02.3
Non-financial Performance Indicators
PRODUCTION
Fresenius Medical Care’s customers justifiably expect to receive all of our products in the required number at a constantly high quality and on the specified delivery date. In our view, quality in production means meeting these requirements reliably. For us, manufacturing quality therefore comprises much more than just producing an end product that fulfils pre-defined specifications. The goods and raw materials must also have been supplied in the appropriate quality, and the production chains must be error-free. In addition, supply chain management has to be coordinated. Here the Fresenius Medical Care Group’s vertical integration is an important lever for success. As all of these processes are largely internal, we are able to control the quality of such ourselves.
One of the ways in which we can achieve quality is by ensuring that we only resort to outsourcing when a supplier convinces us that it can provide better quality than we can. As a result, we produce the main components of a dialysis machine in-house. Core components that are not only decisive for the quality and reliability of our products but also determine costs are always manufactured in our own plants. Our employees also play an important role in ensuring reliable production quality: experience shows that our teams that are used to working together deliver particularly consistent quality. In our production sites in North America, for example, the workforce in 2008 was 100 % identical to that in the previous year. As a result, Fresenius Medical Care was able to retain the know-how of its experienced production team.
In 2008, our production activities again centered on expanding capacities in our plants worldwide. This has enabled us to meet the continous growing demand for our products.
At our plant in St. Wendel, Germany, we invested around €39 million from March 2008 and into the first quarter of 2009 in expanding our production capacities. Approximately €23 million were spent on a production building and two new fiber spinning lines with which we manufacture hollow fibers, the most important component of our dialyzers. These fibers are also delivered from St. Wendel to other production sites where dialyzers are manufactured. As a result of this investment, production capacity for these fibers grew by almost a third. About €16 million were allocated to increasing the production of bags for peritoneal dialysis, enabling us to expand the capacity in this area by around a quarter. In the year under review, moreover, additional facilities for manufacturing single-use dialyzers went into operation, for which €36 million were earmarked at the beginning of 2007. As a result, 35 million of these “artificial kidneys” are now produced in St. Wendel every year.
The following example illustrates the scale of our fiber production. In our International segment we produced approximately 158 million kilometers of fiber last year – enough to reach the sun (distance earth / sun about 150 million kilometers). If we added the fibers produced in North America, we would make our way back, too.
We expanded the capacity of our plant in Ogden, Utah, from 32 million dialyzers in 2007 to 36 million last year, an increase of 12 %. We achieved this, among other things, by upgrading two production lines. Now all five production lines are at the same high technical level. We plan to operate additional production lines in Ogden by 2010. Our total investment budget for the expansion of production here will amount to $72 million in 2008 and 2009.
Hemodialysis machines are manufactured mainly at two sites: in Schweinfurt, Germany, and in Walnut Creek, California. While the German plant manufactures components as well as machines, the U.S. plant is specialized in assembling and testing of dialysis machines for the North American market.
Every second dialysis machine manufactured worldwide comes from our plant in Schweinfurt. In Schweinfurt, we further expanded production capacity for hemodialysis machines in 2007 and 2008 with a total investment budget of €25 million. We intend to increase the production volume there by 7 % to 10 % annually until 2015. A new building has been constructed with 3,600 square meters of space, where the machines can be checked directly after they come off the production line, and where software tests can be performed and dialysis treatments simulated. In the logistics area, which occupies a large part of the factory space, the machines c an be subsequently packed and prepared for shipment.
In 2008, we produced a total of around 80 million dialyzers and fiber bundles worldwide. With this production capacity, we achieved a market share of 44 % compared to 40 % in 2007. This means that Fresenius Medical Care remains the uncontested leader in the dialyzer market. This also applies to dialysis machines: 90 % of all of the dialysis machines sold in the U.S. came from our plants.
China is the growth engine in the Asia-Pacific region. The Chinese market continues to hold enormous business potential for Fresenius Medical Care: in view of the size of the population, the economic growth, and the healthcare measures planned in China, we expect the number of dialysis patients in the country to increase. The production site in Jiangsu, China, which we took over in the summer of 2007, is only a two-hour drive from Shanghai, giving us good access to qualified personnel and well-developed transport routes. The main products manufactured at the site are tubing systems and other single-use dialysis products for the Chinese market. As a result of the expanded capacities, we will be able to supply other markets in the region from Jiangsu in future and thus partake in the extremely dynamic growth in the region.
In Japan, we operate two plants in Inukai and in Buzen and have increased the capacity of both of these. The plants primarily manufacture single-use products needed for peritoneal dialysis. We also started producing FX generation dialyzers in Japan in 2008. These products are in high demand in Asia.
Our manufacturing processes, especially in our eight production sites in North America and in five major sites in Europe, are geared toward the Lean Six Sigma management system that combines Lean Manufacturing and Six Sigma approaches. Lean Six Sigma is used to analyze and optimally coordinate all production processes. Our aim is to achieve better production results, and in particular reduce defect rates, while shortening manufacturing cycle times. In 2008, we held further training sessions at the plants to heighten employees’ awareness of the opportunities that Lean Manufacturing and Six Sigma offer to positively impact product quality and thus help us to achieve our goals. In North America we also use the CAPA (Corrective And Preventive Action) program to help prevent problems from occurring. This involves identifying possible sources of error by observing processes before problems arise. CAPA is therefore an integral element of the management systems in all of our production sites.
Our technical customer service also plays a key role in ensuring quality. It is responsible for installing, maintaining and repairing our dialysis machines, and instructing users on how to use them – in more and more regions around the world even 24 hours a day, seven days a week. It is therefore a reliable interface between the Company and our customers. In 2008, the focus was on introducing the new tam (Technical Assistant Management), which can be used to make all customer service processes electronic and thus more efficient. Visit reports made by service technicians, for example, can be transmitted directly to Fresenius Medical Care’s SAP system and from there passed on to the personnel department where work hours are recorded to finally reach the finance department where customer invoices are issued. Spare parts orders are also fed directly into the SAP system in question, where they are processed immediately.
| Chart 02.3.3 | Produced dialyzers 1996 until 2008 |
