Durban Automotive Cluster 2007 – 2009 Business Plan

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					    Durban Automotive Cluster
     2007 – 2009 Business Plan



                                                                   Ver 1.10
                                                 10 November 2006




                            Prepared by
              Mr Douglas Comrie, Cluster Facilitator
           On behalf of the DAC Executive Committee




                                                     8 Old Main Road, Hillcrest, 3610


DAC
                              PostNet Suite #10139, Private Bag X1005, Hillcrest 3650
                                                             Tel: +27 (0) 31 765 3870
                                                             Fax: +27 (0) 31 765 3873
                                                              admin@bmanalysts.com
Durban Automotive Cluster                                  www.dbnautocluster.org.za




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                Draft Durban Automotive Cluster 2007 – 2009 Business Plan


CONTENTS
Executive Summary ................................ ................................ ................................ ....... 3
1      Introduction................................ ................................ ................................ ............ 4
    1.1       The Durban Automotive Cluster as a PPP ................................ ..................... 4
    1.2       Purpose of the Business Plan ................................ ................................ ......... 5
2      Reflection on Past Successes ................................ ................................ ................. 6
    2.1       Industry Overview ................................ ................................ ......................... 6
    2.2       Programme Successes ................................ ................................ .................... 6
3      Key Challenges ................................ ................................ ................................ .... 10
    3.1       Local Economic Development Challenges ................................ .................. 10
    3.2       Industry Challenges ................................ ................................ ..................... 10
4      Business Plan for 2007 – 2009 ................................ ................................ ............ 12
    4.1       Overview................................ ................................ ................................ ...... 12
    4.2       Implementation model ................................ ................................ ................. 13
    4.3       Executive Function ................................ ................................ ...................... 15
    4.4       Supplier Competitiveness ................................ ................................ ............ 16
    4.5       Human Resource Development ................................ ................................ ... 18
    4.6       Logistics Coordination................................ ................................ ................. 21
    4.7       Industry Transformation ................................ ................................ .............. 23
    4.8       Manufacturing Excellence ................................ ................................ ........... 26
5      Expected Outcomes of Business Plan................................ ................................ ..29
6      Budget ................................ ................................ ................................ .................. 32
    6.1       Overview................................ ................................ ................................ ...... 32
    6.2       Budget for 2007 ................................ ................................ ........................... 33
    6.3       Budget for 2008 and 2009 ................................ ................................ ........... 36
Appendix A: DAC Membership ................................ ................................ .................. 37
Appendix B: Programme Concept Maps ................................ ................................ ..... 39
Appendix C: Contact Details ................................ ................................ ....................... 44




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EXECUTIVE SUMMARY
The Durban Automotive Cluster is a public private partnership between the
eThekwini Municipality and the automotive industry in KwaZulu-Natal, primarily
concentrated in the eThekwini Municipality. This document represents the business
plan for the Durban Automotive Cluster for 2007 – 2009.

The automotive manufacturing industry in KwaZulu-Natal, largely concentrated
within the eThekwini Municipality, employs approximately 20,000 people and
contributes roughly R21 billion to the local economy per annum.

The growth and competitiveness progress of the regional industry has been impressive
over the past few years. Some of the more impressive figures in this regard include
Toyota embarking on a ramp up of production to 220,000 vehicles per annum and
investment of R8bn in the last year. The component manufacturing sector has
reported real growth in revenue of 36% and employment growth of 34% over 2002 –
2005. Furthermore, Greenfield and Foreign Direct Investment amongst component
manufacturers in the last year was estimated at over R2bn.

Despite this very positive past performance challenges still remain. The key local
economic challenges include those of sustaining economic growth, reducing
unemployment and Black Economic Empowerment. The industry challenges can be
grouped into the six areas of macroeconomic trends, advancing competitiveness
requirements, more onerous compliance requirements, the increasing importance of
managing operational risk, transformation and developing a world class skills base.

The Durban Automotive Cluster’s five core programmes deal with each of these
challenges in a structured way and the business plan defines specific goals in respect
of each. The successful implementation of this plan should therefore lead significant
progress in respect of addressing both the local economic development and industry
challenges.

The overall budget for the programme for 2007 is R2.2m while the total budget for
the three-year period is R7.0m. 50% of the total funding is being requested from the
eThekwini Municipality while the remaining 50% will be raised from industry via
membership fees.


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1 INTRODUCTION

1.1 The Durban Automotive Cluster as a PPP
The Durban Automotive Cluster (DAC) is a public private partnership (PPP) between
the eThekwini Municipality and the automotive industry in KwaZulu-Natal, primarily
concentrated in the eThekwini Municipality. The DAC is a registered Section 21
company and hence complies with municipal funding requirements.

The DAC was established in January 2002 with the primary purpose of developing
the competitiveness of the KwaZulu-Natal automotive industry following the
successful completion of a six-month pilot project that was initiated in July 2001.

The automotive manufacturing industry in KwaZulu-Natal, largely concentrated
within the eThekwini Municipality, employs approximately 20,000 people and
contributes roughly R21 billion to the local economy per annum.

While Toyota is by far the largest vehicle manufacturer in the province and country,
and is projected to produce 220,000 vehicles in 2010, MAN, Volvo and Bell
Equipment also assemble medium and heavy commercial vehicles in the province,
whilst over 80 local component firms manufacture and supply to vehicle assemblers,
other component manufacturers, the independent aftermarket and the export market.

The DAC comprises five core programmes, with each of these dealing with a
particular aspect of the business plan. These programmes are as follows:
   Supplier Competitiveness: Develops the KwaZulu-Natal supply base to world
    class levels, encourages transparent relationships and facilitates growth
    opportunities through a variety of focused interventions.
   Logistics Coordination: Reduces logistics costs, eliminates inefficiency, improves
    reliability and supports knowledge creation.
   Human Resource Development: Supports the creation of a world class Human
    Resource Development environment, primarily through knowledge sharing, in-
    service training and joint training.
   Industry   Transformation:     Is      an   effective   economic   transformation   and
    empowerment facilitator for the automotive industry in KwaZulu-Natal.



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   Manufacturing Excellence: Is a continuous improvement benchmarking network
    which assists firms to identify areas of operational competitiveness strengths and
    weaknesses and then capacitates the firms to address those challenges by learning
    best practices from one another.

1.2 Purpose of the Business Plan
The DAC’s present (2004 to 2006) business plan and funding cycle ends on 31
December 2006. This document therefore represents the business plan for the DAC
for the period 1 January 2007 to 31 December 2009.

This document very clearly outlines both local economic development challenges and
challenges confronting the local automotive industry.
   The key local economic challenges include those of sustaining economic growth,
    reducing unemployment and Black Economic Empowerment.
   The key industry challenges can be largely grouped into the six areas of
    macroeconomic trends, advancing competitiveness requirements, more onerous
    compliance requirements, the increasing importance of managing operational risk,
    transformation and developing skills to world class levels.


Aside from identifying major challenges, this business plan also outlines the strategic
direction and firm set of interventions that the industry wishes to embark upon in
partnership with the eThekwini Municipality so as to place the local economy and
automotive manufacturing industry in a stronger strategic and operational position.

Operationally, the foundation of the DAC will remain much as it has since its
establishment, with industry contributing technical and management expertise to
focused Technical Steering Committees and these Technical Steering Committees
then in turn reporting into an Executive Committee comprising both industry and
local government representatives.

The funding model used, also as per previous years, is based on a 50-50 contribution
by the eThekwini Municipality and the regional industry over the three-year period.




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2 REFLECTION ON PAST SUCCESSES

2.1 Industry Overview
The growth of the regional industry has been impressive over the past few years.
While Toyota itself is in the process of increasing its production volumes from just
over 100,000 vehicles per annum to an anticipated 220,000 by 2010, the automotive
component manufacturing industry has also grown substantially.


For example, real revenue growth amongst component manufacturers in KwaZulu-
Natal was an estimated 36% over 2002-2006, which is higher than the growth of 16%
and 4% recorded for the Eastern Cape and Gauteng regions respectively. Employment
growth has also been very positive with local firms increasing employment by an
estimated 34% versus 26% in the Eastern Cape and 15% in Gauteng.


Investment in the industry has also continued to outperform that of the Eastern Cape
and Gauteng regions. Over the past year the KwaZulu-Natal firms spend on average
5.1% of their turnover on capital equipment, compared to 2.6% and 4.2% in the
Eastern Cape and Gauteng respectively, while Greenfield and FDI investment
amongst component manufacturers in 2005/6 can be estimated at over R 2 billion and
investment at Toyota over the same period at over R8 billion.

2.2 Programme Successes

2.2.1 Supplier Competitiveness
In support of the vision to develop the local supply base, this programme has utilised
a multi-faceted approach towards strengthening local suppliers. Three of the main
elements of this programme ore outlined below.

   Procurement Skills: The interface between 1st tier suppliers and 2nd tier suppliers
    has been strengthened considerably through extensive training and development.
    1. Formal specialised training has been run in the field of automotive purchasing
       management in conjunction with the Business Studies Unit of the Durban
       University   of   Technology creating      over   50 qualified     procurement
       professionals.


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    2. Procurement best practices and awareness of global trends were encouraged
       through over 25 workshops sessions involving over 750 participants. Subjects
       typically dealt with included increasing levels of local content and bolstering
       supply chain management.


