Driving operational excellence through Value Stream Analysis at Ziehl-Abegg Thailand

In an increasingly competitive manufacturing environment, operational excellence is no longer a differentiator, it is a baseline requirement. For global industrial companies managing complex, multi-building production environments across international markets, the gap between current-state inefficiencies and world-class performance can represent tens of millions in unrealized value. This case study details how Ziehl-Abegg Thailand partnered with Kaizen Institute to conduct a comprehensive Value Stream Analysis (VSA) and design a structured, multi-initiative improvement roadmap across productivity, planning, sourcing, and quality areas.

Ziehl-Abegg Thailand and its commitment to operational excellence

Ziehl-Abegg (Thailand) Ltd. is the Thai manufacturing subsidiary of ZIEHL-ABEGG SE, a global technology leader founded in Berlin in 1910 and headquartered in Künzelsau, Baden-Württemberg, Germany. The group is one of the world’s leading companies in ventilation, drive, and control technology, with approximately 5,800 employees across 17 production plants, 30 companies, and 114 sales locations in more than 100 countries. Its energy-efficient fans and precision drive systems serve a broad range of end markets, including HVAC and refrigeration technology, elevators, cleanrooms, agricultural facilities, and medical technology.

The Thai facility, located in Rayong, produces fan systems, including rotors, stators, cables, impellers, and final assemblies, serving the group’s international markets with high-precision electromechanical components. Its multi-building production layout spans sub-assembly and final assembly operations across four main buildings covering stator and cable production, over-molding, rotor assembly, and final assembly through to dispatch.

Figure 1 – Ziehl-Abegg shop floor

Committed to maintaining its competitive position and improving operational efficiency, Ziehl-Abegg Thailand partnered with Kaizen Institute Thailand to drive a structured operational transformation.

The operational challenges identified across the value stream

Prior to the VSA engagement, a comprehensive gemba-based diagnostic revealed significant inefficiencies distributed across the entire value stream, from raw material receipt through to finished goods dispatch. These challenges spanned production, planning, logistics, quality, and sourcing, and collectively constrained the facility’s ability to respond to market demand with the speed, cost efficiency, and quality consistency required.

Low and inconsistent production efficiency

Efficiency levels across production areas were well below target. Plant-wide assembly efficiency stood at 57.4%, over-molding at 67.2%, and cable production at 83.9%, against a target of 85% for all areas. A yamazumi analysis conducted across all three production areas revealed labor productivity improvement opportunities of +20%.

One of the most striking findings emerged in the final assembly line, where the current team was sized for a cycle time significantly faster than actual demand, with takt times spanning from 43 to 126 seconds, resulting in structural overproduction and resource misallocation.

Excess inventory across all stocking points

Inventory levels were excessive at every point in the value stream. Raw material inventory totaled 266 MTHB, semi-finished goods 9.7 MTHB, and WIP 7.8 MTHB. The total inventory value reached 227.6 MTHB.

This excess buildup did not stem from a single issue. Root cause analysis pointed to four compounding factors driving inventory inflation:

• Demand forecasts driving replenishment rather than actual orders.
• A dramatic shift in demand patterns from around mid-year onward.
• Infrequent safety stock reviews.
• Locally defined inventory parameters disconnected from real consumption patterns.

Prolonged and variable lead times

The end-to-end lead time from order receipt to finished goods dispatch was 14 days for both the raw material-to-dispatch and semi-finished-to-dispatch stages. Information flow analysis revealed that value-added time as a percentage of total lead time ranged from just 5% (when stock was immediately available) down to 1.6% in worst-case scenarios where neither raw materials nor components were ready, with total lead times in that scenario reaching 186 hours against only 3 hours of value-added activity.

Muda concentrated across key production areas

Structured muda hunting exercises conducted over 120-minute observation windows in final assembly, cable production, and over-molding quantified the proportion of non-value-added activity in each area. Final assembly showed 75% muda versus 25% value-added; cable production 78% muda versus 22% value-added; and over-molding a 50/50 split. Identified wastes included waiting (for balancing, final test, preheat cycles, and machine cycles), overproduction beyond daily targets, over-processing (extra conveyor pushes, unnecessary cleaning cycles), people movement (excessive walking by operators), and material waiting (WIP accumulation on conveyors and after impeller pressing). In cable production, crimping was not synchronized with downstream assembly, causing systematic wait time at the next station.

