcproxy.han.nl/statistics/711286/value-of-the-global-ppe-market/

 

Businesses started spending much more on PPE compared to the last few years. Safety at work is considered a hot topic now. The requirements and standards are lifted up in terms of quality, comfort and price. PPE is designed in many more categories based on the material type and usage. Customised and fitting equipment are becoming trends since the workforce is very diverse. ^[24]

 

From another perspective, stricter regulations and safety requirements also put companies in a much more difficult position – they have to find a balance between their PPE budgets and best value to comply with the legislation. ^[25]

3.3. Sub- Question 3

 

Responsiveness

 

https://docs.google.com/document/d/1pyqQMvWuAkwud_Of22bNiJQqK0q2pp-exPGLKDkz8gc/edit?usp=sharing (2019 Avery Dennison Supplier Scorecard Guide (AD-Internal)

 

Avery Dennison has its own scoring system which uses Global Procurement Supplier Scorecard to assess supplier’s performances. This scorecard is intended to assist Avery Dennison and its Suppliers to build stronger relationships centered on solving repetitive problems and driving continuous improvement. There are several types of measurements to measure supplier’s responsiveness in the company. However, the researcher only looks at those are relevant to this research, which in this case are:

 

1. Average Lead Time: Lead Time = Receipt Date – Order Date. Weekends are removed
2. Availability: Availability is the Supplier’s ability to deliver to the greater date of either the Supplier’s standard lead time or Avery Dennison’s requested delivery date (if later than the standard lead time). A delivery is considered a miss if it a day or more late. If the order is delivered in partial shipments, the considered date will be the date of the last receipt.

 

Classification: Avery Dennison – Internal 2019 Avery Dennison Supplier Scorecard Guide

 

This table belows shows the performances of top 15 suppliers (based on order frequency), with the baseline being the benchmark of market, reference to findings of sub questions 1.

 

The performance percentage is calculated by baseline/lead time, then the average will be calculated by the number of purchase orders that had been made to that supplier.

 

 

Based line	Top performers	Bottom performers
7 days	4 days	11 days

Figure 13: Baseline to calculate suppliers’ responsiveness (days)

 

No	Supplier	Total number of orders	AVERAGE of Lead time (days)	Performances
1	IMES NV	224	4.476	239.34%
2	GROENEVELD-INTERSAFE BV	81	4.654	225.19%
3	Vandeputte NV	54	4.714	255.34%
4	INTERSAFE BELGIUM NV	39	4.692	228.53%
5	LISAP SA	36	4.474	238.22%
6	MANUTAN-OVERTOOM	25	4.520	254.40%
7	ROLLER-BELGIUM SPRL	14	4.857	193.39%
8	DIANTHUS	14	3.786	310.06%
9	ATLAS-SCHUHFABRIK GMBH & CO. KG	13	3.857	235.00%
10	TRANSPOSAFE SYSTEMS BELGIUM	10	4.000	279.42%
11	ERIKS AND BAUDOIN	9	3.111	326.67%
12	STAPLES NETHERLANDS	7	4.429	249.17%
13	AKTA TRADING HOLLAND B.V.	7	2.857	372.62%
14	MANUTAN	6	5.000	178.33%
15	NOVOLAB NV	5	6.000	130.00%

Figure 14: Top 15 suppliers performance (by days and percentages)

 

Most of them had above standard performances, only 5 out of 70 suppliers had the lead time a bit longer than the rest (full table can be found in appendix).

 

Safety Compliance:

As being presented in sub-question 2, Personal protective equipment (PPE) must comply with the European and national regulations for quality, selection, use and maintenance to be launched into the market.

All suppliers can confirm that their products have all the remarks due to these checkpoints are the very first issue that the government will look at before allowing them to be produced, purchased and traded.

Costs and Asset:

In an internal meeting to define the Annual Operation Planning for 2020, the leadership team has decided that the target for every sub-categories in MRO for the year is to cut costs by realising supplier reduction of 3% by the end of 2020, which will be approximately 15% per supplier.

The current spend on PPE items in 2019 is €829,380.02. With that being said, the estimated spend for 2020 is € 804,498.62. (reduced by € 24881.40)

3.4. Sub- Question 4:

Current situations of buying process at plants

Last year, a total of 179 orders were placed at the Alphen plant, which broke down to approximately 15 orders per month.

Figure 15: Purchases Orders placed at Alphen plant – by month

In Turnhout, the figure was slightly higher with 19 orders placed per month

Figure 16: Purchases Orders placed at Turnhout plant – by month

The number was reduced in Soignies, with only 11 monthly orders. 

Figure 17: Purchases Orders placed at Soignies plant – by month

However, there is a similarities between them: the fluctuation between months. As it has been stated in the problem statement, one of the biggest problems in this category is that managers had no control over the stock and process. Which led to abrupt orders from the local buyers. This also has a hidden issue: there are possibilities that there will be shortage of PPE items during the operation process.

Comparing 2 periods: (Sep 2017 – Aug 2018) and (Sep 2018 – Aug 2019); the spend of the latter was almost doubled to that of the former.