   Special Interest Groups (SIGs): Group-based interventions focusing on specific
    areas of competitiveness concern have been formed. Issues dealt with under the
    five SIGs include inventory control, risk management, ISO 14001 & OHSAS
    18001, IMDS and the ELV directive.


   Awareness of Industry Capabilities: An increased awareness of the size and
    scope the industry in KwaZulu-Natal has been created through ongoing efforts to:
       1. Promote local manufacturing capabilities amongst local buyers, domestic
           vehicle assemblers, South African embassies abroad and foreign buyers
       2. Create an increased awareness of government support mechanisms
           including outbound and inbound trade missions

2.2.2 Logistics Coordination
Through the focus on reducing logistics costs, eliminating inefficiency, improving
reliability and knowledge creation a number of achievements have been achieved.


   Knowledge sharing: Savings of up to 40% have been achieved on certain sea
    freight routes in efforts to ensure that individual firm logistics costs reflect
    available market related prices.


   Best practices: Advice on best practices in many aspects of supply chain relations
    has been provided. Specific subjects covered include Value Stream Mapping,
    Change Management, Basic Stability, Creating Continuous Flow, Making
    Materials Flow, Creating Level Pull, Lean Warehousing and Lean Logistics.


   Awareness & national integration: Members have been kept aware of ongoing
    and potential developments in the logistics field while other automotive industry
    clusters have been engaged with to develop national solutions to key logistics
    concerns.

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2.2.3 Human Resource Development
Creating a world class Human Resource Development environment is an enormous
challenge but significant progress in this area has nevertheless been made.


   Knowledge sharing: Firms have been equipped with the necessary knowledge to
    make more informed Human Resource related decisions. Six workshops were run
    in 2006 to with a total of 114 Human Resource practitioners participating.


   Joint training: A co-operative training environment has been created whereby
    training expenditure is optimised. Joint negotiation of training rates and the
    running of joint courses resulted in savings and/or increased training expenditure
    of over R185,000 in 2006 alone.


   In-service training: A culture of in-service training has been promoted so as to
    bolster the industry’s skills base. 56 learners were sensitised to coaching and
    mentoring, business etiquette, and the SA and international automotive industries
    before being placed at firms.

2.2.4 Industry Transformation
The Industry Transformation programme has defined its role as that of being an
effective economic transformation and empowerment facilitator for the automotive
industry in KZN.


   Awareness: Through a strong focus on awareness of transformation issues more
    capacity has been created in the industry to effectively engage with transformation
    challenges and opportunities.


   Best Practice: A series of best practice workshops have been held to unpack
    transformation indicators as stipulated in the Broad-Based Black Economic
    Empowerment Act.


   BEE Supplier Development: The development of black owned automotive
    component firms has been strongly supported particularly in terms of bolstering


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    operational competitiveness. Participating firms increased sales by an estimated
    33% in real terms between 2002 and 2005 (vs SA average of 19%). All
    participating firms are no also ISO 9001 accredited.


   Skills Development: Eleven bursaries were awarded to previously disadvantaged
    individuals (PDIs) studying towards automotive related qualifications. Specialists
    have been trained in TS16949, ISO14001, APQP/PPAP/FMEA, Statistical
    Process Control (SPC) and automotive purchasing management.

2.2.5 Competitiveness Benchmarking
In support of improving operational competitiveness this programme has gone a long
way towards encouraging the adoption of best practices.

   Competitiveness Benchmarking: Annual competitiveness benchmarking reports
    provide each individual firm with a clear understanding of their competitiveness
    strengths and weaknesses. At a macro level a basket of roughly 30 different
    competitiveness indicators all show positive trends in the KwaZulu-Natal
    automotive industry, although performance relative to key global competitors still
    highlights the need for further progress.

   Best Practice Workshops: 12 best practice workshops have been held at firms
    identified as top performers in particular areas over the past three years. These
    have encouraged firms to learn from local success stories and the practical
    application of best practices. Examples of subjects dealt with include ‘using
    kanbans as a JIT manufacturing tool - a case study of Hesto Harnesses’ and
    ‘production planning in a JIT manufacturing environment – a case study of Smiths
    Plastics’.

   Newsletters: Newsletters are distributed every second month. These newsletters
    explore the latest industry trends along with a wide range of strategic issues
    confronting the industry. Examples of the titles of past editions include ‘Does
    exporting matter in the SA auto components industry? Exporting versus Non-
    exporting firm performance levels’, ‘Unpacking Employment Equity in the SA
    Auto Components Industry’ and ‘The Asian Pacific threat unpacked: Analysing
    the SA auto components industry’s comparative performance’.

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3 KEY CHALLENGES

3.1 Local Economic Development Challenges
While there are a wide variety of economic and social development challenges
confronting the economy, from a local economic development perspective there are
three which have been indicated to be most pertinent to the direction of the DAC and
the local automotive industry more generally.


   Sustaining economic growth: Sustaining economic growth particularly in
    traditional manufacturing sectors has been met with mixed successes in an
    environment of reducing import duties and consequently more open competition.
    Furthermore, national government has a very clear expectation of 6% economic
    growth per annum, the responsibility for which is borne by industry and the
    various tiers of government alike.


   Employment creation: The high unemployment levels in South Africa and
    ongoing urbanisation of the population place employment creation high on the
    local economic development. The sustained economic growth already discussed
    therefore very clearly needs to be linked to employment creation opportunities.


   Black Economic Empowerment: The involvement of previously economically
    marginalised population groups is a high priority for all tiers of government and
    the economy as a whole. Creating a more equitable society in respect of Broad
    Based Black Economic Empowerment is therefore also recognised as a priority
    for this industry.

3.2 Industry Challenges
Despite very promising performance in recent years the industry is faced with a
number of major challenges over the next few years. Six of the most notable are
outlined below.


   Unfavourable macro-economic trends: A strong exchange rate and domestic
    inflation present varying degrees of challenges. Furthermore, these macro


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    economic indicators need to be understood within the context of diminishing
    Motor Industry Development Programme (MIDP) export benefits and reducing
    import duties in the domestic market, both of which exacerbate already existent
    pressures.


   Advancing competitiveness standards: Attaining cost competitiveness while
    ensuring that progress in other operational competitiveness areas (such as quality,
    flexibility, reliability and innovation) keeps pace with global competition is an
    ongoing challenge. Despite very promising past progress, benchmarking data
    shows that performance still lags automotive industries in leading automotive
    economies.


   More onerous compliance requirements: The industry is increasingly export
    oriented. Adequately meeting changing local and international compliance
    requirements relating to quality, environment and health and safety has therefore
    become an important order qualifying criterion in the industry.


   Operational risk: Global sourcing is demanding higher levels of security and
    reliability in the supply chain. Minimizing the risk associated with sourcing from
    firms in South Africa, even from those firms those that are foreign owned, is
    therefore critical in respect of securing and keeping export contracts.


   Transformation: Increasing the pace of transformation in the areas of ownership,
    procurement and employment equity in particular remains critical. In the absence
    of an industry charter, transformation in the national industry has lacked any form
    of clear direction in this area.


   Developing skills to world class levels: Skill levels, particularly at lower levels
    within organisations, remain far weaker than those of many other emerging
    economies. This poses a major challenge in respect of both achieving
    competitiveness and sourcing skills to accommodate growth.




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4 BUSINESS PLAN FOR 2007 – 2009

4.1 Overview
In support of addressing the aforementioned challenges a number of priorities have
emerged for the DAC for 2007 – 2009. The business plan has consequently been
designed in such a way as to support three sets of objectives, namely a set of industry
competitiveness objectives (ongoing objectives) which in turn must support both a set
of industry strategic objectives and a set of local economic development objectives.
The components that comprise these groups are outlined below.

4.1.1 Industry Competitiveness Objectives
   Cost: Achieving cost competitiveness relative to manufacturers in other countries,
    particularly emerging economies, is critical.
   Quality: Quality performance in respect of quality to customers as well as
    performance in respect of the concept of ‘total cost of quality’ needs to match the
    performance of international competitors.
   Reliability: Delivery reliability to customers and supporting operational reliability
    needs to be improved to levels comparable to those of international competitors.
   Flexibility: Delivery frequency and delivery lead times to customers and
    supporting operational reliability needs to be improved to levels comparable to
    those of international competitors.
   Compliance: Prevailing compliance requirements must be met timeously, with
    these typically including requirements such as those of ISO/TS 16949
    certification, ISO 14001 certification, OSHAS 18001 certification and IMDS
    compliance.

4.1.2 Industry Strategic Objectives
   Operational Competitiveness: Advance overall operational competitiveness to
    levels comparable to, or ahead of those of, leading global competitor automotive
    regions as per what has been outlined above.
   Operational risk: Reduce the operational risk generally associated with sourcing
    from South Africa and emerging economies more broadly, particularly in respect
    of consistency of quality and delivery reliability.



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   Black Economic Empowerment: Achieve significant Broad Based Black
    Economic Empowerment (BBBEE) progress in respect of the seven areas
    identified in the BBBEE Act.
   Skills development: Develop skills at all levels within the industry to levels
    competitive with those in leading emerging economies.

