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Hau L. Lee Stanford University. Fast changing hardware and software Multiple sources of technological advances Frequent product transitions Manufacturing.

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Presentation on theme: "Hau L. Lee Stanford University. Fast changing hardware and software Multiple sources of technological advances Frequent product transitions Manufacturing."— Presentation transcript:

1 Hau L. Lee Stanford University

2 Fast changing hardware and software Multiple sources of technological advances Frequent product transitions Manufacturing cost pressures Fast changing hardware and software Multiple sources of technological advances Frequent product transitions Manufacturing cost pressures Short product and technology cycles Outsourced manufacturing partners Outsourced design partners Consumer electronics channel Other associated product providers Outsourced manufacturing partners Outsourced design partners Consumer electronics channel Other associated product providers Multiple supply chain partners Fashion like product Strong competitive forces Increasing product variety Potential of external disruptions Fashion like product Strong competitive forces Increasing product variety Potential of external disruptions Demand and supply uncertainties

3 ChallengesImplications Increasing demand and supply uncertainties Uncertainty drives need for flexibility Shortening product and technology cycles Dynamic instead of static supply chains Multiple outsourced supply chain partners Differential interests of multiple players

4 ChallengesImplications Increasing demand and supply uncertainties Uncertainty drives need for flexibility Shortening product and technology cycles Dynamic instead of static supply chains Multiple outsourced supply chain partners Differential interests of multiple players Agility Adaptability Alignment

5 ChallengesImplications Increasing demand and supply uncertainties Uncertainty drives need for flexibility Shortening product and technology cycles Dynamic instead of static supply chains Multiple outsourced supply chain partners Differential interests of multiple players Agility AdaptabilityAdaptability AlignmentAlignment

6 Largest convenience store chain in Japan ($23.3B annual sales) with 10,853 outlets (1,200 sq. ft each) #1 in fast foods #1 in battery, ladies stocking sales #2 in paperback/ magazine sales 55 Inventory turns/year Value of $1 Investment SEJ Nikkei

7 ISDNNetworkISDNNetwork 7-11 Japan district office OFC mobile computer Manufacturer Combined distribution center Store Host computer Satellite center Multimedia distribution Multimedia transmission 7-11 Japan HQ Dedicated line

8 IdentifyIdentify AnalyzeAnalyze ActAct MeasureMeasure POS+ Total visibility Correlation and Substitution Local events Product transitions Localized promotions Shelf & merchandizing New product development Trust-based agile logistics Dynamic shelving Supplier collaborations

9 New product release data General design changes Chip design data Chip design changes Mechanical design data Mfg. Design changes Sourcing changes Mexico California Hungary Texas Chip Design (GPU & MCP) Chip Supply Mechanical Design Plastics Component Procurement PCBA Mfg. Testing System Build & Test Final Packaging General Design Strategic Sourcing Marketing & Distribution 2001 Product launch in 14 months (versus 20 months for Sony Playstation 2), winning 3.6% market share in 4 months.

10 2nd Source Manufacturing Chip Packaging Mechanical Design Services Procure Components Plastics PCBA Mfg. Testing Final Packaging Chip Design (GPU & MCP) In November and December 2005, Xbox launched Xbox 360 simultaneously in N America and Europe, beating Sony’s Playstation 3 by close to a year. Chip Design 3rd Source Manufacturing Transportation customs clearance

11 Product postponement: field-programmable integrated circuits Process postponement: die-bank as decoupling point and customize to order. IRL (Internet-Reconfigurable Logic) allows reconfiguration remotely via the Internet Postponement strategy supports NPI and upgrades Number 1 market leader Wafer fabrication Die-bank FA&T

12 March 17, 2000, lightning-induced fire at Philips’ radio-frequency chips factory in Albuquerque, New Mexico

13 Percent of Respondents Based on a Stanford study on Driving Business Value through B2B Outsourcing, supported by GXS, 2007

14 Percent of trading partners integrated via B2B solutions Based on a Stanford study on Driving Business Value through B2B Outsourcing, supported by GXS, 2007

15 Average Percent Improvement Based on a Stanford study on Driving Business Value through B2B Outsourcing, supported by GXS, 2007

16 Integrated Information Systems – Centralized Command Integrated Information Systems – Centralized Command Local Empowerment Decentralized Control Deep Intelligence Efficient Execution “Sensible” Sense “Responsive” Response

17 ChallengesImplications Increasing demand and supply uncertainties Uncertainty drives need for flexibility Shortening product and technology cycles Dynamic instead of static supply chains Multiple outsourced supply chain partners Differential interests of multiple players AgilityAgility Adaptability AlignmentAlignment

18 Oklahoma City as central procurement, stocking, kitting and assembly site for North America and Asia. 80’-90’ Complex technology with Lucent as leader Primary market in North America Supply base in Asia not well developed 91’-00’ Response time a competitive pressure Fast growing market in Asia Bulk of supply base in Asia 1996: Taiwan and Qingdao as engineering, procurement and final assembly hub for Asia, backed up by OKC.