Spend 2018

Location	Headcounts	PO Spend	PO Quantity
ALPHEN AAN DEN RIJN – NETHERLANDS Total	376	€258,091.74	35820
SOIGNIES – BELGIUM Total	436	€99,878.68	20086
TURNHOUT – BELGIUM Total	707	€111,540.08	15951
Grand Total		€469,510.49	71857

Figure 18: PPE expenditure at 3 plants from Sep 2017 – Aug 2018

Spend 2019

Location	Headcounts	PO Spend	PO Quantity
ALPHEN AAN DEN RIJN – NETHERLANDS Total	376	€315,366.25	32040
SOIGNIES – BELGIUM Total	436	€265,364.68	34753
TURNHOUT – BELGIUM Total	707	€248,649.09	32187.5
Grand Total		€829,380.02	98980.5

Figure 19: PPE expenditure at 3 plants from Sep 2018 – Aug 2019

 

After analyzing the possible issues in the flow chart, the researcher has found out that there were several problem within the process:

Process steps	Potential Failure Mode
Risk assessments	Frequency
	Types of hazards
	Job characteristics
Stock management	Purchases
	Uses
	Replenishments
	Frequency
Communications between plants and buyers	Underreporting
	Late notification

 

An FMEA analysis will be shown in sub question 6 to find out the root causes to identify the differences.

3.5. Sub- Question 5:

Responsiveness

 

According to Mr. Musse, MRO category manager, due to the fact that PPE items are related to safety issues at work; one of the utmost requirements for this is: there are enough quantities and diverse types for employees when needed.

Stock control is undoubtedly an important task, running out of them can expose employees to potential risks at the workplace. If the stocks for the required PPE run out, the corresponding tasks will either be postponed or modified until the appropriate PPE is obtained.

This requires a more proper PPE stock management plan. The plant managers need to get more up-to-date on shelf lives and purchasing reports. Because knowing which type and the quantity of items bought is a key. Having a better grip at stock will narrow down the chances that workers will be faced with risks and dangers because of shortage equipment.

 

Safety Compliance

As this is a requirement from the government and as well as health and safety related, Mr Musse also stated that all the items bought have to be complied with EU regulation.

This will ensure that employees have enough practicable equipment to protect them against hazards, without any additional cost to the company.

On the employees’ side, they must use the protective clothing or equipment that are required for their specific tasks as in instruction. They should use them properly not to create damage/malfunction the clothing or equipment. Since with that manner, their safety cannot be guaranteed and can also add additional expenses to replace equipment of the damage, malfunction or need to clean or sterilise the clothing or equipment.

Costs and Assets

The quantity and types of each plant will differ depending on their jobs, activities and head counts at the places. So after collecting data of previous years and discussing with plants’ managers. There are several types that are no longer in need, as well as some new items that were added due to requests from workers and managers.

Instead of using 19 different sub categories for items, this year Alphen is expected to use only 15. However, in Soignies, due to the expansion (Avery Dennison acquired Mactac), the diversity of PPE will be increased by 9, reaching 20 types in total. Whereas in Turnhout, the numbers go down by 5, at 23 different types at this moment. Each year, the increase indexes are estimated to be at 5-7%.

The researcher was informed the estimated quantity for next year per plant will be as follows:

Location	ERP Commodity (ERP Commodity)	Quantity	Average Unit price	Spend
ALPHEN	Defense and Law Enforcement and Security and Safety Equipment and Supplies	2	€410.04	€820.08
ALPHEN	Medical Equipment and Accessories and Supplies	22	€74.49	€1,638.71
ALPHEN	Uniforms	2923	€30.27	€88,485.94
ALPHEN	Self adhesive labels	53	€21.35	€1,131.73
ALPHEN	Masks or accessories	70	€17.22	€1,205.54
ALPHEN	Signage	22	€16.17	€355.74
ALPHEN	Decontamination aids and safety cleaning equipment	21	€14.93	€313.53
ALPHEN	Respiratory protection	1270	€13.73	€17,432.18
ALPHEN	Vision protection and accessories	25	€8.48	€211.92
ALPHEN	Protective gloves	4067	€7.34	€29,861.40
ALPHEN	Goggles	67	€6.39	€427.86
ALPHEN	Eye shields	25	€3.31	€82.75
ALPHEN	Personal safety and protection	24	€2.72	€65.34
ALPHEN	Bath and body	39	€2.62	€102.04
ALPHEN	Material Handling and Conditioning and Storage Machinery and their Accessories and Supplies	25570	€2.04	€52,133.26
Grand Total		34200		€194,268.02

Figure 20: PPE expenditure estimated for full year 2020 at Alphen plant

Location	ERP Commodity (ERP Commodity)	Quantity	Average Unit price	Spend
SOIGNIES	Defense and Law Enforcement and Security and Safety Equipment and Supplies	4	€410.04	€1,640.16
SOIGNIES	Safety glasses	562	€106.50	€59,851.01
SOIGNIES	Gas masks	25	€87.46	€2,186.38
SOIGNIES	Medical Equipment and Accessories and Supplies	423	€74.49	€31,508.00
SOIGNIES	Ear plugs	583	€64.45	€37,572.41
SOIGNIES	Safety shoes	875	€59.90	€52,415.45
SOIGNIES	Signage and accessories	80	€33.65	€2,692.00
SOIGNIES	Uniforms	1496	€30.27	€45,287.37
SOIGNIES	Hearing protectors	42	€25.49	€1,070.62
SOIGNIES	Apparel and Luggage and Personal Care Products	46	€20.95	€963.47
SOIGNIES	Soaps	68	€20.37	€1,385.22
SOIGNIES	Respiratory protection	587	€13.73	€8,057.24
SOIGNIES	Label making tapes	43	€11.93	€513.09
SOIGNIES	Safety apparel	105	€11.43	€1,200.00
SOIGNIES	Vision protection and accessories	36	€8.48	€305.16
SOIGNIES	Protective gloves	1209	€7.34	€8,876.92
SOIGNIES	Eye shields	40	€3.31	€132.39
SOIGNIES	Personal safety and protection	4325	€2.72	€11,774.28
SOIGNIES	Material Handling and Conditioning and Storage Machinery and their Accessories and Supplies	36	€2.04	€73.40
SOIGNIES	Fall protection and rescue equipment	74	€1.58	€116.77
Grand Total		10659		€267,621.31