4.1.3 Local Economic Development Strategic Objectives
   Economic growth: Show sustainable economic growth, with this reflected in
    growth of firms and investment by firms.
   Employment creation: Increased employment levels in the local industry thus
    contributing to the drive to reduce unemployment
   Black Economic Empowerment: Show progress in respect of all seven BBBEE
    transformation indicators.


Figure 1: Model for attaining industry and local economic development objectives




4.2 Implementation model
While the successful implementation of the business plan in its entirety will be the
responsibility of the Executive Committee, as in previous years the ‘vehicle’ for


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                attaining the defined objectives will be a set of function specific programmes run by
                Technical         Steering          Committees              (TSCs)          comprising                  nominated           industry
                representatives. Each of these TSCs will in turn be responsible for overseeing the
                successful implementation of a set of interventions that fall within their respective
                scope of operation.


                The Executive Committee and TSCs as of 10 November 2006 are reflected in Figure
                2.


                Figure 2: Executive Committee as of 30 November 2006


                                                                     Executive Committee
                                                 Wolfgang Ropertz (Production Dir, Smiths Assembly) 1
                                                 Zamo Xaba (Human Resources Dir, Kaymac Group) 2
                                                 Laurie Coetzee (Commercial Director, Smiths Manufacturing)
                                                 Christo Roets (Purchasing Manager, Aunde)
                                                 Cyril Khambula (Human Resources Dir, Toyota)
                                                 Shunnon Tulsiram (Head Dept Econ Devp, eThekwini Municipality)
                                                 Ted Waldburger (Chief Executive Officer, Behr)
                                                 John Frankiskos (Managing Dir, Federal Mogul)
                                                 Hassim Jamal (Managing Dir, Commercial Elastic)
                                                 Alan Holmwood (Snr General Man, Toyota)
                                                 Lino Pucillo (General Man, Toyota)
                                                                                                                    3
                                                 Chief Facilitator: Douglas Comrie (Operations Dir, B&M Analysts)
                                                 Facilitator: Thabani Shale (DAC Man, B&M Analysts) 3
                                                 Dr Justin Barnes (Managing Dir, B&M Analysts) 3                                            1
                                                                                                                                                 Chairperson
                                                                                                                                            2
                                                                                                                                                 Vice chairperson
                                                                                                                                            3
                                                                                                                                                 Non-voting member




      Supplier                          Logistics                       Human Resource                           Industry                          Competitiveness
   Competitiveness                    Coordination                       Development                          Transformation                        Benchmarking
Christo Roets (Aunde) 1          Laurie Coetzee (Smiths) 1         Zamo Xaba (Kaymac Group) 1             Cyril Khambula (Toyota) 1             Wolfgang Ropertz (Smiths) 1
                                                                                                                                                Malcolm White (Behr)
Bill Brickley (Bloxwich)         Blair Helm (Aunde)                Trish Sims (Bloxwich)                  Hassim Jamal (Comm. Elastic)
Russell Curtis (DIPA)            Keith Lambert (Behr)              Mary van Niekerk (Duys)                Krish Maharaj (Federal Mogul)         Sean Ellis (B&M Analysts) 3
Manuel Ferreira (PFK)            Steve Crocker (Duys)              Alan Blades (Federal Mogul)            Patrick Chetty (Kaymac)
Andrew Turner (Ramsay)           Kevin Ellis (Kaymac)              Maxwell Mgcaba (Feltex)                Graham Randall (Kaymac)
Wade Botha (Smiths)              Gordon Reddy (Kaymac)             Yureshini Hirday (Hesto)               Trusha Pillay (Maritzburg Eng.)
Selvin Konar (Smiths)                                              Niri Santhilal (Hesto)                 Phiwo Thango (Morecare Eng.)
                                 Thabani Shale (B&M Analysts) 3
                                                                   Johan van Niekerk (Hullets)            Paul Kenny (Smiths)
Thabani Shale (B&M Analysts) 3
                                                                   Deirdre Botha (PFK)
                                                                                                          Thabani Shale (B&M Analysts) 3
                                                                   Kylie Griffin (PFK)
                                                                   Chrissy Dore (Toyota)
                                                                   Stuart Forbes (Toyota)
                                                                    Thabani Shale (B&M Analysts) 3




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4.3 Executive Function
The Executive Committee’s activities and responsibilities can be categorised into two
groups, namely the ongoing oversight of the DAC and defined activities.

In terms of ongoing oversight, the Executive Committee serves to provide strategic
guidance to the DAC, ensures that the various commitments in the business plan are
successfully met and oversees the finances of the DAC.

The executive function also includes the following discrete responsibilities:
   Annual performance review: The industry’s performance and progress is
    monitored so as to gauge the effectiveness of current interventions, identify
    weaknesses and shortfalls, and put forward recommended corrective actions.
   Annual General Meeting (AGM): An AGM is held each year to report on the
    progress of the DAC to all members while at the same time providing a platform
    for launching activities for the ensuing year.
   Resource centre: As the strategic hub of the automotive industry in KwaZulu-
    Natal the DAC has established a dedicated resource centre comprising material on
    manufacturing best practice; global automotive trends; automotive research
    papers; automotive trade data; quality, environmental and health and safety
    standards; all DAC workshop material and selected training material (all subject
    to copyright restrictions).
   Member recruitment: Increased membership is important in terms of harnessing
    all the intellectual capital within the industry, ensuring activities are inclusive and
    have a positive impact on the entire value chain, and meeting industry
    membership financial contribution commitments.
   Interaction with other institutions: Partnerships and relationships with
    organisations that either share or could support the DAC’s objectives are
    evaluated and established where deemed to be beneficial.




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4.4 Supplier Competitiveness

4.4.1 Introduction
Suppliers to the automotive industry continue to face severe pressures in the areas of
cost, quality and on-time and in full delivery. Moreover, benchmarking findings of the
KwaZulu-Natal based automotive component manufactures revealed the following
key areas of weakness more specifically:
       Poor supplier quality performance
       Decreasing levels of local content in the last two years
       Erosion of the second tier supply base
       Cost down pressures driven by OEMs and first tier suppliers
       Reduction of South African technology in a global industry
       Inadequate supply chain management support from customers
       Lack of commitment to supplier development programme by lower tier firms

In recognition of these challenges the Supplier Competitiveness Programme has
resolved to bolster supply chain management within firms and between firms,
improve supplier quality performance, increase levels of local content and promote
the manufacturing capabilities of the local automotive industry.

4.4.2 Development of Purchasing Skills
The purchasing function at firms wields the most influence over suppliers and is the
department that interacts most with suppliers. It therefore stands to reason that this
department should play the dominant role in supplier development at firms. The
procurement and supply chain related interface functions at firms will therefore be
developed via:
   Best practice procurement workshops that will add significant value in terms of
    awareness and adoption of best practices. Eight workshops will be run annually
    with an anticipated average of 40 delegates from industry attending each.
   Specialised automotive courses in purchasing and related fields will be
    developed and run jointly by the Durban University of Technology and the DAC
    so as to further develop the procurement function.




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   Procurement forum which will provide a platform for identifying and engaging
    with various operational supply chain management challenges

4.4.3 Facilitation of Growth
The main instrument for proactively facilitating growth is the promotion of awareness
of automotive manufacturing capabilities that exist in KwaZulu-Natal. This will be
done via two avenues.
   Database maintenance and promotion: Updating, maintaining and promoting
    the existing online supplier database. Promotional brochures for the supplier
    database will be updated and marketed aggressively to domestic and international
    buyers as well as to relevant South African embassies abroad
   Supply side support: Making use of appropriate government supply side support
    mechanisms designed to promote industry, typically incentives offered under the
    Export Marketing and Investment Assistance (EMIA) scheme.

4.4.4 Special Interest Groups
SIGs have been successful at resolving specific operational competitiveness
challenges facing firms. The formation of short and medium term SIGs will
consequently be continued. It is planned that three new SIGs will be formed each year
over the three-year period and that these will mostly be in support of supply chain
management within firms and between firms, improved supplier quality performance
and increased levels of local content.

4.4.5 Joint Auditing of Common Suppliers
The cooperative relationship amongst DAC members has reached the stage where it is
feasible to undertake joint supplier audits of common suppliers. This is expected to
allow for a higher skill level of auditor to be utilised for the audits, thus facilitating
the more rapid development of the suppliers, while at the same time reducing the cost
of the auditing function as a whole. This initiative will comprise:
   The facilitation of collaborative auditing relationships.
   The development and mentoring of auditors in respect of ‘core tools’ to be
    imparted to suppliers.
   An evaluation of opportunities for developing and then sharing in-house expertise
    as opposed to developing and then sharing outsourced expertise will be evaluated.


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4.4.6 Joint Procurement of Commodity Items
In response to extreme cost pressures a pilot project to employ ‘joint procurement’ of
commodity items and services will be extended to include a greater number of firms
and a greater number of sourced items and services. Participating firms will negotiate
a favourable price and supply agreements for selected common consumables and
services.

