Supply Chain Reality Show

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Supply Chain Reality Show VandeVate Supply Chain
Logistics
January 24, 2006
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Purpose To share a Live Case study with you
that illustrates how International Logistics and
Distribution must evolve to support and meet the
needs of dynamic complex Global Supply Chains.
Expected Outcome Understanding of an Overall
Supply Chain Logistics Project and the
importance of Logistics to drive operational
efficiencies, reduce lead time, and capture
savings.
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AGENDA

• ADTRAN - Company Overview
• Reality Show Set UP
• Theme
• The House
• The Location
• The Cast
• The Challenges the Cast must overcome
• The ROI analysis
• QA

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• The Network Access Company

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Corporate Statistics

• FY2004 Revenue 455 Million
• FY2004 Net Income 75.4 Million
• 17 Years of profitable growth
• Employees 1,600 total
• Headquarters Cummings Research Park, Huntsville,
  Alabama
• Sales office throughout the US
• In-house and outsourced manufacturing (China)
• NOTE Released Earnings Today

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Earnings History

19942004 Annual EPS

2004
2002
2000
1998
1996
1994
Excludes gain on sale of securities
Excludes investment impairment charges
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Adtran Products Module Assembly Cards Plug In
Cards Chassis, Routers Access shelves-Cabinets
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Proven Track Record
ADTRAN Market Share
87
93
70
Domestic
Domestic
Domestic
HDSL Deployment
ISDN Extension
DDS Circuits
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46
46
Worldwide
Worldwide
Worldwide
Enterprise TDM IAD
Enterprise T1 DSU/CSU
Enterprise DDS DSU/CSU
Sources Gartner Dataquest, internal company
estimates
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Solid Customer Base
Carrier Global
Enterprise
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Supply Chain Reality Show
Theme
Locate a fine-tuned, process driven, efficient,
well established best in class domestic
distribution process, unplug a piece of it, take
it 8,000 miles to a foreign land, plug it back
up, teach it a foreign language, expose it to the
elements and see if it can increase operational
efficiencies, reduce customer lead times, and
drive cost reductions.
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Supply Chain Reality Show
The House
A Two Room House Room One 85,000 square foot
room used for Finished Goods Room Two 75,000
square foot room used for RMS Kitting
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Supply Chain Reality Show
Location
Existing location for 16 Years,
Huntsville Alabama Proposed
location for the Future, Hong Kong
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Supply Chain Reality Show
The Cast of Characters
Finished Goods Direct Ship Bypass Huntsville
distribution Direct Fulfillment Hold inventory
in HKG vs HSV Raw Materials 3PL
Distribution-Warehousing service provider

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Supply Chain Reality Show
Challenges to Overcome

• Locate and find a suitable house, 3PL service
  provider
• Throw everyone together in the house
• Mix in import-export complexities, terms of
  delivery, EOR-IOR
• Add Corporate Tax liability burden (17 HKG vs
  36 US)
• Non Resident offshore status vs stand-a-lone Hong
  Kong Entity
• 13 Hr time difference, language barrier
• Logistics-Transportation problems (capacity, rate
  variances, damage)
• Inventory management and reporting (inventory
  mgt, liability, loss)
• IT-ERP interface/integration-support dedicated
  and public lines
• SOP and 3PL training for FG and RMS ERP sales
  order entry
• Prepare Business case with ROI and get Sr. Mgt
  Buy-in
• 3PL Contract, legal review, mutual
  language-partnering vs adversarial
• Negotiating Rates
• Sarbanes Oxley audit review, controls

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3PL Distribution in Hong Kong
Finished Goods ROI Analysis Direct
Ship Direct Fulfillment
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ROI Summary

• Annual Savings low to mid six figures
• Break Even Analysis 20,000 units
• Volume Analysis
• Cost Analysis
• RFP-3PL Analysis
• FG Internal Distribution Cost Analysis
• SWOT
• DS Logistics Flow Chart
• DF Logistics Flow Chart
• Qualitative Analysis

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ROI Analysis Raw Materials Drop
Ship Rogue TurnKey
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ROI Analysis

• Annual Savings low to mid six figures
• Freight Lane Analysis Inbound-Outbound Ocean/Air
• Oracle Report to Data Mine out of ERP
• 3PL DC Cost Analysis
• Internal DC Cost Analysis
• Customs-Tax Impact on Duties/Fees/Taxes
• Pallet-Carton Volume Analysis
• SWOT
• Logistics Flow Process

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Conclusion
You are the Sr. Management of ADTRAN What is your
decision now with regard to my recommended
change? Do we proceed with the new HKG Remote DC
or do you kill the idea and we continue to ship
through our existing HSV DC?
Revenue Savings mid to high six figures
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Quotables

• There is nothing so useless as doing
  efficiently that which should not be done at all
• Peter Drucker

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Q A
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Thank You!