Hamilton Beach 2007 Annual Report Download - page 18

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second quarter of 2008. These actions are expected to reduce
purchases of high-cost euro- and British pound sterling-
denominated materials and components, reduce freight costs,
lessen NMHG’s exposure to future currency exchange
fluctuations, reinforce our strategy to manufacture in the
market of sale and provide additional opportunities to source
components from lower-cost countries. This manufacturing
restructuring program is anticipated to generate savings
beginning in 2008 and improve net results starting in 2009.
At maturity, benefits are expected to exceed $20 million in
annual cost savings.
Quality initiative. A number of
programs within NMHG are part of a
corporate-wide emphasis on quality
and an initiative to further reduce
overall defect rates. These programs
focus on reducing warranty costs
per truck and eliminating rework.
Nevertheless, warranty expenses
increased in 2007 due, in part, to
several issues relating to specific
components on new products utilized
in unique customer applications. The
company is working diligently to address these concerns and
continues to deliver cost reductions and product quality
improvements through its Value Improvement Program.
Benefits from these initiatives were realized in 2007 and
further benefits are expected to be realized in the 2008 to
2009 time frame.
Global supply chain. Demands on NMHG’s global
procurement group were again high in 2007. During the year,
the company continued to be challenged by increases in
material costs, particularly commodities such as steel, lead,
copper, rubber and oil. However, broad price increases
implemented in 2006 and 2007 have partially offset the effect
of these increased costs. NMHG adopted a program to pass
through selected higher commodity costs to its customers
during 2007 and expects to continue to do so as needed in 2008
and beyond. The company will continue to closely monitor
economic conditions and their resulting effects on costs.
In addition to the short-term actions established to
manage these challenges, a program designed to completely
transform the supply chain process was implemented at
NMHG in 2007. The company implemented the Supplier
Relationship Management (“SRM”) module of the SAP
software system. The SRM system will enable greater regional
and worldwide coordination of purchasing and provide greater
efficiencies. Supporting the SRM system is a new, centralized
global procurement organization structure with local
capabilities designed to deliver quality parts to plants on time
for production. The full impact of the program is expected to
be realized in 2008 and beyond.
Concurrently, NMHG is continuing its ongoing efforts to
optimize its supplier base and lower costs by developing a
smaller, more reliable and more
responsive group of vendors. Non-
core components continue to be
outsourced to low-cost suppliers
around the world, with increased
focus on China, India, Mexico and
Eastern Europe. This program to
enhance profitability should produce
benefits in 2008 and 2009.
Global IT excellence. In 2007,
NMHG developed a plan to transform
its information technology (“IT”)
staff from a decentralized group to a global, centralized
organization. When implemented in early 2008, the new
organization will have improved capabilities to understand key
functional area IT needs, manage increasingly complex projects
and transition the company’s hardware and software to fewer,
global systems. This program is expected to significantly
improve the efficiency and effectiveness of the entire NMHG
organization over time.
Key Programs for Flexible, Modular Products
A key NMHG strategy is to develop modular products
that can be flexibly configured to provide unique, tailored
solutions that deliver superior value to end users. Supporting
this strategy is NMHG’s well-developed and recognized ability
to translate end-user needs into global, adaptable and highly
reliable products. The following programs are focused on
achieving these results:
New product development process. In 2007, NMHG
continued to implement this program to improve profitability
through its unique approach to developing new products.
NMHG produced nearly
91,000 lift trucks in 2007,
all with attention to quality
and many customized
to meet the unique needs
of key customers.
Right: Hyster® trucks at an exclusive Hyster® dealership in Portland, Oregon, ready to be shipped to customers.