 

Figure 21: PPE expenditure estimated for full year 2020 at Soignies plant

Location	ERP Commodity (ERP Commodity)	Quantity	Average Unit price	Spend
TURNHOUT	Defense and Law Enforcement and Security and Safety Equipment and Supplies	2	€410.04	€820.08
TURNHOUT	Shelf trolleys	33	€162.15	€5,350.79
TURNHOUT	Safety glasses	97	€106.50	€10,330.16
TURNHOUT	Gas masks	78	€87.46	€6,821.49
TURNHOUT	Ear plugs	57	€64.45	€3,673.46
TURNHOUT	Safety shoes	512	€59.90	€30,670.52
TURNHOUT	Safety vests	39	€42.50	€1,657.43
TURNHOUT	Signage and accessories	30	€33.65	€1,009.50
TURNHOUT	Protective knee pads	40	€32.44	€1,297.60
TURNHOUT	Uniforms	1011	€30.27	€30,605.30
TURNHOUT	Safety hoods	450	€20.84	€9,377.02
TURNHOUT	Soaps	87	€20.37	€1,772.27
TURNHOUT	Masks or accessories	80	€17.22	€1,377.77
TURNHOUT	Signage	47	€16.17	€759.99
TURNHOUT	Respiratory protection	35	€13.73	€480.41
TURNHOUT	Safety apparel	345	€11.43	€3,942.85
TURNHOUT	Ear muffs	25	€8.27	€206.75
TURNHOUT	Protective gloves	10978	€7.34	€80,604.50
TURNHOUT	Goggles	1487	€6.39	€9,495.98
TURNHOUT	Shoe insoles	92	€3.46	€317.93
TURNHOUT	Eye shields	307	€3.31	€1,016.12
TURNHOUT	Personal safety and protection	1948	€2.72	€5,303.19
TURNHOUT	Bath and body	34	€2.62	€88.96
Grand Total		17814		€206,980.05

Figure 22: PPE expenditure estimated for full year 2020 at Turnhout plant

3.6. Sub- Question 6:

To tackle the problem, first and foremost priority of Avery Dennison is to find the main root-cause and pose a solution to it to bridge the gap between the desired and current situation.

As can be seen in the findings of sub-question 4. The biggest problem is that the company didn’t have the annual consumption plan on hand. The orders were placed whenever needed.

Which leads to insufficient managing the stocks and increasing costs.

Failure mode and effects analysis (FMEA) is a technique that is used for continuous improvements in product or process designs. This technique can help determine the risk priority numbers; based on that the levels of risks associated with potential problems will also be indicated. As a result, solutions can be posed to the most severe issue.^[26]

FMEA uses scores of 1–10, to measure the probability of occurrence (O), severity (O) and the probability of not detection (D) of the problems. With 1 is the lowest/least risky and 10 as the most cruel scale. The FMEA table was illustrated after the interview with MRO categories managers and anf information from plant managers. The biggest issue is stock management which mainly causes by: Failure to properly stock management control.

 

Figure 23:FMEA analysis of PPE items purchasing process

FMEA ANALYSIS
Process/Product Name:		PPE ITEMS Purchasing Process
Process Step/Input	Potential Failure Mode	Potential Failure Effects	Potential Causes	Current Controls	S   (1 – 10)	O    (1 – 10)	D    (1 – 10)	RPN (S * O * D)
What is the process step or feature under investigation?	In what ways could the step or feature go wrong?	What is the impact on the customer if this failure is not prevented or corrected?	What causes the step or feature to go wrong? (how could it occur?)	What controls exist that either prevent or detect the failure?
Risk assessments	Frequency	Incorrect assessment	Lack of knowledge or abstraction of staff, time	Plant managers and stakeholders request for assessment annually	7	2	2	28
	Types of hazards	Wrong indications for required items	Lack of knowledge or abstraction of staff, time	Stakeholders, managers, EU regulations	9	2	2	36
	Job characteristics	Wrong indications for required items	Lack of knowledge or abstraction of staff, time	Stakeholders, managers, EU regulations	9	2	1	18
Stock management	Purchases	Shortage or Stocks overloads, Costs	Failure to properly stock management control	Stakeholders, managers, EU regulations	6	7	4	168
	Uses	Shortage or Stocks overloads, Costs	Failure to properly stock management control	Stakeholders, managers, EU regulations	6	7	5	210
	Replenishments	Shortage or Stocks overloads, Costs	Failure to properly stock management control	Stakeholders, managers, EU regulations	7	7	6	294
	Frequency	Incorrect assessment, shortage/overload stocks, costs	Lack of knowledge or abstraction of staff	Plant managers and stakeholders request for assessment once needed	7	6	6	252
Communications between plants and buyers	Underreporting	Delays, shortage, costs	Lack of knowledge or abstraction of staff	Quarterly report/ spend visibility	6	3	3	54
	Late notification	Delays, shortage, costs	Lack of knowledge or abstraction of staff	Quarterly report/ spend visibility	5	3	2	30

3.7. Sub- Question 7: Alternative Solutions

Based on the previous findings, the researcher has figured out that the root-cause of the main problem was failure in stock management control. To decrease the failures, there are 3 alternative solutions can be considered:

1. Software for annual planning for stock managements, training employees:

The software needed to help with annual planning for stock management will be purchases. Then there will be employees assigned to work with the system. They will be trained on how to work and cooperate the system into day-to-day business.