High direct material costs and sourcing inefficiencies

BOM analysis of a representative fan model, with a total unit cost of 1,778.66 THB, revealed that the top six components accounted for 80% of the total cost, with PCBA (Printed Circuit Board Assembly) alone representing 45% (845 THB/unit). The direct material cost per fan stood at 2,129 THB against a target of 1,944 THB, representing a significant gap addressable through strategic sourcing, supplier consolidation, and value engineering.

Changeover time and quality losses

Machine setup time on the balancing machine (identified as a priority area) stood at 21 minutes, with a reduction target of 7 minutes through SMED application. The winding machine required 40 minutes for changeover, and plastic injection tooling changes took between 3 and 4 hours. On the quality front, scrap costs were running at approximately 450 KTHB per year, with a 20% reduction target established. Rework was not yet being systematically measured, representing both a data gap and an opportunity for improvement.

The approach to transforming operations: Four pillars of improvement

The VSA engagement produced a structured future state vision for Ziehl-Abegg Thailand, organized around four strategic improvement pillars: productivity improvement, sourcing improvement, planning improvement, and quality improvement. More than ten kaizen events were designed, each with a defined leader, sponsor, KPIs, baseline, target, methodology, and benefit projection. Daily KAIZEN™ was embedded as the sustaining mechanism across all initiatives, anchored in Leader Standard Work and team organization.

Productivity improvement: Line & layout design, capacity planning, and mizusumashi

The productivity pillar brought together three interconnected initiatives. The first focused on line and layout design, with the goal of doubling assembly productivity from 4.2 to 8.4 fans per man-hour. This was to be achieved through border-of-line redesign, Standard Work, yamazumi-based line balancing, and the implementation of mizusumashi.

Figure 2 – Yamazumi chart

The second initiative focused on capacity planning, with the goal of increasing production productivity from 1.82 to 3.71 fans per man-hour and generating 11.2 MTHB in benefits. This was to be achieved by building a medium- and short-term capacity planning tool aligned to forecast and production plan, and by designing layouts agile enough to respond to capacity fluctuations.

The third initiative, internal logistics (mizusumashi), targeted a doubling of logistics operator productivity from 33.3 to 66.7 fans per man-hour, generating an additional 11.2 MTHB in benefits. This was to be achieved through the design and deployment of a standardized milk-run system synchronizing material delivery cycles with production takt time.

Complementing these three initiatives, an autonomous release process was introduced to increase locally released parts from 0% to 50%, reducing dependency on external release processes through gap analysis, commodity grouping, and staff training.

Sourcing improvement: Strategic procurement and supplier base management

The sourcing improvement initiative targeted a reduction in direct material cost per unit from 2,129 THB to 1,944 THB/fan, generating 78.0 MTHB in total benefits (44.8 MTHB confirmed, 33.2 MTHB planned) over 11 months.

The approach combined cost transparency, negotiation, and structural sourcing actions. On the cost and negotiation side, it included detailed cost breakdown requests, competitive bidding, and fixed-cost contracts for high-spend items such as winding wire. On the structural side, it covered supplier consolidation across business units and subsidiaries, localization, and value engineering through re-engineering and make-or-buy analysis.

Planning improvement: Production pull planning and raw material supermarket

Production pull planning targeted a reduction in semi-finished goods days on hand from 29 to 2 days, generating 0.45 MTHB in annual savings and 9.0 MTHB in free cash flow by implementing a kanban-based pull system with a leveling box, logistics box, and production sequencer, eliminating forecast-driven overproduction.

Figure 3 – Kanban system example

The raw material supermarket initiative targeted a reduction in raw material inventory days from 176 to 48 days, generating 5.3 MTHB in annual savings and 106.4 MTHB in free cash flow. This was achieved through a combination of analytical levers such as ABC/XYZ analysis, Material Requirements Planning (MRP), parameter optimization, and demand accuracy reviews via S&OP cycles; and operational actions, including dead and slow-moving stock disposition and supplier negotiations to localize safety stock.