4.5 Human Resource Development

4.5.1 Introduction
From a Human Resource Development perspective the DAC has identified a range of
deficiencies and areas where further improvement is possible in the industry. Specific
areas that have been identified are as follows:
   Improve employee efficiencies
   Address key skill shortages
   Improve employee commitment
   Nurture innovation at all employee levels
   Enhance employment equity profiles
   Establish and maintain a healthy workforce and safe working environment.
   Actively embark on interventions to combat the spread of HIV/AIDS


The Human Resource programme has resolved to create a world class Human
Resource base in support of a world class automotive industry within KwaZulu-Natal.
This will be achieved utilising a three-pronged approach incorporating awareness,
enhanced skills development particularly in areas where critical skill needs have been
identified, and developing Human Resource excellence in the form of efficient and
effective Human Resource departments.

4.5.2 Senior Management Workshop
An annual knowledge creation workshop directed toward MD's, FD's, and Operations
Directors will be conducted with the following aims:
   Sensitising or introducing the importance of active Human Resource management
    and development in relation to achieving World Class Manufacturing best
    practice.

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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan


   Providing information on the Human Resource Development programme's
    structure and how this framework will strengthen Human Resource in the industry
    through enhancing the capabilities of personnel working in this field.

4.5.3 Stakeholder Interface
This initiative will facilitate a collaborative relationship between industry, regulatory
bodies and educational institutions. Regulatory bodies and educational institutions
will be actively engaged with in relation to the development of technical skills. These
initiatives will be primarily, although not solely, focused at in-service training
programmes.

4.5.4 Joint Training
Whilst being directed toward actively enhancing Human Resource skills and the
provision of relevant compliance related training; this initiative will also ensure cost
savings. Brain-storming sessions and surveys will be conducted annually to establish
the training needs of member firms and to decide upon agreed training courses for the
year ahead. The joint courses will be conducted by independent service providers at
preferentially negotiated rates.


It is envisaged that the following will be covered:
       Human Resource related topics identified will be dealt with at three sessions
        of one day each per annum.
       Training for supervisors on ‘soft skills’ will be provided. This is aligned to the
        supervisory training to be provided on World Class Manufacturing and
        industry trends.
       HIV/AIDS, OSHAS 18000, ISO14001, TS 16949 and the related core tools.
       Broader courses covering subjects such as core skills such as problem solving
        and lean thinking.

4.5.5 In-service Training
In-service training will be promoted via two avenues. While the first relates to
promoting the industry as a career avenue for learners, the second relates to providing
opportunities for those learners to be placed in industry:



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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan


   Learner workshops: Two workshops will be conducted on an annual basis for
    learners which will coincide with the P1 and P2 learner placements. The
    workshops are to be hosted at member firms and will facilitate the transferral of
    knowledge associated with World Class Manufacturing principles, life-skills, as
    well as building their knowledge on the SA and global automotive industries.
   Human Resource manager workshop: An annual workshop for Human
    Resource managers and Skills Development Facilitators will focus on the
    importance of developing in-service training programmes. During these
    workshops the relevant educational institutions (DUT and Mangosuthu) and
    regulatory bodies will provide an insight into student sourcing and procedural
    amendments. Member firms (approximately three) that are excelling within this
    domain will be requested to provide case studies on their experiences to provide
    inspirational guidance.

4.5.6 Management Training
The objective of these workshop training sessions will be to bring the Human
Resource functions in the industry closer to the production environment and hence
encourage a better alignment between investment in skills and the adoption of World
Class Manufacturing best practices. Four workshops on World Class Manufacturing
will be run for Human Resource managers per annum. The one day workshops will
each comprise:
   An introduction to a particular set of World Class Manufacturing theories
   Case study presentations
   A plant tour of the host firm
   And a critical review and corrective action/implementation session

4.5.7 Supervisory Training
Workshops on the theory of World Class Manufacturing and the importance of these
principles in enhancing organisational competitiveness in response to global pressures
will be run for supervisors. The workshops will cover both global and domestic
trends, World Class Manufacturing principles (e.g. Just in Time, Total Quality
Management, and Continuous Improvement) and the practical application of the best
practices related to the principles studied. This training will assist in the alignment
management and the shop floor in respect of organisational strategies.

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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan


4.6 Logistics Coordination

4.6.1 Introduction
The following areas have been identified as being of a high priority in respect of
addressing logistics weaknesses in the industry:
   Improving lead time performance
   Increasing on time and in full delivery reliability performance
   Reducing costs, especially in respect of freight and general logistics costs
   Making relevant knowledge regarding logistics and freight movement available
   Creating an awareness of relevant legislative frameworks
   Building logistics skills


The TSC has resolved to establish lean value-chains in support of a world class,
KwaZulu-Natal based automotive component manufacturing industry. The logistics
initiative will undertake to establish the ‘lean value chains’ through awareness, skills
development, focusing on cost competitiveness and supporting logistics excellence
throughout the supply chain.

4.6.2 Newsletters
Logistics related information briefs will be distributed every second month. These
will serve to ensure that firms are adequately aware of relevant logistics information
timeously, particularly in respect of infrastructure and port related prob lems.

4.6.3 Stakeholder Interface
The stakeholder interface will serve as a means of improving the efficiency of the
external logistics function. This will encompass continual, active interaction with
regulatory bodies, freight forwarders, port operations, various shipping lines, as well
as logistics service providers. Members will be kept informed of outcomes,
particularly in respect of those that have been successful in using the combined
bargaining power of the cluster to improve the prevailing service levels in this field.

4.6.4 Lean Logistics Workshops
Enhancing operational performance through the adoption of lean logistics practices
has been identified as a key priority. This initiative will comprise workshops focused


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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan


on reducing ‘waste’ in the broader sense of the word. Three workshops will be run
each year, with the following nine subjects covered over the following three years:
value stream mapping - current state, value stream mapping - future state, change
management, achieving basic stability, creating continuous flow, making materials
flow, creating level pull, lean warehousing and lean logistics.


The two-day workshops will be run at firms and designated champions from member
firms will be invited to attend. Each workshop will comprise the following:
   An introduction to the relevant theory
   Case study/best practice presentations
   A plant tour of the host firm showing its application of the theory in question
   A critical review and extraction of lessons from the session

4.6.5 Supply Chain Management Network Workshop
Two workshops will be run annually, with these targeted at promoting the cost
efficient, reliable and flexible movement of material/goods. The two workshops will
address best practices regarding the development of Supply Chain Management
Networks with particular reference to the consolidation and movement of freight both
upstream and downstream.

4.6.6 Freight Rate Negotiations
Active engagement in negotiating preferential sea, road, and rail freight rates for DAC
member firms will remain a key focus area in the ongoing effort to achieve cost
competitiveness in the field of logistics.

4.6.7 Provision of Logistics Expertise
The DAC will continue to employ the services of an expert in the field of logistics to
provide advice on both internal and inter-firm logistics. This facility will be made
available to the TSC and individual firms.




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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan



4.7 Industry Transformation

4.7.1 Introduction
The specific purpose of the industry transformation programme is to correct the
racially imbalanced dimensions of the regional automotive industry. In this regard the
programme will focus specifically on the following six areas:
   The expansion of Employment Equity profiles and opportunities
   Identification and support of BBBEE initiatives throughout the regional
    automotive industry, focusing on ownership and procurement in particular
   Support the development of identified PDI–owned automotive component firms
    so as to increase their competitiveness to world class levels.
   Education and communication of transformation issues consistent with current
    legislation agenda.
   Facilitate the provision of critical skills required for the industry


The vision adopted by the transformation programme technical steering committee
members is one of being an effective economic transformation and empowerment
facilitator for the automotive industry in KwaZulu-Natal.

4.7.2 Development of SMEs owned by PDIs
The automotive industry is an increasingly global one and as such local automotive
suppliers need to meet the same or very similar performance standards as their
counterparts in Japan, Europe and North America. This poses major challenges in
respect of developing SMEs in particular. The following actions are proposed to
continue the fast track development programme of the PDI-owned SMEs:
       Benchmarking: Benchmarking against national and international automotive
        performance standards to identify priority improvement areas.
       Twinning between large firms and BEE SMEs: Continuation of the
        ‘twinning’ initiative aimed at transferring high level skills and knowledge
        from large firms to the SMEs via non-commercial partnerships between
        partnered firms.




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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan


       Intervention guidance: Provide guidance in respect of the appointment and
        management of any consultancy assistance sought by the firms to address
        identified weaknesses.


In respect of the guidance element, it is envisaged that any consultancy support
funded either directly or indirectly by the DAC should be provided under the
guidance of the Industry Transformation TSC so as to ensure maximum effectiveness,
suitability of the service provider to the automotive operating environment and high
levels of accountability.

4.7.3 Identification of SMEs owned by PDIs
The identification of additional PDI-owned SMEs to be developed as automotive
suppliers remains a major challenge. The following actions are proposed to increase
the number of PDI-owned SMEs being developed by the DAC:
   Information sharing workshop: An annual information sharing workshop on the
    automotive industry will be run for an estimated identified 100 PDI-owned SMEs
    (venue and associated costs to be provided by Toyota South Africa). The
    workshop will cover global and domestic automotive trends, sourcing strategies in
    the automotive industry and BEE funding.
   Survey and evaluation: Participants in the above workshop will be surveyed and
    evaluated.
   Development: The 30 most promising SMEs identified above will be included in
    aspects of the DAC BEE development programme.