2. Suppliers Consolidation: Collaborating with a few big suppliers:

This will require several negotiations between Avery Dennison and a few potential suppliers on how to give them all of the annual quantities of PPE items with the first and foremost condition that they will be able to supply whenever needed. This will put part of the stock management process on suppliers’ hands. The plant managers will inform the suppliers when they need items then the suppliers will react accordingly.

3. Industrial Vending Machines and purchasing associated Software:

Vending machines for PPE items and the software associated will be bought.

The quantities and types of items bought will be managed by the machine and the system. When there is a replenishment needed, the system will directly send an order to the supplier with the details and quantities needed.

All three solutions are recommended to be implemented in the period of 5 years.

The advantages and disadvantages of those 3 solutions are described in the table belows:

Root-cause	Failure in stock management control
Alternative solutions	Purchasing software for annual planning for stock managements, training employees.	Suppliers Consolidation: Collaborating with a few big suppliers.	Industrial Vending Machines and purchasing associated Software
Advantages	–       Flexibility –       Efficiency –       Have a better control on stocks	–       Less players –       Have a better control on stocks –       No costs	–       Flexibility –       Efficiency –       No personnel associated –       Have a better control on stocks
Disadvantages	–       Training periods are long –       Need personnel associated –       Costs	–       Risks of suppliers are not able to replenish on time –       Less Flexibility	–       Costs –       Needs initial trainings for employees on how to cope with the system

Figure 24:Advantages and disadvantages of the three alternative solutions

3.8. Sub- Question 8: Benefit and Cost analysis

This chapter will illustrate the list of investment needed at the first stage and any operation expenses may occur within the project duration.

Investment list
5 years	CAPEX	OPEX
Purchasing software for annual planning for stock managements, training employees.	– Investment for licensing at the beginning	– Yearly subscription for the software – Assigned one person per plant to work with the planning system
Suppliers Consolidation: Collaborating with a few big suppliers.	– No financial costs
Industrial Vending Machines and purchasing associated Software	– Investment for the machine at the beginning	– Yearly subscription for the software

Figure 25: Investment list details

Period	CAPEX	OPEX		Total
5 years		Personnel	System
Purchasing software for annual planning for stock managements, training employees.	€50,000.00	€642,000.00 (€ 40,000.00 p.p.* 3 plants * 5 years *indexes)	€154,253.56 (€599 monthly subscription* 12months * 5 years* 3plants*indexes)	€804,253.56
Suppliers Consolidation: Collaborating with a few big suppliers.	–	–	–	€0.00
Industrial Vending Machines and purchasing associated Software	€82,500.00   (11 machines *€ 7500)	–	€565,596.39   (€599 monthly subscription* 12months * 5 years * 11machines* indexes)	€648,096.39

Figure 26: Investment list (CAPEX, OPEX)

3.8.1. Non-financial costs and benefit:

1.  Software for annual planning for stock managements, training employees.

Purchasing software’s to plan for stock management and training employees can help in reducing the number of items used. The company can also know better the quantities and items types which currently are needed.

However, the disadvantage of this solution is that: each plant needs an associated personnel, which is both time-consuming and costly. The monthly subscription for the software is not that big of a problem but the salary would become an eye-sore in the long time.

1. Suppliers Consolidation: Collaborating with a few big suppliers.

This solution suggests Avery Dennison should only focus on collaborating with big suppliers.

As in the finding of sub question 3: The big 6 are all potential suppliers which have high responsiveness and safety compliances. Avery Dennison can create agreements with them where all the quantities will be put on their hands. As a result, they will be responsible for replenishment and there are no costs associated. By this way, the company can reduce the problems with shortage of products and replenishments.

However, it’s too risky to put all the quantities onto a few suppliers’ hands. This will decrease the buying power of Avery Dennison. And also, there will be the risks that some specific items or customised products could not be delivered by the chosen suppliers.

1. Industrial Vending Machines and purchasing associated Software

The advantages of implementing this solution: Industrial Vending Machines and purchasing associated Software can be seen in cutting costs and have a better grip on what/where the items are used. The associated software monitors and records all transactions and operations. Employees will need to scan their employee-card in order to get access to the machine.

After they choose the products and withdraw it, the system will record their associated employee number and time stamp when the products were taken. It logs all data and is able to send them automatically in email or present them in downloadable, importable XLS or CSV files.

Project codes and costs codes can be attached to item distribution if needed.

Which makes the stock management process much easier for the plant managers. There is a backup cloud where all the logs will be downloaded to prevent loss/damage once power outage occurred.

 

It is capable of 24/7 unassisted operation, and can carry up to 2100 items. The system can point the machines directly at the existing suppliers. From there, the replenishments demands will be passed to the purchasing platform.The company can also set the restriction for each department/divisions by restricting the employee card. This to make sure the employees will only withdraw what they are supposed to. ^[27]

This can help the plant managers to assess the stocks level much more accurately. Since the item distribution’s history will be recorded, the employees will also be more aware when they want to withdraw the equipment.

