Strategic Report Our strategy in action In this section we demonstrate how we are implementing and making progress against each of our six strategic themes. 1 Increase direct sales effectiveness through sector focus It is not our products alone that provide value to customers. The extensive application and systems knowledge of our direct sales and support people is at the heart of our Customer Value Propositions. Through expanding the sector focus of our direct sales force we will enhance our Customer Value Propositions and increase our sales effectiveness. We have identified several priority industries, such as Food & Beverage, Healthcare and Oil & Petrochemical, to act as a focus for investment and sales force sectorisation. Our priority industries have been chosen for their potential return on investment and for our already strong competitive position within these markets. We are also increasing our focus on thermal energy management within those priority sectors, with the goal of making our Spirax Sarco steam specialties business the customers first choice provider for steam solutions and thermal energy management. Spirax Sarco Mexico sectorises its sales force Until recently, Spirax Sarco Mexico s sales and service engineers worked geographically across five regions. During 2015 the company completed an extensive reorganisation and sectorisation of its sales force. The process began with a comprehensive analysis of steam users and market segments by a wide range of factors including geographical location, market size and sales. The optimum number of sales engineers required to effectively address each market sector was identified, analysis of the sales force was undertaken to determine how each sales engineer could be utilised most effectively, the sales force was restructured and weekly training sessions established to deepen the sector specific knowledge of the sales engineers. Sectorisation of the sales force has already seen results, with segment specialists offering improved customer service and sales in target industries growing. Approximately a quarter of Spirax Sarco operating companies completed the sectorisation of their sales force during 2015 1.6 million investment approved to consolidate the manufacture of clean steam products in a state-of-the-art, ISO 14644-1 Class 7 cleanroom facility in Cheltenham, UK Continue to implement sales force sectorisation across our businesses Complete the clean-steam manufacturing facility to enhance our manufacturing capability, widen our product offering and provide a showcase for customers from the Food & Beverage, Pharmaceutical and Biotechnology industries 26 Annual Report 2015
2 Develop the knowledge and skills of our expert sales and service teams Continually improving the competency, technical skills and in-depth application knowledge of our sales and service engineers is central to our direct sales business model. Understanding our end users processes and applying appropriately engineered solutions to their steam or niche pumping problems are pivotal to our business success. Through continually investing in the professional development of our people, we develop a level of expertise that is unrivalled by our competitors. We train our customer facing employees in our 48 state-of-the-art training centres located around the world, most of which are equipped with live steam or pumping installations that facilitate hands-on training. Our engineers also undergo extensive on-the-job training and mentoring. We have developed a wide range of training materials and tools that are internet-based and available through our training centres, to facilitate the ongoing professional development of all our engineers. Read more on page 58 New training centres opened in Malaysia, the Philippines and France during 2015 40 new or upgraded courses added to our e-learning library during 2015 Spirax Sarco recognised for excellence at 2015 National E-Learning Awards, UK Spirax Sarco Malaysia opens new state-of-the-art training centre During 2015, Spirax Sarco Malaysia opened a new state-ofthe-art training centre, equipped with live steam installations. The training centre is now being used to further develop the expertise of our sales engineers and other customer facing employees, as well as providing training to our end users technical and maintenance staff. The training centre, which is part of a new office and warehouse complex, was opened by Nicholas Anderson (pictured centre) on 24th June. The fit out of the four-storey building, which also includes offices, a warehouse and a cafeteria, was project managed by Ciara O Sullivan (pictured left), during a six month overseas secondment as part of her two-year sponsored graduate placement with Spirax Sarco. Following the success of her secondment, Ciara has now secured a permanent position with the Company. Identifying and recruiting high calibre employees and then developing their skills is a core component of our strategy for growth. Establish a Spirax Sarco Academy during 2016, to oversee delivery of the learning and development programmes of the Spirax Sarco steam specialties business customer facing staff Complete installation and open a new Spirax Sarco training centre in India Corporate Information Financial Statements Governance Report Strategic Report Annual Report 2015 27