4.7.4 Blockages & opportunities research
In 2002 the DAC undertook research to identify blockages for BEE firms, as well as
opportunities for BEE, in the local industry. The research undertaken was beneficial;
although, it is now dated. The new research will seek to better inform the direction
and actions of the Industry Transformation TSC while also assisting to set
quantifiable goals. Key issues covered will include:
       Present position: The present position of the industry with regards to BEE
        and specifically direct empowerment (i.e. management control and
        ownership).



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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan


       Blockages and opportunities: The blockages and opportunities for BEE
        within the context of the more recent changes in the industry, with specific
        reference to tier of supply, the multinational versus local ownership dynamic,
        and at large versus small firms.
       Recommendations: with regards to the advancement of BEE, including a
        specific focus on direct empowerment.

4.7.5 Facilitation of BEE opportunities
The comparatively few BEE suppliers in the industry highlight a need for attention to
be focused on exploring opportunities for the formation of new BEE enterprises
where possible. Resource will therefore be allocated to the identification and
facilitation of opportunities for outsourcing, Joint Ventures (JVs) and/or increased
PDI shareholding in current suppliers.

4.7.6 Foundations for BBBEE
The DAC has run a number of very successful and well attended workshops on
BBBEE issues in the past and with the promulgation of new legislation the direction
of BEE is becoming far clearer for the automotive industry. Further to this the DAC
also went so far as to embark on the development of a framework for BEE within the
province, although this was subsequently put on hold because of a larger national
initiative which at the time of compilation of this plan had yet to be concluded.


To establish and develop BBBEE principles at a firm level more effectively than what
would occur without external facilitation the following will be under taken:
   Annual survey: An annual survey of the BBBEE profile of member firms will be
    conducted. The results of the survey will be distributed to the individual firms that
    participated to create awareness of the relative BBBEE position of each firm.
   Series of best practice BEE workshops: Workshops will be run for all DAC
    members, thus ensuring firm-level awareness of the inter-linked nature of the
    challenge and the need for a strategic response on their part. These workshops will
    deal with each of the seven transformation indicators.




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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan


4.7.7 The expansion of Employment Equity profiles
Strong support will be provided to the other programmes in respect of Employment
Equity, with a particular focus on ensuring that:
   Employment Equity remains a priority when developing individuals to fulfil
    critical skill gaps
   Enrolment in various specialised and non-specialised courses support
    Employment Equity objectives
   Where free training or bursaries are made available that they are prioritised for
    Affirmative Action candidates.

4.7.8 Participation in national industry transformation initiatives
At the time of compilation of this business plan the National Association of
Automotive Component and Allied Manufacturers (NAACAM) and the National
Association of Automobile Manufacturers of South Africa (NAAMSA) were
engaging government on strategic empowerment issues for the sector. As a major
stakeholder, and one with some expertise in the field of transformation in the
automotive sector, the DAC needs to actively participate in these national initiatives.
Doing so will ensure that the interests and priorities of the KwaZulu-Natal industry
are not overlooked at a national level while at the same time encouraging
transformation to be placed on as strong a footing nationally as what it has been
within the DAC.

4.8 Manufacturing Excellence
Participants in this programme have at their disposal a tool to help them to understand
how competitive they are and identify benchmark performance levels, while also
allowing them to learn from firms facing similar pressures and challenges to their own
that have successfully adopted World Class Manufacturing practices. The benefits can
be groups into four categories as outlined below.

4.8.1 Competitiveness Benchmarking
Annual competitiveness benchmarking reports provide each individual member firm
with a clear understanding of their competitiveness strengths and weaknesses. The
methodology utilised is a multifaceted one incorporating the following:



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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan


   Customer Benchmark: An assessment of customer requirements, performance
    relative to those requirements and performance relative to direct competitors
   Like With Like Comparative Benchmark: A competitiveness analysis of over
    30 indicators from six ‘market drivers’, factory observations and interviews with
    key managers and labour representatives
   Supplier Benchmark: An assessment of supplier requirements and their
    understanding of performance requirements and performance relative to
    requirements


The six ‘market drivers’ that have been identified through extensive research in the
automotive industry over the last ten years are:
       Cost control
       Quality performance
       Value chain flexibility
       Value chain reliability
       Human Resource Development
       Innovation.


These market drivers, along with key financial indicators, are benchmarked against
both lean manufacturing best practice and against a global competitiveness database.


As of November 2006 there were 146 firms in the global competitiveness database.
The database covers six major economic regions and comprises 12 sub-sectors. This
database allows for firms to be benchmarked against:
   A South African average
   A global average
   The relevant sub-sector average
   And the option of a firm with similar operations based abroad.

4.8.2 Best Practice Learning
Firms are offered the opportunity to attend best practice workshops held quarterly.
These workshops are hosted by firms that have been identified as top performers in a
specific area.


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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan


4.8.3 Newsletters
Newsletters are distributed every second month. The newsletters explore the latest
industry trends along with a wide range of strategic issues confronting the industry.


The content of these newsletters is shaped by the latest information, findings and
trends as they emerge, ensuring that the newsletter content is as relevant as possible to
the industry at the time of publication.

4.8.4 World Class Manufacturing Training
Training will be provided on an annual basis for the designated Manufacturing
Excellence/benchmarking champions to ensure that participation in the benchmarking
programme is as beneficial to all firms as possible.




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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan


5 EXPECTED OUTCOMES OF BUSINESS PLAN

5.1.1 Overview
The continued positive economic performance of the automotive manufacturing
industry in South Africa under the policy framework of the MIDP provides the
regional automotive industry with a solid foundation upon which to build despite the
existing competitiveness challenges.


Given its proven track record over the last five years and its expanded focus to 2009,
the DAC should provide further impetus to the development of the automotive
industry in eThekwini Municipality and KwaZulu-Natal more broadly


This will ensure that the region’s automotive sector continues to report economic
growth ahead of that of the South African average. This however needs to be
supported by strong performance in a variety of areas including enhanced
competitiveness, skills development and transformation.


The specific outcomes of this three-year business plan, and which link directly to
objectives of the DAC, are outlined in the following three sub -sections.

5.1.2 Industry competitiveness outcomes
   Cost: As a proxy measure for cost competitiveness for the industry two different
    measurements are used. Firstly, inventory holding levels must be lower than those
    of other regions in South Africa and comparable to that of automotive industries
    in leading developing economies. Secondly, Toyota South Africa’s Cost Index of
    Manufacture (CIM) for a basket of locally sourced components must reflect a
    local sourcing cost comparable to that of sourcing the same basket of components
    from automotive regions with Toyota plants that are potentially competing for
    similar export projects within the Toyota globally (typically Thailand and
    Turkey).
   Quality: Customer return rate and internal reject rates for component
    manufacturers must be comparable to those of automotive industries in leading
    developing economies



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            Draft Durban Automotive Cluster 2007 – 2009 Business Plan


   Reliability: Delivery reliability performance of component manufacturers to
    customers must be comparable to that of automotive industries in leading
    developing economies
   Flexibility: Performance to customers of component manufacturers comparable in
    respect of lead time from production and delivery frequency comparable to that of
    automotive industries in leading developing economies
   Compliance: DAC firms must adequately meet prevailing compliance
    requirements (such as those of ISO/TS 16949, ISO 14001, OSHAS 18001 and
    IMDS)

5.1.3 Industry strategic position outcomes
   Operational Competitiveness: Advance overall operational competitiveness and
    attain the targets set out above.
   Operational risk: Measured as the consistency of quality to customers and
    delivery reliability to customers from component manufacturers
   Black Economic Empowerment: Highest proportion of PDIs in management
    relative to the other major automotive regions in South Africa, the highest
    proportion of PDI owned suppliers relative to other major automotive regions in
    South Africa and the strong progress in each of the 5 remaining BBBEE focus
    areas relative to other major automotive regions in South Africa
   Skills development: Training investment and days spent on formal offline
    training must be comparable to that of component manufactures in leading
    developing economies. Workforce numeracy and literacy levels must similarly be
    comparable to those of automotive industries in leading developing economies
    and there must a clear reduction in key skill shortages.

5.1.4 Local Economic Development Outcomes
   Sustainable economic growth: The sustainable contribution to the local economy
    will be evident in respect of consistent inflation adjusted turnover growth of the
    component manufacturing sector. This will be accompanied by average
    investment levels higher than that of the national average. Both of these are
    subject to stable macro economic conditions.




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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan


   Employment creation: Employment growth in the component manufacturing
    sector will remain positive and above the national average for the national
    automotive industry given stable macro economic conditions
   Black Economic Empowerment: There will be a marked increase in the
    economic participation of previously disadvantaged individuals in the industry.
    This will be measured via an aggregated scorecard for the regional industry which
    will reflect overall BBBEE transformation in the industry.




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             Draft Durban Automotive Cluster 2007 – 2009 Business Plan


6 BUDGET

6.1 Overview
The revenue budget for the DAC for 2007 – 2009 is outlined below. The historical
figures for 2006 are also reflected for comparative purposes. The most notable
difference in the 2007 budget is inclusion of KZN SAABC industry contributions.
While the benchmarking programme has been an integral part of the DAC since the
DAC’s inception, these contributions were not previously included in the budget.
Total industry contributions to the DAC’s various programmes in 2007 is R1,100,556.