The disadvantage of this solution is costs associated, both investment and during operating. Also, there will be training periods required for plant managers for them to work and analyse the data from the system.

3.8.2. Financial Costs and Benefit:

Cost of operating a vending machine is also including the cost of electricity and maintenance due to the fact that the machines need to operate 24h/24h.^[28]

Electricity cost is calculated by: ^[29]

E(kWh/day) = P(W) × t(h/day) / 1000(W/kW)

= 40W x 24hrs /1000(W/kW) = 0.96kWh/day => 350.4kWh/year/machine

The average electricity price in the Netherlands is 23 cents per kilowatt hour (kWh). One of the top three most expensive in Europe. Hence, the electricity price for the Netherlands will be used as a base for both countries in this case^[30].

Which will make the costs to operate each machine per year, in terms of electricity, is:

Yearly consumption = 350.4 * 0.23 = €80.60/per machine

And utility bills are expected to rise 18-30% every year due to increase in taxes, transport costs and funding for renewable energy.^[31][32]

In findings of sub-question 5 for costs and assets, the increase indexes for quantity are expected to be at 5-7%. According to the annual quantity of which was informed by plants’ managers and all related information, the calculation for saving are done as follows:

There will be 11 machines installs in 3 plants, the number was indicated by the area of the plants, plants’ playout are added in the appendices:

Location	No of machines
ALPHEN	3
SOIGNIES	4
TURNHOUT	4
Grand Total	11

Figure 27: Number of Vending Machines needed

The price of the machines, subscription fee were retrieved by a quote from the supplier. Maintenance fee was an estimation. The company expects to see a total supplier reduction spend of 3%, and approximately 15% per supplier.

 

Lists	Unit price
Price per machine	€7,500.00
Monthly subscription – per machine	€599.00
Annual subscription – per machine	€7,188.00
Maintenance service estimated per year per machine	€1,000.00
Discounted rate	15%

Figure 28: List of Investment unit prices

3.8.3. INVESTMENT ANALYSIS

The calculation will be done for the period of 5 years:

The initial investment is the costs of 11 machines for plants.

Each year, there will be operating costs which are: software subscription, electricity costs for the machine, maintenance costs.

The savings is the gap between the estimated annual quantity with the previous period. Since now the quantity, types will be managed by the software, there should not be any exceeding costs caused by unplanned reordering, failure in stock management as in last year.

To prepare for the worst scenario, all the increase indexes are used in this calculation will be the maximum of that section.

Industrial Vending Machines and purchasing associated Software	2020	2021	2022	2023	2024	2025
Investment on machine	€82,500.00	0	0	0	0	0
Software subscription	€79,068.00	€84,602.76	€90,524.95	€96,861.70	€103,642.02	€110,896.96
Operating costs	€886.51	€1,233.14	€1,715.30	€2,385.98	€3,318.89	€4,616.58
Maintenance costs	0	€11,000.00	€11,770.00	€12,593.90	€13,475.47	€14,418.76
Discounted expenses	€138,086.34	€82,310.51	€88,408.71	€95,065.34	€102,370.93	€110,442.45
Savings on quantity	€160,302.42	€171,523.59	€183,530.24	€196,377.36	€210,123.78	€224,832.44
Discounted benefits	€136,257.06	€145,795.05	€156,000.71	€166,920.76	€178,605.21	€191,107.58
Cash flow – investment – operating expenses per year	-€2,152.09	€74,687.69	€79,520.00	€84,535.79	€89,687.39	€94,900.15
Sum Cash flow (incl. investment)	-€2,152.09	€72,535.61	€152,055.60	€236,591.39	€326,278.78	€421,178.93

Figure 29: Investment analysis of Vending Machines project (period 5 years)

Return on Investment of this project is high, there is no heavy investment at the first stage.

Payback period is short, in the second year then the company would probably see the benefit.

NPV is positive, indicating this project will bring profit for the company.

 

ROI	58.05%
Payback Period	2 years
NPV	€196,619.22

Figure 30: Investment analysis : ROI, Payback Period, NPV

4. CONCLUSION & RECOMMENDATION

4.1. CONCLUSIONS

1. What is the desired situation of a company’s PPE category with effective management at optimum costs?

A company is considered as effectively manage PPE category at optimum costs can be seen as:

• Having suppliers who can deliver the equipment between 4-7 days, which is the baseline of the worldwide market. To ensure that PPE items will be there, when and where it is needed.
• The PPE equipment that are provided to employees must meet the criteria from EU regulation. The employer is responsible for providing enough and relevant items to the employee at no costs and assuring its adequacy, including maintenance, and sanitation. The employees have to use the given equipment as instructed to prevent unwanted damages to the equipment.
• The average costs a company would pay for PPE items per employee per annum is approximately €326.20. This is to make sure that employers put sufficient amounts of investment and effort to protect workers’ health and safety at the workplace.

1. What are the current trends in the PPE market?

The value of the PPE industry is estimated & forecasted to increase dramatically until 2025. Requirements in terms of innovations, price, quality, diverse, etc. are lifted up

PPE equipment protects workers from risks and hazardous environments, so it is a must that suppliers need to ship products whenever needed. Especially if it’s a B2B purchasing process.