Strategic Report Our strategy in action continued 3 Broaden our global presence Our strong global presence is a result of decades of investment in building easily recognisable brands that symbolise expertise and reliability. We achieve a first-tomarket advantage from early entry into new markets and profit from the growth opportunities that the emerging markets represent. Our strong infrastructure around the world is enabling us to branch into neighbouring markets. We generally enter new markets through establishing a direct sales presence in the country through the creation of a sales office or the installation of one or more sales engineers. Occasionally, we purchase our distributor to allow us a foothold in an emerging market. Leveraging our existing strong infrastructure, we are also pioneering the introduction of Watson-Marlow into much of the developing world, demonstrating the superior technology and lower life-cycle costs of peristaltic and niche pumps. Spirax Sarco commences direct sales in India During 2015 our Spirax Sarco steam specialties business commenced direct selling in a newly established, wholly owned operation in India, following the sale of our 49.3% interest in our Associate company Spirax Marshall in March. We are constructing a world-class manufacturing plant, warehouse, sales offices and state-of-the-art training facilities in Chennai, which are due for completion in Q2 2016, and have established two further regional sales offices in Mumbai and Delhi. We currently employ around 40 people, including sales and service engineers, and are actively strengthening this team in line with business growth. By establishing a direct sales presence, and manufacturing and holding stock locally, we have created the flexibility required to take advantage of the good medium and long-term growth prospects in this important developing economy. Four new Spirax Sarco steam specialties operating units commenced trading during 2015 in Egypt, Peru, India and Colombia Three new Watson-Marlow operating units commenced trading during 2015 in Japan, Taiwan and Chile A Spirax Sarco direct sales presence established in the Ivory Coast and Algeria Continue to identify geographical markets that provide opportunities to expand our global presence Increase Spirax Sarco sales coverage in India Increase Spirax Sarco presence in North Africa and the Middle East Continue to broaden the presence of Watson-Marlow in Asia Pacific and the Middle East 28 Annual Report 2015
4 Leverage our R&D investments Our ability to deliver an increasingly wider range of solutions to reduce energy and water usage, lower plant emissions and improve plant productivity and efficiency, rests with our commitment to new product development. We believe that investing in R&D is crucial to the longterm sustainability and success of the Group. We have increased our R&D investments in recent years and will leverage these investments to generate sales growth, with shorter time-to-market of new products and solutions in such areas as thermal energy management, controls, condensate management and new pumping technologies and systems. Product development will increasingly be aligned to sector requirements. Where appropriate, we will look to make acquisitions in related areas that deliver new products and technologies and expand our addressable markets. SIMS (Spirax Intelligent Monitoring Systems) energy and monitoring platform and STMS (Steam Trap Management System) software completion Watson-Marlow Bredel launched Apex 28/35 pumps to help Water & Wastewater end users reduce maintenance costs BioPure launched PureSU, to help Bioprocessing end users control their whole fluid path Spirax Sarco receives a Queen s Award for Enterprise in Innovation During 2015 received a Queen s Award for Enterprise in Innovation the UK s highest accolade for business success for the design and manufacture of a novel flowmeter. The Spirax Sarco TVA flowmeter is a revolutionary alternative to traditional steam flow measurement, combining reliable, accurate and cost-effective steam metering with quick and easy installation, across a range of industries worldwide. The flowmeter, which incorporates a proprietary sensor and unique mathematical algorithms, was developed in Cheltenham, UK and tested in our worldclass technology centre and steam laboratory. Annually, we invest around 10 million in R&D across the Group and are focused on providing products that help our end users to improve their process efficiencies and meet their sustainability targets. Continue to improve process development to reduce time-to-market and strengthen the pipeline of breakthrough new products Release of Steam Quality Station for continuous monitoring of steam quality, in the Pharmaceutical, Healthcare and Food & Beverage industries Innovative product launches from Watson-Marlow during 2016 Corporate Information Financial Statements Governance Report Strategic Report Annual Report 2015 29