Quality improvement: Scrap & rework reduction and incoming inspection

Scrap and rework reduction (Kobetsu KAIZEN™) targeted a 20% reduction in scrap costs and the establishment of systematic rework measurement, generating 0.1 MTHB in benefits over 8 months through structured A3 problem solving, ishikawa root cause analysis, and Standard Work.

On the other hand, the incoming inspection initiative, supported by Standard Work, targeted a reduction in inspection time from 7 to 3 days over 3 months. The approach combined Coordinate Measuring Machine (CMM) optimization of inspection levels based on Acceptable Quality Level (AQL) standards, and risk-based segmentation of suppliers allowing inspection to be reduced or eliminated for top-performing suppliers.

Changeover reduction: SMED

The SMED initiative targeted a reduction in balancing machine setup time from 21 to 7 minutes over 3 months, with additional SMED investigations planned for the winding machine (40-minute changeover) and plastic injection tooling (3–4 hour changeover).

Leader Standard Work and Daily KAIZEN™

To sustain all breakthrough results, a Leader Standard Work initiative targeted an improvement in the Daily KAIZEN™ assessment score from 76% to 100% over 7 months. The approach encompassed gemba walk scheduling, kamishibai audit routines, structured management review meetings, and a phased rollout of Daily KAIZEN™ across the organization. A mission control room was established as the visual project management hub, centralizing all initiative tracking, KPI monitoring, and improvement review into a single, permanently updated workspace.

Figure 4 – Mission control room

Results achieved through the VSA program

The implementation of the VSA-driven improvement roadmap generated substantial financial and operational results across all four pillars. The total benefit package delivered by the program reached:

Financial results

• Total annual savings of 95.6 MTHB, driven primarily by sourcing improvement (78.0 MTHB), capacity planning (11.2 MTHB), raw material supermarket (5.3 MTHB), production pull planning (0.45 MTHB), internal logistics (0.6 MTHB), and scrap & rework reduction (0.1 MTHB).
• Total free cash flow of 115.4 MTHB, with the largest contributions from raw material supermarket inventory reduction (106.4 MTHB) and production pull planning (9.0 MTHB).

Operational results

Across production, logistics, planning, sourcing, and quality, every initiative delivered measurable progress against its baseline:

• Production productivity target: doubling from 4.2 to 8.4 fans per man-hour through line redesign, Standard Work, and capacity planning implementation.
• Logistics operator productivity target: doubling from 33.3 to 66.7 fans per man-hour through mizusumashi deployment.
• Raw material inventory days: reduced from 176 to 48 days.
• Semi-finished goods days on hand: reduced from 29 to 2 days.
• Machine setup time (balancing): reduced from 21 to 7 minutes.
• Incoming inspection lead time: reduced from 7 to 3 days.
• Direct material cost per fan: reduced from 2,129 to 1,944 THB.
• Local part release rate: increased from 0% to 50%.
• Leader Standard Work assessment score: progressed from 76% toward the 100% target.

Collectively, these results establish Ziehl-Abegg Thailand as a benchmark within the global Ziehl-Abegg network, proof of what disciplined, end-to-end transformation can deliver when methodology, leadership, and team capability move as one.

Conclusion: Transforming operations through structured continuous improvement

The results achieved at Ziehl-Abegg Thailand demonstrate what becomes possible when a rigorous diagnostic methodology is combined with a structured, people-centered approach to change. By addressing inefficiencies simultaneously across production, planning, logistics, sourcing, and quality, the organization built the operational foundation required to compete at the highest level, not just in Thailand, but within the broader Ziehl-Abegg global network.

This is the kind of outcome that the Kaizen Institute approach is designed to deliver. By integrating consulting with capability building, we ensure that improvements are not only implemented but also sustained over time.  Our Value Stream Analysis offering is designed to deliver an end-to-end operational transformation system, eliminating fragmented, area-by-area improvement efforts and aligning production, planning, sourcing, and quality around clear, quantified priorities.  The result is a disciplined, sustainable improvement trajectory that converts one-time gains into a compounding culture of operational excellence.