Figure 3: Revenue Budget 2007 – 2009 (Rands excl VAT)
                                        2006
                                                        2007          2008        2009        Total
                                     (historical)

 Industry
   DAC membership fees                  691,566         674,556      715,029      757,931   2,147,516
   KZN SAABC membership fees            414,000         426,000      451,560      478,654   1,356,214
 Cash contribution sub-total          1,105,566       1,100,556    1,166,589    1,236,585   3,503,730
                                        Not
   In kind contributions                                484,000      513,040     543,822    1,540,862
                                     recognised
 Sub-total                            1,105,566       1,584,556    1,679,629    1,780,407   5,044,592

 eThekwini Municipality
 Cash contributions                     691,566       1,100,556    1,166,589    1,236,585   3,503,730
 Cash contribution sub-total            691,566       1,100,556    1,166,589    1,236,585   3,503,730

 Total cash contributions             1,797,132       2,201,112    2,333,179    2,473,169   7,007,460

The expenditure budget for the DAC for 2007 – 2009 is outlined below. The historical
figures for 2006 are again reflected for comparative purposes. The most notable
program increases are for Industry Transformation and Supplier Competitiveness.

Figure 4: Expenditure budget 2007 – 2009 (Rands excl VAT)
                                    2006
                                                      2007         2008         2009         Total
                                 (historical)
 Executive Committee
                                     304,560         376,600       399,196      423,148     1,198,944
 Functions
 Supplier Competitiveness            336,600         441,000       467,460      495,508     1,403,968
 Human Resource
                                     243,000         228,000       241,680      256,181      725,861
 Development
 Logistics Coordination               245,000         245,262       259,978      275,576      780,816
 Transformation                       253,972         484,250       513,305      544,103    1,541,658
 Sub-total                          1,383,132       1,775,112     1,881,619    1,994,516    5,651,247
 Manufacturing Excellence             414,000         426,000       451,560      478,654    1,356,214

 Total                              2,189,112       2,201,112     2,333,179    2,473,170    7,007,460




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               Draft Durban Automotive Cluster 2007 – 2009 Business Plan


6.2 Budget for 2007

6.2.1 Revenue Budget for 2007
Industry contributions are fee based, with member firms making monthly payments
according to the categories outlined below. A new form of membership, namely one
aimed at increasing SME membership, has been created in addition to the existing
membership types of ‘full member’ and ‘associate member’.

Figure 5: Industry cash contribution fee structure for 2007 (Rands excl VAT)

    Membership type                                                     Total annual
                                   Monthly fee         No. of firms     contribution

                                                   1             2
    Full DAC member                          1963           19                447,564
                                                  3            4
    Associate DAC member                      597           28                200,592
    Small firm member                          220          10                 26,400
    Sub-total                                                                 674,556

    National benchmarking                    1,500          13                234,000
    International
                                             2,000           8                192,000
    benchmarking
    Sub-total                                                                 426,000

    Total                                                                    1,100,556

It is envisaged that the eThekwini Municipality will make its payments on either an
annual or bi-annual basis in advance so as to provide the Section 21 company with the
necessary cashflow to operate.

The DAC is heavily reliant on the contribution of time, expertise and resources of its
member firms. Given that these in kind contributions can be considered to be for the
benefit of the entire industry and not just individual firms, the in kind contribution for
industry comes close to matching its cash contributions.


1
    Reflects a 6% increase between 2006 and 2007
2
    Full membership is expected to increase from 17 firms to 19 firms
3
    Reflects a 6% increase between 2006 and 2007
4
    Associate membership is expected to increase from 23 firms to 28 firms




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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan

Figure 6: Industry in kind contribution for 2007 (Rands excl VAT)
                                                                            Frequency
                                                              Cost per                      Total
                                                                                per
                                                                unit                     contribution
 Contribution type                                                            annum
 Provision of Executive Management for Executive
                                                                 10,000
 Committee Meetings                                                             4                40,000
 Provision of management for Technical Steering
                                                                    5,000
 Committees                                                                     32              160,000
 Provision of experts for workshops and training
                                                                    2,000
 sessions                                                                       30               60,000
 Provision of venues for workshops & meetings                     2,000         40               80,000
 Twinning programme                                              12,000         12              144,000

 Total                                                                                          484,000


6.2.2 Expenditure Budget for 2007
The expenditure budget by programme element is outlined below. Facilitation days
for activities have been budgeted at R 2,750 per day while standard workshops hosted
at a venues other than a member firm have been budgeted at R3,000 per half -day.

Figure 7: Expenditure Budget 2007 (Rands excl VAT)

                                                                # per       Cost per
                                Unit description                annum       Unit        Total

 Executive Function
 Management &                   Monthly
                                                                    12        22,000       264,000
 administration fee
 Annual performance review      Annual                              1         13,750        13,750
 Annual General Meeting         Annual
                                                                    1         24,600        24,600
 (AGM)
 Resource centre                Monthly
 maintenance and                                                    12         2,750        33,000
 management
 Member recruitment             As required                         1         13,750        13,750
 Interaction with other         As required
                                                                    1         27,500        27,500
 institutions
 Sub-total                                                                                 376,600

 Supplier Competitiveness
                                8 workshops, 6 forum
 Development of purchasing      meetings and the                    1        139,500       139,500
 skills                         management of 2 courses
 Facilitation of growth         Annual                              1         87,000        87,000
 Special Interest Groups        Formation & facilitation            3         27,500        82,500
                                Establishment of
 Joint auditing of common       relationship, mentoring and         12         8,250        99,000
 suppliers                      facilitation
                                Establishment of
 Joint procurement of           relationship & then                 12         2,750        33,000
 commodity items                facilitation
 Sub-total                                                                                 441,000




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          Draft Durban Automotive Cluster 2007 – 2009 Business Plan



Human Resource Development
Senior Management       Workshop
                                                             1    11,250     11,250
Workshop
Stakeholder interface   Coordination & facilitation          5    10,800     54,000
Joint Training          Monthly facilitation of
                                                             4     8,250     33,000
                        training
Knowledge sharing       Workshops                            4    11,250     45,000
In-service Training     Workshops                            3    13,250     39,750
Supervisory Training    Training workshops                   4    11,250     45,000
Sub-total                                                                   228,000

Logistics Coordination
Newsletters                  Every second month              6     2,752     16,512
Stakeholder interface        Monthly                         12    5,500     66,000
Lean Logistics workshops     Two-day workshops               3    13,750     41,250
Supply chain management      Workshop
                                                             2    14,250     28,500
network workshop
Freight rate negotiations    Research, analysis &
                                                             3    11,000     33,000
                             negotiation (sea, air & land)
Provision of expertise       Monthly retainer                12    5,000     60,000
Sub-total                                                                   245,262

Industry Transformation
Development of SMEs          Monthly facilitation
                                                             12   24,750    297,000
owned by PDIs
Identification of SMEs       Annual
                                                             1    35,750     35,750
owned by PDIs
Blockages & opportunities    Annual
                                                             1    16,500     16,500
research
Facilitation of BEE          Monthly as required
                                                             12    5,500     66,000
opportunities
Foundations for BBBEE        Workshops per annum             4    11,250     45,000
Expansion of EE profiles     Interface with other TSCs       0         0          0
Participation in national    Participation in national
                                                             3     8,000     24,000
transformation initiatives   meetings/forums
Sub-total                                                                   484,250

Manufacturing Excellence
Competitiveness              Firm level benchmark &
                                                             21   16,000    336,000
Benchmarking                 report
Obtain international         As required
                                                             6     8,833     53,000
benchmarking data
Best Practice Learning       Quarterly                       4     5,000     20,000
Newsletters                  Every two months                6     2,000     12,000
World Class Manufacturing    Annual
                                                             1     5,000      5,000
Training
Sub-total                                                                   426,000

Total                                                                      2,201,112




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           Draft Durban Automotive Cluster 2007 – 2009 Business Plan


6.3 Budget for 2008 and 2009
The budgets for 2008 and 2009 respectively reflect the following changes from the
2007 budget:
   An inflationary increase of 6% in membership fees per annum from firms and the
    eThekwini Municipality
   An inflationary increase of 6% for all expenses




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            Draft Durban Automotive Cluster 2007 – 2009 Business Plan


APPENDIX A: DAC MEMBERSHIP
Alltube
Aunde
Automould
Automotive Manufacturing & Coating
Avlock International
Behr Engine Cooling
Bell Equipment
Bloxwich Industries
Braceable Manufacturing
Commercial Elastic
Dunlop Tyres
Duys Component Manufacturers
Fascor
Faurecia Interior Systems
Federal Mogul Friction Products
Federal Mogul Valves
Feltex Automotive Leathers
Feltex Automotive Trim
Feltex Fehrer
Feltex Foam 5
GUD Filters
Hesto Harnesses
Hulett Aluminium
I&J Component Manufacturers
Kaymac Rotomoulders
Maritzburg Engineering
Microfinish
Morecare Engineering Services
Navago Machine Components
PFK Electronics
Plastamid




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              Draft Durban Automotive Cluster 2007 – 2009 Business Plan


Pressure Die Casting
Ramsay Engineering
Shurlok International
Smiths Manufacturing
Smiths Plastic5
Technique Manufacturing Corporation
Toyota
Trellicor
Triple C Productions
Van Ryn Rubber Holdings
Venture
Webroy




5
    Only a member of the Manufacturing Excellence programme




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                                                         Draft Durban Automotive Cluster 2007 – 2009 Business Plan