Strategic Report Our strategy in action continued 5 Optimise supply chain effectiveness Our direct sales business model, with extensive product ranges and short order books, requires a regional manufacturing strategy with plants throughout the world to optimise customer service and minimise costs. Through optimising effectiveness, we are developing our entire supply chain to enhance product availability, increase flexibility, reduce costs and improve service levels in support of sales growth. We have strategically located our manufacturing plants in Europe, North America, Latin America and Asia, to optimise supply chain efficiency. During 2014 we appointed a Group Supply Chain Director to provide management across the supply chain, identify inefficiencies, share best practice and better align our manufacturing and sales organisations. During 2015 we further expanded the Group Supply Chain function, adding a Group Supply Chain Sourcing Manager and a Group Supply Chain Operations Manager. Read more on page 59 Supply Chain Strategy launched, focused on delivering excellence in our supply chain Demand driven planning systems deployed; strong improvements in delivery performance and inventory optimisation Supply chain agility actions delivered, compressing lead times and enabling greater responsiveness Global Excellence in Manufacturing, Watson-Marlow tubing manufacture Global Excellence in Manufacturing (GEM) is Watson-Marlow Fluid Technology Group s way of working, our operating system, the way we manage our operations and our daily work. It brings together best practice in manufacturing from within and outside the Group and drives continuous improvement across the supply chain. GEM is focused on meeting the needs of our customers and is people driven. It is process orientated, data led and supportive of sustainable growth. GEM improvements can either be individual bright ideas which are reviewed, agreed and implemented, or larger business led projects requiring capital expenditure. Since 2012, GEM has resulted in over 1 million of savings, added nearly 15,000 hours to capacity, improved customer service and increased sales. For example, pump roller press automation at our Falmouth site reduced the length of time required to assemble 1,000 rollers from three hours to 20 minutes. This created over 500 hours of extra capacity in labour savings during 2015. Continue to execute our Supply Chain Strategy Further strengthen our supply chain community, delivering greater synergy and effectiveness Deliver continuous improvement across all Operational Excellence metrics 30 Annual Report 2015
6 Operate sustainably and help improve our customers sustainability Sustainability is at the core of our business operations, driving our strategy to innovate and manufacture products that improve the sustainability and competitiveness of our customers operations, while improving our own operational efficiency, reducing our environmental impacts and improving the quality of life of our employees, their families and the communities in which we operate. In a resource constrained and competitive world we have an obligation to create a more sustainable way of life and to ensure the long-term sustainability of our business. Our approach to sustainability encompasses five primary areas of emphasis: our workplaces, our supply chain, our environment, our customers and our communities. Through setting strategic objectives in each of these areas we are continuously improving our sustainability and the sustainability of our customers processes and operations. Read more on pages 54 63 Executive sponsor allocated to each strategic sustainability objective Sustainability benchmarking exercise completed Significant improvements in H&S performance 13% reduction in our global carbon emissions during 2015 Horizon 2020 is an EU Research and Innovation programme that seeks to maintain Europe s competitiveness on the global stage. Within Horizon 2020, the SPIRE (Sustainable Process Industry through Resource and Energy Efficiency) initiative seeks to achieve a significant overall efficiency improvement of up to 40% in CO 2 e footprints through reduced consumption of fossil fuels and raw materials. During 2015 Spirax Sarco Ltd, UK, secured SPIRE funding of 558k over three years through the SYMBIOPTIMA Project*. The main objective is to lead the development of a Smart Thermal Energy Grid capability, utilising existing and new Spirax technologies including SIMS (Spirax Intelligent Monitoring Systems) technology. The Smart Thermal Energy Grid will allow clusters of industrial facilities to collaborate for optimal use of energy. Operating within a consortium of 15 European organisations Spirax Sarco is also acting as Project Co-ordinator, liaising directly with the EC on behalf of the consortium. * This project has received funding from the European Union s Horizon 2020 research and innovation programme under grant agreement No 680426. Continue to invest management time in furthering our sustainability agenda Group-wide roll-out of our refined sustainability strategy Focus on improving our and our end users energy efficiency Corporate Information Financial Statements Governance Report Strategic Report Annual Report 2015 31