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Driving Supply Chain Flexibility

Driving Supply Chain Flexibility. Chris Armbruster Director Supply Chain Strategy Agere Systems. Waste Not Tolerated. Our Choice. or. “The quest for certainty blocks the search for meaning. Uncertainty is the very condition to impel man to unfold his powers.” --Erich Fromm.

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Driving Supply Chain Flexibility

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  1. Driving Supply Chain Flexibility Chris Armbruster DirectorSupply Chain StrategyAgere Systems

  2. Waste Not Tolerated

  3. Our Choice or

  4. “The quest for certainty blocks the search for meaning. Uncertainty is the very condition to impel man to unfold his powers.” --Erich Fromm It’s also the driving force behind flexibility.

  5. Foundry Chip Maker EMS Ult. Customer Phenomenon 1(Latency) Phenomenon 2(Amplification) Phenomenon 3(Interference) Net Effect Uncertain Demand + + = Demand can become out of phase or shift in time. Changes in demand can become exaggerated. Noise can superimpose onto the demand signal. Solution = Visibility & Collaboration Flexibility Can’t Do It All

  6. Intelligence Speed Strategy + + = Flexibility

  7. The data exists, but must be mined for meaningful information. Business Intelligence Notwithstanding its fickle nature, uncertainty can be understood, characterized, bounded and modeled. • Key input to developing a relevant fulfillment strategy.

  8. Certainty Window Time Risk Risk Execution Window • Speed of info stretches certainty window • Speed of operations shrinks execution window SpeedAll About Aligning Windows

  9. CustomerRequirements Identify Key Flexibility Points Where to buffer inventory & capacity (& how much) Where to focus on speed, how often to plan & how to trigger execution What to insource & what to outsource Business Intelligence Strategy Speed Product & Supply Chain Architecture Process & SystemBlueprint Strategy

  10. Agere’s Approach to Flexibility

  11. About Agere $1.8B FY03 Revenue • No. 1 in chips for hard disk drives • No. 1 in chips for wired communications • No. 1 in 802.11b chips for PCs • Top ten customers: Apple, Cisco, HP, Lucent, Maxtor, NEC, Nokia, Samsung, Seagate, Western Digital Employees: 6,800 Regional Offices: Allentown, PA Santa Clara, CA Assembly & Test Sites: Bangkok, Thailand & Singapore Ascot, UKHong Kong, China

  12. About Our Supply Chain Package Assembly & Test Wafer Fabrication Circuit Assembly 4-10 Wks 2 Days Hours

  13. Market Error Forecasts are often based on uncertain markets. Propagation Error As demand propagates up the supply chain, the demand signal degrades. Using Business Intelligence To Manage Uncertainty +Error -Error Visibility & Collaboration Flexibility

  14. Short Horizon Volatility • How certain demand is over a short horizon • Finished goods inventory policy Downsides • Long Horizon Volatility • How certain demand is over a long horizon • Semi-finished inventory policy Upsides Profiling Uncertain Demand Demand Certainty Probability Our customers are somewhat certain about their demand over a quarter, but beyond the current week they are not sure when in the quarter it will materialize.

  15. Speed Lean Manufacturing Package Assembly & Test Cycle Time Shrink Execution Window for Package Assembly & Test Operations to Fit Inside Certainty Window Certainty Window Time(Weeks)

  16. Order Fulfillment & Delivery More Than Just Fast Manufacturing 24 Hour Planning Cycle

  17. Key Flexibility Point is just before Package Assembly & Test Statistically size and locate buffers Align Package Assembly & Test execution time w/ Certainty Window Strategy Process & System Blueprint Daily PlanningCustom Built APS Agere’s Flexibility Strategy Customer RequirementsFlexibilityResponsiveness Security Business IntelligenceDemand Profiling Leading Indicators SpeedLean Manufacturing Logistics Supply Chain Architecture Insource Assembly & Test Outsource Wafer Fabrication

  18. Lean Manufacturing Supports Multiple Manufacturing Locations FedEx Partnership Automation and eBusiness Build to Forecast Super Fast Cycle Times JIT Receipt of Customer Order Order ProcessandPlanning Wafer Fab Buffers for Flexibility, Response andSecurity Package Assembly and Test Pick and Pack Ship Product on Customer Dock Buffers for Flexibility, Response andSecurity Buffers for Flexibility, Response and Security Demand Collaboration Supply Collaboration DailyPlanning Statistically Profiled

  19. This Stuff Really Works 100% 10 Shipping Performance to Customer Request Date 90% 9.5 Inventory Velocity (Turns) 80% 9 70% 8.5 60% 8 Shipping Performance Inventory Turns 50% 7.5 40% 7 30% 6.5 20% 6 10% 5.5 0% 5 2001 2002 2003

  20. Thank You

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