Non-financial success factors

In addition to financial performance indicators (for further information please see the section “Basic information on the Wilo Group – Management and control”), other non-financial success factors are relevant to the strategic and operational management of the Wilo Group. These include employees, efficient production processes, integrated procurement management, quality, resource efficiency and corporate compliance.

Employees

The Wilo Group stands for technologically advanced products and system solutions for the efficient use of water as a resource. The employees around the world are the basis and the driving force for sustainable economic success. Their readiness to innovate and their high degree of commitment and technological expertise serve to secure company’s future prospects. The Wilo Group’s engineers, technicians and commercial employees contribute their various strengths and competencies every single day with passion and pioneering spirit. 

The focal points of HR work are selected and realised on the basis of the Group-wide corporate strategy. The HR strategy is influenced both by social and human resources developments and by long-term trends, which are accounted for accordingly in the HR work. The following HR activities are assigned special significance in order to ensure that the Wilo Group remains competitive on the labour market as an attractive employer in the long term.

MANAGEMENT IN THE DIGITAL AGE Digitalisation and the accompanying technological progress are increasingly necessitating a broader management spectrum. In order to help the Wilo Group’s managers to perform their management duties in the digital age, Group-wide management guidelines have been defined in cross-border cooperation between more than 50 international managers and the global management development pools. Designated as “Leadership Principles”, they are derived from the enhanced corporate strategy Ambition 2020+, the digitalisation strategy enshrined therein and the Wilo Group’s corporate values.

In the context of digital transformation, the Leadership Principles serve as a guide for the management of employees. In times of increasing digitalisation, innovation and top performance are promoted in line with the premise that humans must always be the focus. Alongside the incorporation of the Leadership Principles into existing global processes and procedures, mandatory global manager training, called Leadership Lab 4.0, was developed to communicate the management guidelines to the Wilo Group’s international top management and established as significant management training in the Wilo Group.

DIVERSITY MANAGEMENT Meanwhile, globalisation and the growing diversity of the workforce are also presenting the Wilo Group with a wide range of opportunities in terms of cooperation and resource utilisation. Diversity leads to opportunities and new tasks that are addressed as part of HR management. Intercultural exchange is promoted and new working conditions are created to this end.

The key principle of diversity management at the Wilo Group is to turn the individual differences between employees into a factor for business success. The HR policy and HR processes are designed to motivate employees to contribute their potential for the benefit of the organisation. 

In addition to establishing heterogeneous teams and enforcing and promoting equality of opportunity irrespective of gender, age, religion, ethnicity, sexual orientation, disability or nationality, global training events are held at Wilo at regular intervals. This reinforces the key principle of diversity management among the workforce. By signing the “Diversity Charter” in 2016, a business initiative for the global promotion of diversity in companies and institutions, the Wilo Executive Board underscored its commitment to recognising, appreciating and promoting diversity in the Wilo Group.

TALENT MANAGEMENT The optimum deployment of employees and the use and ongoing development of skills are key activities in HR management that make a significant contribution to the Wilo Group’s competitive capability. With the established international management development pools, the Wilo Group focuses on the emergence of young managers from its own ranks. A large number of participants again entered further professional development within the Group in the year under review. In addition, it became apparent that these programmes substantially support the retention of talented young managers within the company. As a complement to the successful and long-term international management development pools, the Wilo Group shifted focus to regional development programmes in the year under review.

SUCCESSION PLANNING Structured succession planning is carried out at the Wilo Group to ensure that key functions in the Wilo Group can be filled in good time and in line with requirements as soon as the previous holder of the respective function leaves the company entirely or the division as a result of internal changes. This guarantees a stable and steady course of business at all times. For targeted HR planning and development at team and departmental level, the performance and development potential of the individual employees is determined and potential succession arrangements are agreed accordingly. Individual staff development measures and career paths ensure that employees are deployed in line with the respective requirements at all times. 