APPENDIX B: PROGRAMME CONCEPT MAPS
Figure 8: Supplier Competitiveness

  KEY PERFORMANCE                             ACTIVITIES                                    CRITICAL SUCCESS
  INDICATORS                                                                                    FACTORS                    VALUES                                                          VISION
    • Tier 1 supplier
      return rate           1. Hosting series of best practice                                Improve supplier




                                                                                                                                                                                    We will create a more competitive KwaZulu-Natal automotive
    • Compliance with         purchasing workshops                                            quality
      environmental                                                                           performance
      and OHSAS             2. Facilitation of the automotive courses in




                                                                                                                                                                                         supply base to support the South African automotive
      requirements           purchasing and related fields and run
                             jointly with the Durban University of




                                                                                                                               A committee that strives to uplift the purchasing/
                                                                                                                               procurement function within DAC member firms
   • Technology              Technology                                                      Facilitate the
     upgrade                                                                                 increase of local
   • Level of local         3. Updating, maintaining and promoting                           content levels
     content                 the existing online supplier database




                                                                                                                                        and develop local suppliers
                            4. Sharing of information regarding
                             appropriate government supply support                           Promote the
                             mechanisms                                                      manufacturing




                                                                                                                                                                                                               industry
    • Export levels                                                                          capabilities of the
                            5. Formation of Special Interest Groups to                       Kwa-Zulu Natal
                             resolve a specific operational                                  automotive industry
                             competitiveness challenges facing firms

    • The learning curve to 6. Encouraging joint auditing of common                          Bolster supply intra-
      comply with            suppliers                                                       firm supply chain
      customers                                                                              management
      requirements          7. Promoting joint procurement of
                              commodity

    • Supplier              8. Hosting of procurement forum to share
      development            information within DAC members
      programmes




          NB: While the Key Performance Indicators measure each Critical Success Factor, the Activities (in the yellow) cut across all the CSFs & KPIs




                                                                                                                                                                                                                                                 39
                                                                                                                                                                                Draft Durban Automotive Cluster 2007 – 2009 Business Plan



Figure 9: Logistics Coordination
                                                             Durban Automotive Cluster- Logistics Re-structuring Project                                                                                                                                                                                            2006

                                                                Vision                                                                    Objectives                                                     CSF's                                           Activities                                                 KPI's


                                                                                                                                                                                                                                         Newsletters:
                                                                                                                                                                                                                                         The release of bi-monthly logistics related
                                                                                                                                                                                                                                                                                                     Active engagement among
               Creating a world class supply chain in support of a world
                                                                                                                                                                                        Awareness:                                       information briefs
                                                                                                                                                                                                                                                                                                         members as well as
                                                                                                                                                                                        To facilitate the flow of information by
                                                                                                                                                                                        communicating supply chain related issues        Stakeholder interface:                                       influencing stakeholders
                                                                                                                                                                                        consistent with stake holder interactions,       Active interaction with regulatory bodies,                   toward the benefit of the




                                                                                    4) Ensuring the updated transferral of knowledge regarding logistics and freight movement
                   class automotive industry within KwaZulu-Natal
                                                                                                                                                                                        procedural advancements and legislative          freight forwarders, port operations,
                                                                                                                                                                                                                                                                                                    broader DAC membership, in
                                                                                                                                                                                        amendments                                       transnet, shipping lines as well as logistics
                                                                                                                                                                                                                                         service providers. Keeping members                         addition to the distribution of
                                                                                                                                                                                                                                         informed of outcomes. Using the "weight" of                         information
                                                                                                                                                                                                                                         the cluster in placing pressure on these
                                                                                                                                                                                                                                         stakeholders to improveme service delivery




                                                                                                                                                                                                                                         Workshops:
                                                                                                                                                                                                                                         Facilitating workshops attempting to enhance                    Enhanced operational
                                                                                                                                                                                                                                         operational performance and cost competitiveness            performance around internal
                                                                                                                                                                                        Enhancing skills development:
                                                                                                                                                                                                                                         by addressing the following:
                                                                                                             3) Decreasing freight and logistical cost
                                                                                                                                                                                        Facilitating the provision of appropriately                                                                   reliability, flexibility, quality
                                                                                                                                                                                                                                         ► Value chain reliability and flexibility
                                                                                                                                                                                        skilled logistics champions, thereby
                                                                                                                                                                                                                                         ► Value chain quality and cost control                      and cost control through the
                                                                                                                                                                                        addressing the need for critical skills
                                                                                                                                                                                                                                         ►Effectively hearing one customers                            development of skills and
                                                                                                                   2) Increasing OTIF Delivery




                                                                                                                                                                                        development within the crucial operational
                                                                                                                    1) Decreasing Lead times




                                                                                                                                                                                                                                         ► Benchmarking as a strategic tool for
                                                                                                                     5) Building logistics skills

                                                                                                                                                                                        function of supply chain management                                                                            active implementation of
                                                                                                                                                                                                                                                operational competitiveness
                                                                                                                                                                                                                                                                                                        interventions to correct
                                                                                                                                                                                                                                         In addition the following expert workshops will be            sub-optimal performance
                                                                                                                                                                                                                                         facilitated (at a rate of 3 per annum from 2007 to
                                                                                                                                                                                                                                         2009) over a full day:
                                                                                                                                                                                                                                         ►Value stream mapping- current state
                                                                                                                                                                                                                                         ►Value stream mapping- future state
                                                                                                                                                                                                                                         ► Change management
                                                                                                                                                                                                                                         ► Achieving basic stability                                    Actively transferring pressure
                                                                                                                                                                                                                                         ► Creating continuous flow                                 upstream onto suppliers to ensure
                                                                                                                                                                                        Logistics Excellence:                            ► Making materials flow                                      cost reductions associated with
                                                                                                                                                                                        Adopting a value chain perspective in            ► Creating level pull                                      RM inventory holding, poor quality,
                                                                                                                                                                                        relation to supply chain management by           ► Lean warehousing                                          as well as delivery reliability and
                                                                                                                                                                                        enhancing both downstream and upstream,          ► Lean logistics                                             flexibility. Enhanced customer
                                                                                                                                                                                        as well as firm-level operational
                                                                                                                                                                                                                                                                                                     satisfaction through reliable and
                                                                                                                                                                                        performance in terms of best practice WCM        These workshops are to be held over a two day period
                                                                                                                                                                                        ideologies                                       and will involve an introduction to WCM theory, best
                                                                                                                                                                                                                                                                                                    flexible downstream performance
                                                                                                                                                                                                                                         practice presentations, plant tours, as well as critical      in addition to reductions in FG
                                                                                                                                                                                                                                         review and corrective action sessions.                                    inventory


                                                                                                                                                                                                                                         Freight rate Negotiations:
                                                                                                                                                                                                                                         Active involvement in negotiating
                                                                                                                                                                                                                                         preferential sea, road , and rail freight
                                                                                                                                                                                                                                          rates.
                                                                                                                                                                                        Cost Competitiveness:
                                                                                                                                                                                                                                         SCM Network:
                                                                                                                                                                                        Actively negotiating competitive freight rates
                                                                                                                                                                                        as well as identifying best practices in
                                                                                                                                                                                                                                         The development of a SCM network                              cost competitiveness in
                                                                                                                                                                                                                                         addressing best practices with regards                          relation to the ever
                                                                                                                                                                                        relation to both upstream and downstream
                                                                                                                                                                                                                                         to the consolidation and movement
                                                                                                                                                                                        freight movement
                                                                                                                                                                                                                                         of both upstream and downstream
                                                                                                                                                                                                                                                                                                    increasing global threats and
                                                                                                                                                                                                                                          destined freight to ensure cost                           cost down pressures that are
                                                                                                                                                                                                                                         efficient, reliable and flexible                                being encountered
                                                                                                                                                                                                                                         material/goods movement




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                                                                                                        Draft Durban Automotive Cluster 2007 – 2009 Business Plan



Figure 10: Human Resource Development
            Durban Automotive Cluster- HR Re-structuring Project                                                                                                                                                     2006

          Vision                                                          Objectives                                CSF's                                   Activities                                               KPI's

                                                                                                                                             Management Workshop:
                                                                                                                                             Conducting an annual knowledge creation
             Creating a world class Human Resources base in support of
                                                                                                                                             workshop-directed toward MD's, FD's, and
               a world class automotive industry within KwaZulu-Natal                                                                        Operations Directors- with the aim of
                                                                                                                                             introducing the importance of HRD                         Active engagement among
                                                                                                     Awareness:
                                                                                                                                             in relation to achieveing WCM                                 members as well as
                                                                                                                                              levels. In addition, the workshop will                    influencing stakeholders
                                                                                                     To facilitate the flow of information   address the programme's structure and
                                                                                                     by communicating HR related              how this framework will attempt to
                                                                                                                                                                                                        toward the benefit of the
                                                                                                     issues consistent with stake holder     strengthen HR practices by building the cabilities        broader DAC membership,
                                                                                                     interactions and any procedural or
                                                                                                                                             of their HR function.                                    particularly in respect of skills
                                                                                                     legislative amendments. To be                                                                    development. In addition, the
                                                                                                                                             Stakeholder interface:
                                                                                                     actioned in an attempt to create                                                                   distribution of information
                                                                                                                                             Active interaction with regulatory bodies and
                                                                                                     knowledge and address the need          educational insittutions in relation to developing
                                                                                                                                             technical skills in respect of in-service training
                                                                                                     to develop skills
                                                                                                                                             programmes. Keeping members informed of
                                                                                                                                             outcomes, thereby facilitating the collaboration
                                                                                                                                             between industry, regulatory bodies, and
                                                                                                                                             educational institutions. Using the combined
                                                                                                                                             "weight" of the cluster to place pressure on these
                                                                                                                                             stakeholders to improveme service delivery.

