Customer Base Expectations

1
Customer Base Expectations

• Collaborative Supply Chain Models
• Proactive Solutions
• Aggressive Pricing
• Ease of Doing Biz
• Favorable/Fair Terms and Conditions
• Velocity of Materials
• Accepting/Treating CEM as the Customer

2
Integrated Services
Traditional EMS
Distribution outbound logistics
New Product Introduction NPI)
Purchasing inbound logistics
After sales services
Global Manufacturing
Sourcing
Design
Today EMS
Tomorrow EMS
Complete EMS/ODM Module
3
Collaborative SC Models

• Designed for Flexibility
• Supply Chain Model is designed to meet Customer
  Requirements.
• Proactive / Collaborative Demand Planning.
• Responsiveness to Change.
• SC Model is industry Focused.
• Structured by model and Partner.
• Automotive drivers are different to Networking
  drivers.
• One Size does NOT fit all

4
Collaborative SC Models

• Philips is currently in 11 mfg. sites, in 9
  countries, on 3 continents.
• Supply Chain is difficult enough without creating
  non-value complexities.
• This is consumer business, fickle at times, yet
  fairly predictable from a macro perspective

5
High Performance Supply Chain Management
Partnership Process
Fully Integrated Worldwide Program Management
Customer Supply Chain Management
Customer Demand
Requirements Planning

• Order Asset
• Management System
• Inventory Bonding
• Planning Information
• Acknowledgments
• Order Processing

Purchased Items

• Program Items
• Schedule Share
• EC Release

BOM
Demand Projections Stocking Requirements
BOM
BOM
Direct Site Support
Direct Site Support
Product Build Requirements
Ship Final Product to Customers
2-3 Day Process
Customer Manufacturing Russia (PCB Assembly,
Final Assembly, Test and Ship)
Inventory _at_ customer Hub Russia

• Colnbrook
• Distribution Center
• Bonded Inventory
• Process, Pick, Ship

customer Pull-to-WIP
KANBAN
Demand Flow Replenishment
24 Hour Process
6
Demand-Flow Supply ReplenishmentVisual System
Driven / Electronic Commerce Supported
Element 1 Establish a Prime Location 2-Bin Kanban
(or single bin Min/Max) in the electronic
assembly area to support the existing process
lines.
Inventory Hub Bonded Inventory Pick, Ship and
Deliver
Element 4 When a Kanban Bin is depleted (2-Bin)
or depletes below Min-level (1-Bin), Gilat will
replenish from the Sofia Hub.
Electronic Assembly
Electronic Assembly
Electronic Assembly
Element 2 Create and size 1 or 2 Bin Component
Kanbans.
Electronic Assembly
Element 3 Kanban draws off bin until depleted
7
Material Flow ProcessCAN-BE
SUPPLIER L.T. 1-3 Days
KANBAN
PACKAGING SHIPPING TO CUSTOMER
ACCEPTANCE TESTING
KANBAN STAGED COMPLETED BOARDS
KANBAN STAGED AUTO-INSERTED BOARDS
SEQUENCED REELS
Through-Put Time
4 Hours
4 Hours
2-Days
4 Hours
8
Defining the Inventory Carrying Cost
Def carrying cost - Cost of carrying inventory,
usually defined as a percentage of the dollar
value of inventory per unit of time (generally
one year). Carrying cost depends mainly on the
cost of capital invested as well as the costs of
maintaining the inventory, such as taxes and
insurance, obsolescence, spoilage, and space
occupied. Such costs vary from 10 to 35
annually, depending on type of industry.
Ultimately, carrying cost is a policy variable
reflecting the opportunity cost alternative uses
for funds invested in inventory. (Source APICS
Dictionary 8th Edition )
9
Benefit of increase inventory turns
Purchases
Inventory
Turns
1,000,000 1,000,000 Inventory Reduction Cost of
Carrying Inventory (annual) Savings (gt6)
333,000 83,000 250,000 x
25 62,500
3 12
10
Benefit of reduced activities
Activity
Traditional
Electronic
Review MRP Create PO req. Select Supplier Create
PO Review/Sign Transmit Mail PO File
PO Acknowledge PO Print PO Ack. File PO
Ack. Minutes Cost per PO
1 1 1 3 5
5 2 5 1 3 3 3 5 3 30 55
11
Transaction cost reduction benefit
Cost
Total
Transaction

MRP original Purchase Order
1000 1000
55 5
55,000 5,000 50,000
Electronic PO release
Savings (5) 1M purchases
12

Total Acquisition Cost TAC

Quality Problems

• Capital Costs 5.5
• Handling 5.0
• Damage,Theft 3.0
• Obsolescence 2.5
• Insurance 2.0
• Storage 1.0
• 19.0

• Warehouse (3X)
• Purchasing (3X)
• Payables (3X)
• Engineering
• Quality Assurance
• Production

Manu Floor T.A.C
Delivery Problems

• Expediters
• Buyers
• Production
• Management

?1.35?

Procurement Admin.
?1.00
13
Procurements changing role

• Negotiate contracts with suppliers
• Manage supplier/partner relationships
• Serve on product development teams
• Materials planning and management
• Lead-time reduction
• Focus on A items (80 of dollars)

14
Traditional material flow
CIRCUIT BOARD ASSEMBLY
STOCK ROOM
SUB ASSEMBLY
FINAL ASSEMBLY
SUPPLIER
INVENTORY
15
One type of proven solution -Two bin kanban pull
system
EC SIGNAL
CIRCUIT BOARD ASSEMBLY
BIN 2
BIN 1
SUB ASSEMBLY
FINAL ASSEMBLY
SUPPLIER
INVENTORY
Difference
16
Customer
Russia
TERMINAL ON-LINE ORDER ENTRY Day 0
CENTRAL COMPUTER
CUSTOMS
ALL PRICES ON-LINE IN LOCAL CURRENCY
CONSOLIDATED SHIPPING
INVOICE
WAREHOUSE LABLES PACKINGNOTES PRODUCED
ON-LINE GOODS TO BE COLLECTED AT 4 P.M., Day 0
DIRECT SHIPMENT 24 HOURS
CUSTOMER GOODS ARRIVE NO LATER THAN DAY 2

• ALL PRICES IN CUSTOMERS LOCAL CURRENCY
• ALL TEXT IN CUSTOMERS LOCAL LANGUANGE

17
Delivery with customs clearanceBonded warehouse
option
Customs clearance by Customer/Disti
USA/China
Bonded Warehouse
Customers production facility
Payment in USD, GBP, Euro
Russian invoice to customer