APC 2004 Annual Report Download - page 44

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c) Telemecanique OSI electronic sensors, which can
run a teach-mode set up for quick installation or
replacement. Because the range is modular, the num-
ber of spare parts is reduced by a factor of 10.
Schneider Electric integrated these features to help
make its distributor and final-user partners more cost
effective.
d
) Telemecanique Magelis touch screen graphic
terminals and the quickly renewed range of
Telemecanique Altivar speed drives, which are sup-
porting Schneider Electric's growth and leadership in
both segments.
Services: Being part of the solution
Schneider Electric is building on support services for
its installed base-the largest in the market-and devel-
oping services to enhance its customers' energy and
industrial performance. We are part of the solution for
our customers, with the goal of significantly reducing
their energy consumption. Examples of our services
include remote energy monitoring to control electrical
installations, speed drives for high consumption appli-
cations, optimized electricity management in buildings
and remote management for water treatment, with
W@de from Telemecanique.
Our PowerLogic solutions allow customers to manage
electricity costs, quality and reliability. That's why
Mercedes Benz in the US has chosen to work with
Schneider Electric.
In 2004, Services accounted for 8% of total sales.
Efficiency
As part of NEW2004's efficiency drive, we continued
to systematically deploy plans to enhance productivi-
ty during the year. Purchasing was further globalized,
with the development of international purchasing cen-
ters in Bangalore, India; Shanghai, China; and
Budapest, Hungary.
Schneider Electric has decided to leverage high per-
formance R&D centers near highly demanding mar-
kets in Japan, China and the United States. It has also
decided to combine its French electrical protection
and control R&D competencies in a global center
based in Grenoble. Manufacturing resources were fur-
ther rationalized, with site closures in the United
States and western Europe and the transfer of certain
production lines to other locations in the rest of the
world. Productivity and performance enhancement
programs like Six Sigma, Lean Manufacturing and
Quality and Value Analysis were deployed faster
across the entire production base. The Six Sigma
method, which was initially applied in manufacturing,
is now being used for sales and marketing.
During the year, we also optimized support functions by
implementing base-cost reduction plans in France and
launching a program to adapt and optimize the corpo-
rate functions, with a focus on Marketing and R&D.
Lastly, we launched a project to transform our IT and
business processes by globalizing infrastructure,
rationalizing applications and outsourcing systems to
a partner. The construction of a core system has
taken on a global scope. Capgemini was selected as
our partner to build the core system and manage IT
systems in Europe.
Operating Performance
Trends in Schneider Electric's
core markets
Buildings Market
The US non-residential Buildings Market returned to
significant growth after three years of decline.
The downward trend also reversed in Europe, albeit
with noticeable differences in each country. Demand
recovered in France and Scandinavia, continued to
rise in Spain, the UK and Central Europe and shrank
for the second year in a row in Germany.
In both the US and Europe, growth came solely from
the commercial and services buildings segments as
demand for industrial buildings remained flat.
The market expanded significantly in the Asia and
Pacific regions, South America and the rest of the
world.
Residential Market
As a general rule, Residential Market trends vary from
country to country as demand depends on local poli-
cies and cycles. That said, growth was very positive in
2004 both in the US and in most of Europe thanks to
low interest rates and a shift in household savings to
real estate.
Industry Market
The turnaround that began in 2003 gained steam in
2004, driving the strongest growth rate in ten years.
US industry rebounded sharply, making up for much
of the decline seen in 2001-2003. This growth was
fueled by strong corporate capital spending.
Europe experienced a smaller recovery. Demand for
machines was lifted by exports to emerging
economies, particularly China, but companies based
in Europe did not significantly increase capital spend-
ing in the region.
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