1CorporatePresentationV203-2007»OrderResponseTime»ProductAvailability»LeadTime»OrderChanges»DueDatePerformance»ResourceInvestment»AssetProductivity»Inventory»Supplier&CapacityContractsLevelofServiceCostofServiceTheBusinessChallenges2CorporatePresentationV203-2007ComplexityVariabilityConflictingObjectivesWhatarethecharacteristicsofSupplyChanManagement,whyisitsohardtomanage?3CorporatePresentationV203-2007ComplexityLeadTimesLimitFlexibilityLittleorNoPredictabilityandPoorProductMixJanuary?????????????????????????????ChronicCapacityShortagesCurrentProcessesandStructuresInhibitPerformanceInventoryUsedtoCoverProblemsComplicationsintheElectronicsIndustry»ComplexityinComponent/SemiconductorManufacturing»Masscustomization»Personalization»Productmixeffectsoncapacity»Multipleoptions»Contractedvs.ownedcapacity»Combinedmake-to-forecastandmake-to-order»InvertedBOM»Binning»Multi-stageglobalproduction4CorporatePresentationV203-2007UncertaintyinthesupplychainresultsinsignificantvariabilityEarlyOn-timeLateEarlyOn-timeLateUnderForecastOverEarlyOn-timeLateCustomerDemandSupplierPerformanceManufacturingCustomerDeliveriesRawMaterialsFinishedGoods•PastPerformance•MarketResearch•AnalyticalTechnique•IncentivePrograms•Responsiveness•Transportation•Location•Quality•ProcessDesign•ProductDesign•Capacity•QualityByTomDavis5CorporatePresentationV203-2007SupplyChannelOrdersActualLaunchRealShortageReturns/CancellationsOver-SupplyChannelFillandPhantomDemandTargetLaunchEndofLifeTrueEndCustomerDemandUnitsPerPeriodTimeMultipleforecastsandunreliablefulfillmenttodaycreatethebullwhipeffect.6CorporatePresentationV203-2007Shortenedproductlifecyclehasincreasedtheuncertainty.Ramp-upOngoingEndofLifeRamp-upOngoingEndofLifeRoleofInventoryHighUsualLowCostofShortageHighUsualLowCostofOverageLowUsualHighByProfessorHauL.Lee,StanfordUniversity7CorporatePresentationV203-2007Variability»Natural»Demand»Materialsupply»Production»Distribution»Self-Introduced»Replenishmentstrategies»Planningprocesses»Inventorystrategies8CorporatePresentationV203-2007TraditionalfunctionalalignmentscontinuetoimpedeSupplyChainPerformance.—MisalignedFunctionalGoals&Behaviors—PurchasingManufacturingDistributionSales&CustomerServiceGoal:Behavior:LowestpurchasepriceHighestutilizationLowestcost100%customersatisfactionLongleadtimesHighrawmaterialinventorylevelLongrunlengthsInflexibleschedulesHighWIPinventoryLongorderfilltimesInflexibleschedulesHighinventoriesPromiseflexibility9CorporatePresentationV203-2007ConflictingObjectives-ManufacturingLittle’sLawLittle’sLawAssetUtilizationWIPINVCycleTimeVariabilityWIPCycleTimeVariability10CorporatePresentationV203-2007ConflictingObjectives-CustomerLittle’sLawAssetUtilizationWIPINVCycleTimeVariabilityOrderResponseTimeEarlyWarningsDueDatePerformanceFillRates11CorporatePresentationV203-2007ConflictingObjectives-CorporateLittle’sLawAssetUtilizationWIPINVCycleTimeVariabilityOrderResponseTimeEarlyWarningsDueDatePerformanceFillRatesMarketShareProfitMarketRisk