All items that are being used needed to be complied with EU legislation about safety. These additional requirements have set the bars for a qualified manufacturer and PP products much higher.

PPE is designed in many more categories based on the material type and usage. Customized and fitting equipment are becoming trends since the workforce is very diverse.

 

1. Who are the potential suppliers for the company?

 

Suppliers must have sufficient performance in the delivery time frame. They have to be able to confirm that their products have all the remarks that fit with the requirements from the government and from workers.

Currently most of the suppliers had above standard performances, only 5 out of 70 suppliers had the lead time a bit longer than the rest. And the safety compliance can also be verified.

The company expects a reduction in price of at least 3% from supplier, which yields to approximately 15% IRR.

1. What is the current situation of PPE category at Avery Dennison’s Dutch and Belgian plants?

Last year, a total of 538 orders were placed at 3 plants (179 at Alphen, 134 at Soignies and 225 at Turnhout).

The average orders per month were ranged from 11 to 19. It can be seen that there is a fluctuation between months. A result from abrupt orders from the local buyers, as plants’ managers had no control over the stock and process. This also has a hidden issue: there are possibilities that there will be shortage of PPE items during the operation process.

The total spend on PPE items of the period (Sep 2018 – Aug 2019) was almost two folds compared to that of the same period the year before (Sep 2017 – Aug 2018).

1. What are the company’s requirements for PPE items in terms of: quality, costs, safety,

access, etc.?

According to Mr. Musse, MRO category manager, due to the fact that PPE items are related to safety issues at work; there should be enough quantities and diverse types for employees when needed.

As this is a requirement from the government and as well as health and safety related, all the items bought have to be complied with EU regulation. This will ensure that employees have enough practicable equipment to protect them against hazards, without any additional cost to the company.

On the employees’ side, they must use the protective clothing or equipment that are required for their specific tasks as in instruction to better protect themselves and avoid any additional costs.

The quantity and types of each plant will differ depending on their jobs, activities and head counts at the places. So after collecting data of previous years and discussing with plants’ managers the estimated quantities for next full year: Alphen will have 19 sub categories items, Soignies needs 20 whilst Turnhout will require 23 in total. Each year, the increase indexes are estimated to be at 5-7%.

The total quantities for next year is estimated at 62673 items with the total costs of €668,869.38 for 3 plants. (Alphen: €194,268.02, Soignies: €267,621.31, Turnhout: €206,980.05)

1. What are the differences between the desired situation and the current situation?

After analysing the process steps with the help of FMEA analysis. The researcher found out that the biggest issue is stock management which mainly causes by: Failure to properly stock management control.

Stock control is undoubtedly an important task, running out of them can expose employees to potential risks at the workplace.

This requires a more proper PPE stock management plan. The plant managers need to get more up-to-date on shelf lives and purchasing reports.

1. What are the alternative solutions that are available?

To decrease the failures, there are 3 alternative solutions can be considered:

• Software for annual planning for stock managements, training employees:

Purchasing the software for annual planning for stock management and assigning employees per plant to work and cooperate the system into day-to-day business.

• Suppliers Consolidation:

Negotiations between Avery Dennison and a few potential suppliers on how to give them all of the annual quantities. This will put part of the stock management process on suppliers’ hands. The plant managers will inform the suppliers when they need items then the suppliers will react accordingly.

• Industrial Vending Machines and purchasing associated Software:

Buying Vending machines for PPE items and the associated software. The quantities and types of items bought will be managed by the machine and the system. When there is a replenishment needed, the system will directly send an order to the supplier with the details and quantities needed.

 

1. What are the costs/benefits analysis?

All three solutions are recommended to be implemented in the period of 5 years.

A cost-benefit analysis was done to analyse which one of the three solutions posed will fit best with the situation. The outcome was solution 3: Buying Industrial Vending Machines and purchasing associated Software.

This can help the plant managers to assess the stocks level much more accurately. And ensuring there will be enough protective equipment for workers when needed.

Return on Investment of this project is high (58.05%), there is no heavy investment at the first stage.

Payback period is short, only 2 years, in the second year then the company would already see the benefit.

NPV is positive, indicating this project will bring profit for the company, yielded to €196,619.22 after 5 years.

4.2. RECOMMENDATION

Based on the research, the best solution Avery Dennison should implement is Buying Industrial Vending Machines and purchasing associated Software. This will help Avery Dennison to cut costs on PPE items whilst still having a good grip on the stock management. This will make sure that the safety aspects are still in scope, minimizing the issue in the purchasing process; cutting costs; having better control on the PPE stock management process.

This can ensure that the stock level is sufficient and cut the costs down to at least -€160,302.42 per year (€829,171.81 in 2019 and estimated spend in 2020 is €668,869.38).

This solution doesn’t need heavily investing at the first stage and after 2 years of implementing the company could see the benefits.

This helps bridging the discrepancy of total costs in PPE in Dutch and Belgian plants, the managers will have more control over the whole process: quantity, types, diversity, price, etc. Workers will be more responsible for their own safety at the workplace.

With this outcome of this research, Avery Dennison’s MRO category manager will get an in-depth view of PPE categories expenditure in Dutch and Belgian plants, after then they will be able to make a decision to improve the situation. Then, the manager will be able to contribute to achieve: helping manage compliance; and driving results to exceed budgeted savings targets for each division as what has been stated in the Indirect Procurement’s mission.