REMUNERATION Appropriate employee remuneration is an important component of HR policy at the Wilo Group. The remuneration of employees under collective agreements in Germany is based on the applicable regional collective agreement regulations. In addition to their basic salary, employees not covered by collective agreements receive a bonus linked to both company goals and the achievement of personal targets. The basis of remuneration is formed by clearly documented job descriptions that are formulated uniformly throughout the Group. The remuneration of employees at subsidiaries is also based on these job descriptions, taking into account local practices, country-specific regulations and guidelines. The Wilo Group assists its employees in their pension provision and offers pension benefits in line with the specific circumstances and regulations of individual countries.

The Wilo Group had an average of around 7,548 employees worldwide in the 2016 financial year. The number of employees as at 31 December 2016 was 7,615.

On average over the year, the number of employees in the regions developed as follows:


Number of employees by region

  2016 2015 Change %
Europe 4,778 4,686 2.0
Asia Pacific 2,133 2,104 1.4
EMEA 517 477 8.3
Others 120 116 2.2
Total 7,548 7,383 -0.6

Production

The Wilo Group’s global production strategy (GPS) sets out design principles to be followed by all production locations and subsidiaries. The aim is to ensure that customers worldwide are supplied with the right products and services quickly and efficiently. This is based on detailed knowledge of the market and a transparent production network. Strategic decisions such as volume allocations and investments are coordinated systematically. The Wilo Group thereby harmonises its production processes worldwide. In the year under review, 13 new primary production locations were defined on the basis of specific criteria such as location size and vertical integration. The production sites at these locations constitute the production network in the narrower sense and are closely coordinated and managed accordingly.

Wilo is committed to permanently maintaining the operating efficiency of its global production locations at the highest possible level while adopting a pioneering role in terms of production technology. Global production technology management was established in order to achieve these goals. It develops the Group’s production technology focus based on its corporate strategy, competitive situation and technological core competencies. The optimum production technology solutions are identified for each production location and their planned deployment is ensured. In addition, current trends and developments such as Industry 4.0 and additive production processes are investigated intensively. In this way, potential can be identified at an early stage and made usable for the Wilo Group.

The principles and methods of streamlined production systems are firmly established in the Wilo Group in the form of the Wilo Production System (WPS). The WPS sets out binding requirements for the design, implementation, control and improvement of production processes at all production locations. They are adapted to reflect the company-specific and local conditions in each location and region.

In line with the Wilo Group’s corporate philosophy and strategy, the goal of the WPS is to safeguard and promote a culture of continuous improvement by involving all employees. The focus is on value added from a customer perspective. All the value streams in the Wilo production network are therefore geared towards customer requirements. The individual value added processes are designed efficiently and flexibly. Clearly defined methods and standards enable the individual operating divisions and production locations to achieve their ambitious standards in terms of quality, costs and delivery times. Key elements of the WPS include the standardisation of processes, avoiding waste, value stream design and the integration of additional relevant lean principles into product and process development.

The corporate strategy and the annual divisional and plant targets derived on this basis provide the framework and direction for continuous improvement activities and the targeted use of WPS methods. To this end, each of the operating organisational units defines an annual policy deployment process with the support of the Group-wide Production Systems function. This process is broken down incrementally at the level of the individual departments.

Controlling rounds ensure the ongoing monitoring, coordination and communication of all WPS activities across all departments and check them against the priority objectives. Annual audits review the degree of implementation and the targeted use of WPS methods in line with goal planning. To ensure waste-free processes, the WPS philosophies are already firmly established and provide orientation for the concept design and planning of new locations.

In Dortmund, the Wilo Group’s headquarters, activities include investment in a new production complex (smart factory) on the basis of the requirements in terms of growth, infrastructure and modernisation. Production is being fundamentally redesigned in order to lay a milestone in terms of digital transformation and Industry 4.0 and to underline Dortmund’s importance as a high-tech location. 

To this end, the future-oriented production and logistics concept for versatile, low-waste production was developed as part of this strategic location development project. It includes optimum material flow, an appropriate building layout and further steps for the implementation of the future production location. The successful process of transformation into a factory of the future is taking place on the basis of five overarching projects along the entire supply chain. The objective is to establish efficient and stable processes. The main aims are to consistently plan and control customer orders, meaningfully link production processes, improve logistics processes, systematically integrate suppliers and implement comprehensive change management that ensures the involvement of all employees in the transformation process. 