19 TechnologyMarketFocusStrategy Leadership Concentrated supply/demand Margin and control Centralization Maturity Regionally distributed supply/demand Responsiveness Expanded network Decline Globally distributed supply/demand Agility Value chain redesign

20 20005* No. of plants 295* No. of suppliers 3, No. of enclosures 477 Inventory turn 16-7 Profitability Heavy losses Profitable for 4 consecutive quarters *24 plants were sold off or closed. Celestica, Jabil, Sanmina and Solectron now handle 95% of total production needs

21 NYSE (February ‘04 to January ‘07) POSCO S&P Sales ($B) Profit (%) Arcelo r Mittal JFE NSC POSC O

22 Blast Furnace (Remove Oxygen & Impurities) Blast Furnace (Remove Oxygen & Impurities) Residual Carbon Removal, Other Alloys Added Residual Carbon Removal, Other Alloys Added CastingCasting Reheating Ingots Rollin g Iron Ore Crude (Pig) Iron Liquid Steel Slab Ingots Rolled wires, plates, pipes Continuous casting to save energy Factory layout to cut cycle time from days to hours Real time production control Innovative FINEX process Source of national pride

23 Projected worldwide steel shortage In Iron ore cost rose by 20% Coking coal cost rose by 80% Freight cost rose significantly Increasing pressures of trade barriers US China Steel consumption (tons/person)

24 JV with US Steel in 2002 on finishing plant in Pittsburgh Thailand: Cold Roll plant for Auto steel sheets (1/06) Nagoya, Japan: Cold Roll plant for Auto (2/06) Kunsan China: Cold Roll plant for Auto (02/04) Maharashtra, India: Plant for Electrical steel sheet (11/05) Crude steel manufacturing near iron ore mines; finishing plants near customers. JV and strategic alliances with iron ore suppliers in India, Brazil and Australia Plans to build crude steel plants in Brazil 12 M-ton steel plant ($12B) in Orissa, India; Phase I by Dec 2010 with investment of $3.7B Iron Ore Supply Crude Steel Production Finishing Plants Slabs

25 Market Intelligence Architect Supply Chain for Right Product, Market & Time Flexible Network Relationships People-ready Change Mgmt Product PLC Needs Technology Evolution

26 ChallengesImplications Increasing demand and supply uncertainties Uncertainty drives need for flexibility Shortening product and technology cycles Dynamic instead of static supply chains Multiple outsourced supply chain partners Differential interests of multiple players AgilityAgility AdaptabilityAdaptability Alignment

27 “The weakest link of the supply chain defines the supply chain.” “Instead of company to company competition, we are now in an era of supply chain to supply chain competition.” “Win-win relationship is the cornerstone of supply chain success.”

28 Toyota Distribution Dealers Inventory Inventory risk Facility Investment

29 Toyota Distribution Dealers Inventory Facility Investment Inventor Risk

30 Single Enterprise Cross- Enterprise Organizational Boundary Single Dimensional Multi- Dimensional Dimension

31 Time from landing to departure Transit time What about time from landing to destination?

32 DimensionAlignment Decisions, roles, responsibilities Re-assignment and empowerment Risks, costs, rewards Adjusted for incentives with win-win interests Performance measures Extended, joint, stretched to reflect alignment

33 Empowerment of decisions and responsibilities requires provision of capabilities Alignment ultimately demands behavioral change Successful alignment across organizations is based on building trust in a supply chain

34 Average Percent Improvement Based on a Stanford study on Driving Business Value through B2B Outsourcing, supported by GXS, 2007

35 US$M 2005 sales: US$8.2B (7.5% YoY G.R.) 1995 – 2005 CAGR: 22.4% Source: TSMC

36 World’s largest foundry (contract semiconductor fabrication manufacturer) Emphasizes customer relationship as “First and Last Look” Invests in E-SCM to help internal and customers’ supply chain process eFoundry Design collaboration Engineering collaboration Logistics collaboration AllocationManagementAllocationManagement CapacityModelingCapacityModelingAllocationPlanningAllocationPlanning Output Planning PlanningOutput OrderManagementOrderManagement Available - To-Promise To-Promise DemandPlanningDemandPlanning E-SCM Architecture

37 Iterative design verification and improvement process Sharing common mask set with different chips Diamond lane treatment Great cost and time savings for customers Helps customers NPI Win for both TSMC and customers

38 TSMC Solution Manufacturing Focus 1997 Schedule ahead of ITRS Complete SoC portfolio World-class quality Customer-centric total solution Web-based design engineering and logistic service Comprehensive design service Integrated backend service Capacity Leadership Production Excellence Technology Focus Service Focus

39 Fab expansion based on technology and market changes Evolution to service-focus business Optimized product/fab assignment Fab expansion based on technology and market changes Evolution to service-focus business Optimized product/fab assignment AdaptabilityAdaptability Information sharing across supply chain Collaborative relationships with customers Tight connectivity with assembly and test Trust-based, people-oriented organization Information sharing across supply chain Collaborative relationships with customers Tight connectivity with assembly and test Trust-based, people-oriented organization AlignmentAlignment Extensive information integration Optimization-based applications Highly efficient manufacturing processes Centralized command, decentralized control Extensive information integration Optimization-based applications Highly efficient manufacturing processes Centralized command, decentralized control AgilityAgility

40 Integrated Information Systems – Centralized Command Integrated Information Systems – Centralized Command Local Empowerment Decentralized Control Deep Intelligence Efficient Execution “Sensible” Sense “Responsive” Response

41 Market Intelligence Architect Supply Chain for Right Product, Market & Time Flexible Network Relationships People-ready Change Mgmt Product PLC Needs Technology Evolution

42 DimensionAlignment Decisions, roles, responsibilities Assignment to best run overall supply chain Risks, costs, rewards Adjusted for incentives with win-win interests Performance measures Extended, joint, stretched to reflect alignment

43 World class supply chains require capabilities in agility, adaptability and alignment Sensible Sense and Responsive Response to gain agility Right supply chain for the right product and right time Winning with the whole supply chain AAA supply chain management is the key for super-AAA performance and values

44 © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

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