 

5. IMPLEMENTATION PLAN

After the research is finalised, an implementation plan is listed as belows:

 

Milestone	Departments/Stakeholders	Timeframe
Hand-in proposal	Researcher / MRO manager	February 3th
MRO Managers/ Plant managers communication	MRO manager/ Plants managers	February 10th
Assigning Stakeholders/ Departments	Plants managers	February 17th
Negotiating with suppliers	MRO manager	February 17th – February 28th
Installing the machines	Assigned team	March 2nd
Sending out communications to plants	MRO manager/ Plants managers	March 2nd
Trial periods	Assigned team/ Workers/ Plant managers	March 2nd – March 31st
Veriying process	Assigned team/ MRO manager/ Plant managers	March 16th – March 31st
Improvement/Approval	Assigned team/ MRO manager/ Plant managers	April 1st – April 14th
Evaluations/Feedbacks	Assigned team/ MRO manager/ Plant managers	April 15th

Figure 31: Implementation plan

 

The researcher had presented the result to MRO manager, in which the manager confirmed that this project is prominent. And they will further discuss with the leader teams of the company.

6. APPENDIX

SUPPLIERS’ RESPONSIVENESS

No	Supplier	Total number of orders	AVERAGE of Lead time (days)	Performances
1	IMES NV	224	4.476	239.34%
2	GROENEVELD-INTERSAFE BV	81	4.654	225.19%
3	Vandeputte NV	54	4.714	255.34%
4	INTERSAFE BELGIUM NV	39	4.692	228.53%
5	LISAP SA	36	4.474	238.22%
6	MANUTAN-OVERTOOM	25	4.520	254.40%
7	ROLLER-BELGIUM SPRL	14	4.857	193.39%
8	DIANTHUS	14	3.786	310.06%
9	ATLAS-SCHUHFABRIK GMBH & CO. KG	13	3.857	235.00%
10	TRANSPOSAFE SYSTEMS BELGIUM	10	4.000	279.42%
11	ERIKS AND BAUDOIN	9	3.111	326.67%
12	STAPLES NETHERLANDS	7	4.429	249.17%
13	AKTA TRADING HOLLAND B.V.	7	2.857	372.62%
14	MANUTAN	6	5.000	178.33%
15	NOVOLAB NV	5	6.000	130.00%
16	HOOGENBOOM/ RAVELLI RELATIE ARTIKELEN	4	5.750	124.17%
17	BLOMSMA TEKENBURO	4	5.500	148.96%
18	PROSAT SECURITY NEDERLAND BV	4	5.250	189.58%
19	Royal Haskoning DHV	4	5.000	192.71%
20	COVARMED BVBA	4	4.000	235.00%
21	AVN ARBO VEILIGHEIDSCENTRUM NEDERLAND	4	3.000	320.83%
22	SOMATI FIE NV	3	5.333	295.83%
23	HUSCHKA BEVEILGERS	3	5.333	145.83%
24	WILTEC BV	3	4.667	309.17%
25	ERIKS BV ROTTERDAM SCF	3	4.667	309.17%
26	CURA Preventie BV	3	3.667	202.22%
27	DUMOL FIRE CONTROL & PREVENTION BV	2	4.500	157.50%
28	TVH FORKLIFT PARTS S.A.	2	4.000	186.67%
29	APPLUS RTD	2	4.000	233.33%
30	GEVAARLIJKE STOFFEN TRAINING & ADVIES	2	3.000	262.50%
31	RENE LAUFFER CARTOONS	2	2.500	291.67%
32	HCS MISCO	2	1.500	525.00%
33	GLOBAL NET PROFESSIONAL HYGI	2	1.000	700.00%
34	PREBES (K.V.V.P.B)	1	8.000	87.50%
35	MULTICOPY ALPHEN AAN DEN RIJN – USE#	1	8.000	87.50%
36	GBI VAN BEIJEREN	1	8.000	87.50%
37	EFPC	1	8.000	87.50%
38	A3.BE	1	8.000	87.50%
39	WSW KUNSTSTOFF	1	7.000	100.00%
40	MULTICOPY ALPHEN AAN DEN RIJN	1	7.000	100.00%
41	JUNGHEINRICH NV	1	7.000	100.00%
42	ZELLIEN-FABRI NV	1	6.000	116.67%
43	TIMMERMAN BEROEPSKLEDING	1	6.000	116.67%
44	TEBODIN CUNSULTANTS & ENGINEERS	1	6.000	116.67%
45	SAPPI EUROPE SA	1	6.000	116.67%
46	DE BOER T.I.B.	1	6.000	116.67%
47	ARBO Centrum	1	6.000	116.67%
48	ADKOW BV	1	6.000	116.67%
49	YEL-SAFETY BVBA	1	5.000	140.00%
50	VALK TOURS VAN DER	1	5.000	140.00%
51	SPRL GARAGE MONONK	1	5.000	140.00%
52	RPS ADVIES -EN ING.	1	5.000	140.00%
53	LT JARDINS SPRL	1	5.000	140.00%
54	KAISER & KRAFT S.A. LUX	1	5.000	140.00%
55	SANIMAT BVBA	1	4.000	175.00%
56	METAL WORKING SPRL	1	4.000	175.00%
57	BT BRAMMER B.V.	1	4.000	175.00%
58	ARIVIC	1	4.000	175.00%
59	WOLTERS KLUWER BELGIUM NV	1	3.000	233.33%
60	SLICE GMBH	1	3.000	233.33%
61	EXPRO SA	1	3.000	233.33%
62	FONTAINE-BEAUVOIS SPRL	1	2.000	350.00%
63	BOOM B.V. MEPPEL	1	2.000	350.00%
64	AUTAJON LABELS BELGIUM	1	2.000	350.00%
65	PIERROT BLOEMSIERKUNST	1	1.000	700.00%
66	PARDUYNS S.A.	1	1.000	700.00%
67	NILFISK ADVANCE NV	1	1.000	700.00%
68	MEWA SERVIBEL S.A	1	1.000	700.00%
69	BAVO	1	1.000	700.00%
70	ALLIANCE BLE S.C.	1	1.000	700.00%
Grand Total		634	4.474