The organisational structure was expanded by two additional sub-projects in the year under review. They focus on securing stable production processes and the quality of deliveries and developing concepts with regard to the future requirements of the smart factory in terms of working hours and remuneration systems. All sub-projects are accompanied by dedicated project management that specifically manages the digital transformation of all production and logistics processes. Extensive programme management also ensures that all measures and targets of the future production and logistics concept of the smart factory are implemented purposefully and on schedule.

As part of the digitalisation strategy, the relevance and focus of new IT tools for production in Dortmund were specified in 2016. New technologies such as smart robotics and augmented reality promise easier working conditions for employees in the future. Interconnected machines and products allow real-time verification of process data throughout production. Besides effective IT infrastructure, the integration of these technologies and the use of their potential primarily require stable processes, which are ensured by the implementation of the future production and logistics concept.

The aim of these projects is to develop and implement a standardised, resilient, non-location-specific and consistent planning and control process (Holistic Planning and Control) as well production that is synchronised with customer cycles (Synchronized Production Processes). This will lead to smooth production with low time cycle losses and minimal inventories of processed components. The establishment of optimised production processes at the new production site requires the production lines to be supplied in a coordinated manner and with a high frequency. To this end, a sub-project has been initiated to address the realisation of future-oriented logistics with a transparent, highly cyclical material and information flow, thereby ensuring high security of supply accompanied by short turnaround times (Logistics of the Future). Close, systematic supplier integration is also necessary. Integrating suppliers within a partnership structure will enable minimal inventories to be held while ensuring a 100 percent supply service (Supplier Integration). All of the sub-projects are managed via a superordinate change management project to ensure that the change process results in new processes and ways of working and thinking both during the project phase and beyond. The further development of the production system towards digital transformation and Industry 4.0 is supported within these projects on the basis of Wilo-specific requirements.

The global production strategy (GPS) sets out design principles to be followed by the 16 production locations and other subsidiaries. The aim is to ensure that customers worldwide are supplied with the right products and services quickly and efficiently. This is built on a detailed knowledge of the market and a transparent production network. Strategic decisions such as volume allocations and investments are systematically coordinated, thereby allowing production processes to be harmonised worldwide within the Wilo Group.

Wilo is committed to permanently maintaining the operating efficiency of its global production locations at the highest possible level while adopting a pioneering role in terms of production technology. With this aim in mind, global production technology management was initiated in 2015 to develop the Group’s production technology focus based on its corporate strategy, competitive situation and technological core competencies. This means that the optimal production solution technology solutions are identified for each production location and their planned deployment is ensured. In addition, current trends and developments such as Industry 4.0 and additive production processes are being intensively investigated in order to ensure that potential is identified at an early stage and made usable for the Wilo Group.

Procurement

As a manufacturing technology company, Wilo is dependent on the development of material costs to a large extent. In addition, the performance of partners along the entire supply chain can already permanently influence the success and quality of Wilo’s products. 

Against this backdrop, the Wilo Group’s efficient, integrated procurement and supplier management is a significant factor when it comes to successfully achieving the defined business targets, particularly with regard to the acceleration of profitable growth. All procurement activities are geared towards achieving a permanent balance between quality, innovation, flexible and secure supply structures, and competitive costs and prices.

To achieve this objective, the Group Purchasing & Supply Chain Management function has established a clearly structured product group management system with corresponding product-group-specific strategies as well as an international partner and supplier network. Group-wide commodity and material management is continuously being enhanced and optimised in order to achieve greater synergy. Efficient, standardised procurement processes are important when it comes to achieving high reliability and substantial economic efficiency. In the Wilo Group’s two procurement departments, production materials and non-production materials & services, the purchasing and procurement processes as well as the necessary tools and methods are therefore being continuously developed.

The Wilo Group has efficient supplier relationship management (SRM), which is constantly advancing the standardisation and automation of the corresponding business processes. Process times in the company are significantly reduced using the WILO Purchasing Collaboration Portal (WPC), the powerful electronic procurement system. By way of the electronic data exchange introduced in the previous year between Wilo and its suppliers via EDI (electronic data exchange) and web-based EDI connections and the use of system-based request and query processes, additional efficiency improvements were generated in procurement in 2016.

