Accelerated Thinking SM 1IDT© IDT CONFIDENTIAL MAXIMIZE THE PERFORMANCE OF YOUR SUPPLIERS THROUGH COLLABORATIVE GOAL–SETTING AND SCORECARDS James Shih Vice President, Corporate Quality and Reliability Research and Development September 19, 2005 James Shih Vice President, Corporate Quality and Reliability Research and Development September 19, 2005

Accelerated Thinking SM 2IDT© IDT CONFIDENTIAL 品格決定一個人的命運 質量決定一個公司的興衰 Quality Determines a Company’s Success Character Defines a Person’s Fate

Accelerated Thinking SM 3IDT© IDT CONFIDENTIAL Cost of Quality EXPENSE:Prevention Cost Inspection Cost LOSS:Internal Failure Cost Customer Return Cost Quality is NOT FREE Cost of Quality = Expenses + Losses Quality is NOT FREE Cost of Quality = Expenses + Losses +

Accelerated Thinking SM 4IDT© IDT CONFIDENTIAL Cost of Quality One defective component can have a ripple effect across the entire supply chain –Defective parts caught at manufacturing floor: OEM must dedicate precious engineering resources and time to tracking and correcting the problem –If defective parts is caught after product shipped to end customer, the costs can rise by a factor of 10 or more –The tangible cost is easy to calculate, but there are many intangible costs: customer confidence, company reputation, market share loss …

Accelerated Thinking SM 5IDT© IDT CONFIDENTIAL Actions Items to Partner with Your Suppliers 7

Accelerated Thinking SM 6IDT© IDT CONFIDENTIAL SELECT Suppliers That Share Your Passion of Success 7 Actions Items to Partner with Your Suppliers Be proactive, no firefighting Quality must be a company culture Extensive use SPC Continuous improvement

Accelerated Thinking SM 7IDT© IDT CONFIDENTIAL Example of SPC Control SPC Control to Weed out Maverick Lots 70V3569Z Normalized Metal via Resistance Spec LimitNormalized via Resistance

Accelerated Thinking SM 8IDT© IDT CONFIDENTIAL SCHEDULE Regular Meetings with Suppliers to Assess Quality Issues, Discuss Specific Requirements and Outline Plans 7 Actions Items to Partner with Your Suppliers Frequent customer visits Understand customers’ requirements Build relationships

Accelerated Thinking SM 9IDT© IDT CONFIDENTIAL WORK Closely with Suppliers to Address the Root Causes When a Quality Problem Arises 7 Actions Items to Partner with Your Suppliers Always work with suppliers Case study 1

Accelerated Thinking SM 10IDT© IDT CONFIDENTIAL CASE STUDY Working with Suppliers on All Quality–Related Issues 1

Accelerated Thinking SM 11IDT© IDT CONFIDENTIAL SHARE Product Roadmaps with Suppliers to Ensure Mutual Success 7 Actions Items to Partner with Your Suppliers Partner with suppliers Share product roadmap Invest in the future Roadmap converges

Accelerated Thinking SM 12IDT© IDT CONFIDENTIAL MAKE Use of a Supplier Scorecard to Evaluate and Discuss Product Quality and Delivery Issues MAKE Use of a Supplier Scorecard to Evaluate and Discuss Product Quality and Delivery Issues 7 Actions Items to Partner with Your Suppliers Build a scorecard system Constantly rate suppliers Give feedback to suppliers Review progress

Accelerated Thinking SM 13IDT© IDT CONFIDENTIAL 7 Actions Items to Partner with Your Suppliers ISO 9000 ISO TS16949 Stack international JEDEC MIL-STD-883 RoHS / green compliance ENLIST Suppliers That Have Earned Industry Certifications and Follow Industry Standards

Accelerated Thinking SM 14IDT© IDT CONFIDENTIAL ASK Suppliers about the Flexibility of Problem Resolution Plans and Determine Response Time in Addressing Product Defects 7 Actions Items to Partner with Your Suppliers Response time = cost Flexibility Case study 2

Accelerated Thinking SM 15IDT© IDT CONFIDENTIAL Flexibility and Fast Response Time 2 CASE STUDY

Accelerated Thinking SM 16IDT© IDT CONFIDENTIAL Partnering with Your Suppliers Selecting high-quality suppliers is key to success Work with suppliers for collaborative goal setting and use scorecards to improve communication and drive continuous improvements High quality suppliers can reduce customer’s cost of offloading the IQC process and achieve “Dock to Stock”

Accelerated Thinking SM 17IDT© IDT CONFIDENTIAL Partnering with Your Suppliers Build up communication channel with suppliers –Schedule regular meetings to: –Assess quality issues –Discuss specific requirements –Outline plans Work with suppliers on all quality-related issues –Address the root causes when a quality problem arises –Involve suppliers in quality control actions Quality Control Must Be More Than a Plan; It Must Become Part of the Corporate Culture Quality Control Must Be More Than a Plan; It Must Become Part of the Corporate Culture

Accelerated Thinking SM 18IDT© IDT CONFIDENTIAL Building and Administering ScorecardItem Points Available Supplier A Supplier B Supplier C Quality Technology Procurement TOTAL

Accelerated Thinking SM 19IDT© IDT CONFIDENTIAL Building and Administering Scorecard QUALITY Quality problems Field failure rate In-process DPPM Responsiveness for corrective actions / failure analysis Quality data Quality Points Available Supplier A Supplier B Supplier C Quality Problems10 Field Failure Rate7 777 In Process DPPM7 747 Responsiveness7 777 Quality Data4 022 TOTAL

Accelerated Thinking SM 20IDT© IDT CONFIDENTIAL Building and Administering Scorecard TECHNOLOGY Full product lineup Advanced technology Product roadmap Responsiveness Support mature products Professionalism & product knowledge of sales force Technology Points Available Supplier A Supplier B Supplier C Product Line up7 573 Advanced Technology7 573 Product Road Map7 675 Responsiveness7 677 Support Mature Products6 426 Professionalism6 664 TOTAL

Accelerated Thinking SM 21IDT© IDT CONFIDENTIAL Building and Administering Scorecard PROCUREMENT On-time delivery Product lead time Upside flexibility PCN / PDN notice timing Price Procurement Points Available Supplier A Supplier B Supplier C On Time Delivery5 445 Product Lead Time5 444 Upside Flexibility5 545 PCN / PDN Notice Timing5 454 Price Projection5 444 TOTAL

Accelerated Thinking SM 22IDT© IDT CONFIDENTIAL Building and Administering Scorecard Recommend to hold “Quarter Business Review” Set up criteria: Reward and Penalty Green :80% – 100% Yellow :70% – 79% Red:< 70% List “Area for Development” on every category with TARGETED completion date Review status and list new GOALS

Accelerated Thinking SM 23IDT© IDT CONFIDENTIAL Summary Supplier performance directly affects product quality Select suppliers that share passion for quality –Work proactively to prevent problems before they occur Rate suppliers on a regular basis Share product roadmaps and create a forum for OEM and supplier to share product development plans Look for suppliers that have achieved industry certification Remember that quality control is a continuous process

Accelerated Thinking SM 24IDT© IDT CONFIDENTIAL THANK YOU Q and A