                                                                                                                                             Joint Training:
                                                                         3) Increased Commitment
                                                                         1) Increased Efficiencies




                                                                                                                                             Facilitating the provision of HR and legislative
                                                                           4) Nuturing Innovation

                                                                           6) Employment Equity
                                                                             5) H&S/Compliance




                                                                                                                                             orientated joint training courses at preferentially
                                                                             2) Enhancing Skills




                                                                                                                                             negotiated rates. The aim of this being directed               Increased skills and
                                                                                                                                             toward cost savings, as well as actively enhancing
                                                                                                       Enhancing skills                      HR skills and the provision of relevant compliance
                                                                                                                                                                                                           efficiencies. Deepened
                                                                                                       development:                          related training. The following breakdown is               knowledge around WCM at
                                                                                                       Facilitating the provision of         applicable in this regard:                                 an operator level as well as
                                                                                                                                             ► HR related topics (1 Day)- As per member                  the importance of WC HR
                                                                                                       appropriately skilled                 needs (QTY to be decided)
                                                                                                       employees. Thereby addressing         ► OSHAS 18000, ISO14001, TS 16949 and the                  practices in achieving WCM
                                                                                                       the need for critical skills          related core tools                                        levels at a management level
                                                                                                       development within the                ► Broader courses (eg. Problem solving) as per
                                                                                                                                             member needs
                                                                                                       automotive industry
                                                                                                                                             In-service Training:
                                                                                                                                             Facilitating in-service trainingworkshops directed
                                                                                                                                             at learners and students to address, WCM
                                                                                                                                             principles, life-skills, as well as building their
                                                                                                                                             knowledge on the SA and global automotive
                                                                                                                                             industries.


                                                                                                                                             Management training:
                                                                                                                                             Facilitating the provision of HR orientated practical
                                                                                                                                             best practice workshops. These workshops are to
                                                                                                     HR Excellence:                          be held over a one day period and will involve an
                                                                                                     Creating knowledge of HR best           introduction to WCM theory, case study
                                                                                                                                             presentations, plant tours, as well as critical review
                                                                                                     practice and the importance in          and corrective action/implementation sessions                 Enhanced operational
                                                                                                     relation to WCM. Sensitising            .(Implemented at a rate of 4 per year)                   performance on HR variables
                                                                                                     trainers, supervisors, team leaders     Supervisory Training:                                    which are crucial in attaining
                                                                                                     as to the importance of WCM as a        Facilitating the provision ofworkshops                      WCM levels. Achieved
                                                                                                     necessity for combating global           covering WCM theory and the importance of
                                                                                                                                             WCM in enhancing organisational                           through the development of
                                                                                                     pressures                               competitiveness to combat global                                 skills and active
                                                                                                                                             pressures. The workshops are to cover                           implementation of
                                                                                                                                             both global and domestic trends,                             interventions to correct
                                                                                                                                             WCM principles (e.g. JIT, TQM, and CI) and
                                                                                                                                             exposure to best practices per principle.                  sub-optimal performance
                                                                                                                                             This will assist in ensuring that
                                                                                                                                             management and the shop floor are
                                                                                                                                              "on the same page."




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                                                   Draft Durban Automotive Cluster 2007 – 2009 Business Plan



Figure 11: Industry Transformation

     KEY PERFORMANCE                                                                                     CRITICAL SUCCESS
                                                       ACTIVITIES
     INDICATORS                                                                                               FACTORS                        VALUES
                                                                                                                                                                                                       VISION
                                    Our primary activity
                                                                                                          EMPLOYMENT EQUITY
                                    Obtain base data and the industry profile and help to assess the
     PDI representation at firms                                                                          To facilitate the expansion
                                    changes and opportunities and facilitate transformation issues        of Employment Equity
     (specifically African &
     gender)                        through hosting a series of best practice BEE workshops               profiles and opportunities
                                    1. All activities will be outcomes based (monitor return in   PIC     in the various workplaces




                                                                                                                                                                                                 We will be an effective economic transformation and
                                      investment)




                                                                                                                                                                                                 empowerment facilitator for the automotive industry in
     Number of BEE firms in                                                                               that constitute the regional
     the cluster                    2. Research to gather base data – Employment Equity,                  automotive industry
                                      preferential procurement, skills development (DAC
                                      secretariat)                                                 TS




                                                                                                                                                works and operates with integrity and maturity
                                                                                                                                                A committee that believes in what it does and
     Aggregate sales of BEE         3. Obtain cluster data                                         TS    BBBEE
     suppliers in the cluster       4. Plan TSC decision making process around data                CK    To facilitate the participation &
                                                                                                         involvement of the industry
                                    5. Distinguish between information data and                   TSC
     Growth rate of PDI and                                                                              BBBEE initiatives focusing on
                                      developmental data                                           KM
     suppliers                                                                                           ownership and procurement
                                    6. Extract workshop material
                                    7. Execution of workshops                                    TS/TP
                                    8. Evaluation of all workshops                                TSC
                                    9. Report to industry representatives & DAC board              CK    COMPETITIVENESS
      Number of PDI and firms                                                                            Support the development of
      per tier                                                                                           identified PDI –owned
                                   Supporting activities                                                 automotive component firms,




                                                                                                                                                                                                                            KZN
      Effective implementation of  • Determine the levels of preferential procurement                    so as to increase their
                                                                                                 TS
      the transformation             amongst DAC member firms                                            competitiveness to world class
      infrastructure within firms  • Identify barriers and opportunities for BEE suppliers in            levels.
                                     the South African automotive industry                       TS
                                   • Identify industry experts who can be involved in SMME      PK/PT
     Number of firms effectively     development (mentoring)                                             AWARENESS
     involved and engaging with • Provide knowledge with regard to OEM & 1st tier                        To facilitate the education
     TSC                                                                                         GR      and communication of
                                     requirements (technical skills and product knowledge)
                                   • Facilitate the localization of components                   PC      transformation issues
     Increased PDI representation                                                                        consistent with current
     in Operational and Senior     • Identify automotive component manufacturers who
                                     have excelled in various transformation indicators and              legislation agenda.
     Management                                                                                  TS
                                     share these successes with other DAC member firms
     Increased PDI                 • Facilitate outsourcing
                                                                                                KM/PK
     representation in positions   • Identify companies who are looking for BEE investors
                                                                                                  TS     SKILLS DEVELOPMENT
     requiring technical skills    • Develop business linkages with multi nationals BBBEE
                                                                                                         Facilitate the provision of
                                     opportunities and large DAC member firms                    HOJ/
     Investment in critical skills
                                                                                                         critical skills required for
                                   • Plan and set time frames for all DAC activities              TP     the industry
                                   • Budget allocation – cost management & reporting



             NB: While the Key Performance Indicators measure each Critical Success Factor, the Activities (in the yellow) cut across all the CSFs & KPIs



                                                                                                                                                                                                                                                          42
                                                    Draft Durban Automotive Cluster 2007 – 2009 Business Plan



Figure 12: Manufacturing Excellence




               Collective Knowledge
               (Workshops, Newsletters,
                 Inter-firm interaction)                                 Industrial
                                                                       Restructuring
                                                                            for
                                                                        Competitive
                                                                        Advantage




      Individual firm-level benchmarks
(Benchmarks, Firm-level Reports & Presentations)


                                                                     Perception based
                Market Demands                                     survey administered at
                                                   Customer            most important
                Change over time
                                                   Benchmark             customers



                                                                    Quantitatively based
        Operational Competitiveness
        Process and performance levels
                                                                      questionnaire
                                                                        completed
                                                  Like With Like
                                                   Comparative          Management &
                                                   Benchmark          labour interviews
      Intra-firm                    Inter-firm                      Factory observations
    organizations                  organization



                                                                      Perception based
                      Supplier                      Supplier        survey administered at
                    Performance                    Benchmark
                                                                        most important
                    requirements
                                                                          suppliers




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          Draft Durban Automotive Cluster 2007 – 2009 Business Plan


APPENDIX C: CONTACT DETAILS


Industry Contact Persons

Executive Committee Chair                Executive Committee Vice Chair

Mr Wolfgang Ropertz                      Mr Zamo Xaba
(Production Director, Smiths Assembly)   (H.R. Director, Kaymac Group)
Tel    031 719 4911                      Tel    031 7172260
Email wolfgang.ropertz@smiths.co.za      Email kgmxaba@kaymac.co.za




Facilitation Contact Persons

Chief Facilitator                        Cluster Facilitator

Mr Douglas Comrie                        Mr Thabani Shale
(Operations Director, B&M Analysts)      (DAC Manager, B&M Analysts)
Tel    031 765 3870                      Tel    031 765 3870
Email douglas@bmanalysts.com             Email thabani@bmanalysts.com




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