In connection with the digital transformation and in order to sustainably optimise process costs, a new supplier management system was also planned in the year under review. This system includes supplier portfolio management, which will cover all phases of supplier relations in the future. For example, this includes separate online registration of potential suppliers including corresponding information on the components and services offered by the supplier and available certification. The Wilo Group’s supplier management aims to generate cost savings through the further optimisation of the supplier structure while maintaining maximum quality and reliability of supply. The digitalisation-related acceleration of the automation and standardisation of procurement processes is making an important contribution to achieving this aim. The Wilo Group strives to ensure long-term, fair partnerships with its suppliers based on the highest possible degree of commitment, capability and motivation on both sides.

The procurement department for non-production materials & services continued the expansion of internationalisation and the accompanying implementation of product-group-specific processes in the 2016 financial year. For this purpose, cross-functional intragroup cooperation was optimised and made more professional, creating greater potential for cost optimisation. In addition, the degree of business process automation was continuously increased and the integration of individual applications was optimised. For example, the electronic procurement system was enhanced in 2016 in order to relieve procurement staff of routine tasks and to make communication flows more efficient. As a matter of principle, process modelling and optimisation adopts a particularly pronounced focus on sustainable and energy-conscious workflows.

The concept of Suppliers’ Days established in recent years was continued in 2016 with a successful event in Korea. Topic Days were also implemented. This focused and intensive format allows solutions to specific questions and technologies to be developed together with international suppliers in cross-functional teams. Technology, know-how and the innovative potential of the Wilo Group’s partners can thus be ideally integrated into products at an early stage.

Quality

As a premium provider, the Wilo Group sets itself the highest standards when it comes to ensuring the reliably high quality of its products and services along the entire value chain. Quality assurance is therefore a core task at the company. It begins with the development of products and sourcing of products and extends from production to customer service. Customers, their specific requirements and their satisfaction with the services offered by the Wilo Group are at the very heart of this approach.

Group Quality ensures systematic quality management throughout the Group, thereby making a significant contribution to the strategic corporate objective of profitable growth. Quality management is organised by way of the House of Quality, with its four pillars/processes of preventive quality, production quality, customer quality and supplier quality. The House of Quality builds on the areas of system quality, HSE (Health, Safety, Environment) and IPC (International Product Compliance). The House of Quality is being expanded continuously. The individual processes are subject to permanent development, resulting in a shift in focus away from reactive quality management towards preventive quality management. As part of this process, a forward-looking or preventive quality mindset is to be firmly established in the attitudes and actions of employees through all processes of the House of Quality.

The preventive quality activities are aimed at identifying potential product risks early in the development phase of new products and preventing them by way of suitable measures and the optimum design of production processes. This will enable positive effects to be generated both for the entire value chain and in terms of the Wilo Group’s aspiration to satisfy ever increasing customer requirements to the best possible extent. In addition to the further development of already established structures and processes, preventive quality activities centre on the definition and monitoring of strategic performance indicators. These indicators shall be used to make the performance of the preventive quality measures, methods and tools measurable in the development processes. To this end, the technical risk coverage rate was defined as a strategic parameter, for which relevant technical risks are identified and reviewed on a monthly basis to determine the extent to which they are covered or manageable. This indicator shall be applied to all top development projects in the future.

The role of the production quality pillar is to support the production processes methodically in order to ensure reliably production quality through higher process stability. Quality indicators are regularly coordinated with all locations in the “quality hour”. In this way, standard processes are harmonised throughout the Group and a uniform management system is guaranteed. In 2016, the optimisation project initiated in the previous year reduced reject and reworking costs by another 15 percent year on year. The method was further refined so that reject costs for selected production locations can now be broken down into individual production stages. This makes the transparency of the indicators many times greater and therefore significantly supports the reduction of reject and reworking costs.