 

2019 SPEND

 

Location	ERP Commodity (ERP Commodity)	Quantity	Average Unit price	Spend
ALPHEN	Bath and body	60	€2.62	€156.98
ALPHEN	Decontamination aids and safety cleaning equipment	2	€14.93	€29.86
ALPHEN	Defense and Law Enforcement and Security and Safety Equipment and Supplies	209	€410.04	€85,698.12
ALPHEN	Ear plugs	3	€64.45	€193.34
ALPHEN	Eye shields	60	€3.31	€198.59
ALPHEN	Goggles	55	€6.39	€351.23
ALPHEN	Hearing protectors	1	€25.49	€25.49
ALPHEN	Label making tapes	9	€11.93	€107.39
ALPHEN	Masks or accessories	87	€17.22	€1,498.32
ALPHEN	Material Handling and Conditioning and Storage Machinery and their Accessories and Supplies	20146	€2.04	€41,074.57
ALPHEN	Personal safety and protection	101	€2.72	€274.96
ALPHEN	Protective gloves	6170	€7.34	€45,302.40
ALPHEN	Respiratory protection	1236	€13.73	€16,965.49
ALPHEN	Safety apparel	55	€11.43	€628.57
ALPHEN	Safety glasses	13	€209.82	€2,727.65
ALPHEN	Self adhesive labels	24	€21.35	€512.48
ALPHEN	Signage and accessories	24	€229.08	€5,497.85
ALPHEN	Uniforms	3764	€30.27	€113,944.95
ALPHEN	Vision protection and accessories	21	€8.48	€178.01
SOIGNIES	Apparel and Luggage and Personal Care Products	20	€20.95	€418.90
SOIGNIES	Defense and Law Enforcement and Security and Safety Equipment and Supplies	10	€89.94	€899.36
SOIGNIES	Fall protection and rescue equipment	65	€1.58	€102.57
SOIGNIES	Hand trucks or accessories	1	€300.14	€300.14
SOIGNIES	Label making tapes	50	€14.59	€729.50
SOIGNIES	Material Handling and Conditioning and Storage Machinery and their Accessories and Supplies	60	€19.73	€1,183.82
SOIGNIES	Personal safety and protection	33825	€6.79	€229,548.97
SOIGNIES	Shelf trolleys	6	€162.15	€972.87
SOIGNIES	Signage	17	€16.17	€274.89
SOIGNIES	Signage and accessories	598	€48.59	€29,057.46
SOIGNIES	Uniforms	101	€18.58	€1,876.20
TURNHOUT	Bath and body	9	€17.61	€158.52
TURNHOUT	Dollies	5	€39.08	€195.39
TURNHOUT	Ear muffs	4	€8.27	€33.08
TURNHOUT	Gas masks	53	€87.46	€4,635.12
TURNHOUT	Goggles	2134	€2.20	€4,702.07
TURNHOUT	Hand trucks or accessories	1	€142.33	€142.33
TURNHOUT	Hearing protectors	40	€36.75	€1,469.80
TURNHOUT	Label making tapes	19	€15.52	€294.94
TURNHOUT	Masks or accessories	60	€5.26	€315.84
TURNHOUT	Material Handling and Conditioning and Storage Machinery and their Accessories and Supplies	5	€5.67	€28.34
TURNHOUT	Medical Equipment and Accessories and Supplies	10	€74.49	€744.87
TURNHOUT	Mirrors	1	€23.52	€23.52
TURNHOUT	Personal safety and protection	8272	€9.38	€77,574.11
TURNHOUT	Protective gloves	19660	€4.40	€86,511.91
TURNHOUT	Protective knee pads	5	€32.44	€162.20
TURNHOUT	Protective ponchos	34	€38.49	€1,308.76
TURNHOUT	Safety apparel	230	€8.74	€2,010.33
TURNHOUT	Safety footwear	1	€3.50	€3.50
TURNHOUT	Safety glasses	33	€106.50	€3,514.38
TURNHOUT	Safety hoods	230	€20.84	€4,792.70
TURNHOUT	Safety shoes	413	€59.90	€24,740.09
TURNHOUT	Safety vests	9	€42.50	€382.48
TURNHOUT	Shoe insoles	50	€3.46	€172.79
TURNHOUT	Signage	9	€3.69	€33.23
TURNHOUT	Signage and accessories	251	€33.65	€8,446.15
TURNHOUT	Soaps	206	€20.37	€4,196.40
TURNHOUT	Tags	8.5	€205.91	€1,750.20
TURNHOUT	Uniforms	432	€46.52	€20,097.82
Grand Total		98977.5		€829,171.81

 

PLANTS LAYOUT

ALPHEN PLANT

TURNHOUT PLANT

SOIGNIES PLANT

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