The aim of customer quality activities is to further enhance customer satisfaction by reducing or avoiding warranty costs and complaint rates. These activities are focused on the global collection and evaluation of complaint data and regular close contact with the subsidiaries in the form of monthly field return calls. Top quality topics are derived on the basis of this information. The Wilo Group’s subsidiaries receive structured information on the causes of identified quality deficiencies and measures and repairs in the form of quality updates so that they can permanently rectify the deficiencies. Another ten top quality topics were addressed in 2016, bringing the total number of quality updates to 61. Standardised reporting structures for global complaint data allow professional tracking of the effectiveness of these optimisation measures. In addition to this tracking based on monthly statistics, the effectiveness of the quality updates is also ensured by rigorous communication with international subsidiaries. To help establish the preventive quality mindset, early-warning quality updates were introduced this year. Any quality problems can thus be remedies as early as possible and their solutions communicated. Customer quality activities reduced warranty costs by 12 percent compared to 2015.

The fourth pillar in the House of Quality, supplier quality management is used to control supplier quality throughout the entire product life cycle systematically and in close cooperation with procurement and production. The quality costs caused by deficiencies in purchased parts are thus kept as low as possible, and reliable supplier quality is ensured. In the year under review, selected supplier improvement programmes were carried out, resulting in a high average reduction of the PPM indicators. To strengthen the preventive quality mindset in this process, supplier development programmes were also introduced in 2016. Here, the supplier is already developed according to the Wilo Group’s quality requirements before series production in order to ensure a smooth production process later.

The integrated management system for QHSEE (Quality, Health, Safety, Environment, Energy) defines standards and methods for ensuring compliance with all internal and external requirements in terms of quality, the environment and occupational health and safety. In order to make this permanent throughout the Group, central management system tools such as process and document management have been digitalised. Wilo has thus reinforced the foundations for a standardised management system at Group level while meeting the requirements for the ISO audit. At the Wilo locations in Germany, the certification of the energy management system in accordance with DIN ISO EN 50001:2011 was completed successfully. Activities in the area of health, safety and environment (HSE) focused on the development and implementation of Group-wide reporting to improve transparency and ensure continuous improvement. The goal is the implementation of Vision Zero, i.e. the pursuit of a zero-fault target with regard to work accidents and environmental incidents.

The International Product Compliance (IPC) unit analyses and evaluates heightened statutory requirements in terms of their technical provisions, particularly in non-EU countries. Country-specific guidelines and legislation are prepared in terms of the resulting technical standards and the relevant expertise is provided for the Wilo Group’s subsidiaries. This is intended to ensure continuity of sales and remove barriers to harnessing new market potential while achieving a high degree of customer satisfaction. The product-related regulatory intelligence process defines the collection and preparation of country-specific technical provisions and their systematic, organisation-wide communication. Since the year under review, the results of this analysis and consolidation processes have been provided throughout the Group in the comprehensive product compliance knowledge database.

Resource efficiency

The megatrend of globalisation and the resulting scarcity of resources, which is becoming more pronounced worldwide, require an increasingly systematic focus on achieving outstanding efficiency when it comes to handling and using resources. This challenge is particularly relevant for the Wilo Group. Accordingly, resource efficiency has been a firmly established objective of the Wilo Group for a number of years, and one which it pursues systematically and effectively. For example, the company has set international efficiency-related technology and product standards in the market with a number of its product innovations.

The Wilo Group has also optimised its logistics structures in Europe. Improved utilisation and the leveraging of synergy effects between inbound and outbound freight resulted in significant resource savings, reduced delivery times and the stabilisation of logistical delivery performance. More than 500 fewer trucks a year are now being used as a result, saving several hundred tons of CO2 every year. Another project completed in 2016, namely to optimise product packaging, is likewise contributing to the conservation of resources.

Product recycling is another key starting point for resource efficiency. In the long term, the aim is the best possible conservation of resources at the end of a product’s life. The aim is for old products that have been removed from the market to be separated to the greatest possible extent and recycled. There are areas for tackling resource efficiency even in the early phases of the product life cycle. Building on Ecodesign specifications, Wilo uses recycling-appropriate construction taking into account the aspects of disassembly and reuse as well as the necessary recycling-appropriate production processes for every new product developed. In this way, the conditions for a product that can be effectively and efficiently recycled at the end of its life cycle are put in place at an early stage. The potential recycling rate for a Wilo pump has now been improved to nearly 100 percent. In addition, magnets with resource-critical rare earth elements have been returned to Wilo’s production process to a large extent since 2012.

A state-of-the-art recycling centre is operated at the Dortmund location under the management of the Quality Group function. Group-wide recycling standards are also developed here under the motto “prevention through use before recycling and disposal”. Among other things, these standards are aimed at leveraging potential in the areas of production and product returns. For example, an IT-based process enables the plants’ own customer service teams to use certain spare parts directly from returns processing in a targeted manner. The recycling processes introduced in the previous year were optimised further in 2016, increasing recycling income again. The plan for the next step is to increase the quantities currently available by voluntarily withdrawing old products from the market.

The Recycling function also supports product development by formulating precise requirements for recycling-friendly product design. In addition, the recycling centre analyses the existing processes on a Group-wide basis and establishes suitable performance indicators with a view to enabling the evaluation and prioritisation of recycling activities. The primary objective is to design and coordinate recycling activities so that they are beneficial both ecologically and economically.

The Wilo Group has set itself high ecological standards for all new production and administrative buildings. As a matter of principle, buildings worldwide are planned, constructed and operated in accordance with building standards that are geared towards sustainability and low environmental impact. Gold LEED certification was achieved for the new buildings completed by Wilo in Korea, China, India and Turkey in recent years. The new production location that opened in Russia in June 2016 was certified by the Russian Green Building Council and awarded the highest rating, namely a Green Zoom Platinum certificate. The aim is also to acquire gold LEED certification. LEED (Leadership in Energy and Environmental Design) is an ecological building standard developed by the US Green Building Council that lays down stringent standards for environmentally friendly, resource-conserving and sustainable construction. The planned, state-of-the-art production and administrative buildings at the Dortmund location are also being designed and implemented with high standards for resource efficiency.

Corporate compliance

The sustainable success of the Wilo Group is largely based on shared concepts of values and ethical principles that guide employees in their daily activities. The Executive Board of the Wilo Group therefore acknowledges the fundamental Wilo values of integrity, fairness, respect, passion and responsibility as the starting point for a common system of principles and values across all cultural groups. The “Acting Responsibly” code of conduct is based on this and defines Wilo principles as binding standards for the actions of all executives and employees of the Wilo Group. 

Central Wilo principles include

  • adherence to basic social principles such as respecting human rights, equal treatment and equal opportunities,
  • compliance with international and national laws, regulations and standards,
  • sustainable corporate development taking into account economy, ecology and social issues,
  • a commitment to fair competitive practices,
  • compliance with laws and regulations in dealings with our business partners,
  • a commitment to fair working conditions and the trusting treatment of our employees.

Corporate compliance is firmly established in the organisation of the Wilo Group and safeguarded by the compliance director and the compliance office. In this function, the compliance director reports directly to the CEO on issues relevant to compliance. Among other things, the compliance office is responsible for the Wilo Business Keeper Monitoring System (BKMS®). This certified whistle-blower system is available to employees and third parties for confidential and anonymous tips on violations of the code of conduct. In addition to the Executive Board, the Audit Committee also receives regular and ad hoc reports on issues relevant to compliance.

A Group-wide e-learning initiative was launched in the year under review in order to reinforce the compliance culture and knowledge of relevant compliance regulations among all executives and employees. It is initially focusing on the topics of corruption prevention and competition law. Additional topics are planned in subsequent years. In addition, internal rules are successively enhanced in order to make the existing Group-wide code of conduct even more specific and to adapt it more closely to local conditions.

These activities are part of the continuous development and refinement of the existing compliance management system (CMS), including to meet the recommendations of ISO 19600:2014 “Compliance Management Systems”. In the medium term, the Wilo Group is seeking to obtain certification for its CMS in accordance with Audit Standard 980 “Principles for the Proper Audit of Compliance Management Systems” promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany, IDW).

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WILO SE
Corporate Communications
Nortkirchenstraße 100
44263 Dortmund
T +49 231 4102-0
F +49 231 4102-7363

Contact

WILO SE
Corporate Communications
Nortkirchenstraße 100
44263 Dortmund
T +49 231 4102-0
F +49 231 4102-7363