Demand Driven Supply Network TM : Turning Risk Management Into a Positive Message

1. Demand Driven Supply NetworkTM :Turning Risk Management Into a Positive Message John Mallon Director Supply Chain Solutions ON Semiconductor

2. Agenda • About ON Semiconductor • Phase 1 2000 - 2003 Tactical Planning Optimization • Phase 2 2004 – 2006 Flexibility and Scenario Management • Phase 3 2007 – 2010 Collaborative Risk Management • Summary

3. Focus Segments and Customers It is ON Semiconductor’s stated goal to be the leading supplier of premier power solutions worldwide

4. ON Supply Chain Solutions 2000 2003 2005 2007 2009 PHASE 3 PHASE 2 PHASE 1 • Internal optimization • Real time order scheduling • Synchronized corporate and factory planning • Arms distance contracts • Inventory buffer management • Sell-Through planning • Two-tier optimization (lean projects) • Scenario management • Flexibility contracts • Inventory buffer management • Sell-Through planning • Two-tier optimization (lean projects) • Scenario management • Flexibility contracts • Shared demand scenarios and risk profiles (real demand collaboration) • Network optimized supply plans • Event driven management • Fulfillment contracts, shared risks/benefits • Shared demand scenarios and risk profiles (real demand collaboration) • Network optimized supply plans • Event driven management • Fulfillment contracts, shared risks/benefits • Internal optimization • Real time order scheduling • Synchronized corporate and factory planning • Arms distance contracts Tactical Planning Optimization Flexibility and Scenario Management Collaborative Risk Management The risk of a Supply Chain disaster occurs annually, or seldom. The risk of not serving an opportunity with your customer is daily.

5. Agenda • About ON Semiconductor • Phase 1 2000 - 2003 • Phase 2 2004 – 2006 Flexibility and Scenario Management • Phase 3 2007 - 2010

6. Investment in i2 Inventory Optimizer in 2004/05 Investment in i2 Scenario Planner in 2006 PHASE 2 – Minimize Revenue Risk from Demand Obfuscation ON has uniquely combined principles of Advanced Planning, Lean Manufacturing, and Stochastic Methods to createOSCARSM,TheONSupplyChainARchitecture Scenario Planner Evaluate options for possible futures Corporate Planner Capacity alignment by business InventoryOptimizer Optimize inventory in Supply Chain Master Planner Semi-weekly supply-demand match Demand Fulfillment Accurate real-time order promising Demand Planner Best available demand information VMI Manager EDI Driven Replenishment

7. Strategy  Business Planning  S&OP Tactical Planning Execution Financial Capacity Inventory Product Demand Synchronization and closing the loopContinuous management to manage variability Inventory is the risk shock absorber between execution and tactical planning….. Capacity is the risk shock absorber between tactical and strategic planning Inventory Optimization Scenario Planning

8. Internal Inventories 14% Reduction DOS 87 Days 85 Days 78 Days 77 Days 75 Days 1% Increase Direct OTD % Days of Delinquent Revenue 25% Reduction Primary benefitsManage inventory & delinquent revenue • Measure inventory and days of supply • Days of outstanding delinquency • Maintain best-in class service

9. Agenda • About ON Semiconductor • Phase 1 2000 - 2003 • Phase 2 2004 - 2006 • Phase 3 2007 – 2010 Collaborative Risk Management • The Risks and Costs Ahead • Scenario Planning Saves The (Supply Chain) World • Summary

10. Collaboration Maturity The DDSN Capability Model Level 1 Level 2 Level 3 Level 4 Reacting Anticipating Collaborating Orchestrating ON Semi has mastered Supply Chain Excellence, and the AMR DDSN model shows the way for the next generation of improvements Business Process Supply Chain Excellence DDSN Excellence Organization Measurement Continuous Improvement Technology The ESC Maturity Model Culture The ESC Maturity Model provides detailed insight into opportunities for improvement in business collaboration

11. The Risk of Satisfying Opportunities at Your Customer • Technology Platforms

12. 20% 15% 10% 5% % Margin Impact 5% 10% 15% 20% 25% 30% % Flexibility The Risk of Satisfying Opportunities at Your Customer FLEXIBILITY MODELS Due to the Cycle Times of Production within Semiconductor, Flexibility models require the use of inventory and capacity buffers Flex Buffer - Capacity Flex Buffer -Inventory Target FLEXIBILITY COST ON Semi models indicate that a broad brush approach to a flex model can cost between 2% - 4% of margin for every 5% of Flex Model A targeted approach using Demand Scenarios can drastically reduce the potential cost to both partners.

13. Agenda • About ON Semiconductor • Phase 1 2000 - 2003 • Phase 2 2004 - 2006 • Phase 3 2007 – 2010 • The Risks Ahead • Scenario Planning Saves The (Supply Chain) World • Summary

14. Using Scenarios To Enable Collaborative Risk Management Supply Scenarios Constrain/Unconstrain Resources Phase 1 Capacity Edits: Base, Min, Flex capacity Swap Capacity Down time – Holiday or Planned Editing cycle times/yields Phase 2 Structural Changes to BOM Demand Scenarios Consensus Forecast Customer High Confidence Forecast Phase3 Customer Scenario Forecast Busines Scenarios Enter-Prise Intra-Prise Phase4

15. Design OEM OEM ODM SEMI 3PL ODM ODM SEMI 3PL EMSI ODM EMSI EMSI Disty 3PL Design EMSI Disty 3PL Leading OEMs are: “Grabbing the Bull-Whip By The Horns” Leading Semi Suppliers are committing to the Drum Beat PLUS Flex Models Retail Retail Data Exchanges Retail Successful OEM’s are “Re-engaging” to manage the Drum Beat Retail Retail Material Flow Information Flow Some OEM’s have exited the “Demand Synchronization” responsibility Leader’s Become excellent at Demand Consolidation and Stratified Forecasting Partner Relationships Collaborate on Flexibility Models: 1) Flexibility Terms and Liabilities 2) A,B,C Classification Models Aligned 3) Demand Ranges and Confidence Levels Leading Component Suppliers are implementing processes and systems to manage flexibility models. Leaders are supplying Tier 1,2,3 visibility of Stratified Forecasts Leadership OEM’s audit suppliers to assure they have capability to comply and not just signing agreements.

16. OEM (Original Equipment Marketer) Promotion Plans Retail Marketing & Business Plans Procurement S & OP Planning Point Of Sale Collaborative Scenario Planning: A Major Supply Chain Breakthrough to Manage Synchronization Scenario Planning Todays B2B Single Number Forecast Poor Accuracy Updated Weekly Simple Contracts Tomorrows B2B -> Event driven capability Single Number Fcst - > Range Forecast, Risk Stratified Poor Accuracy - > Accuracy mitigated through Scenario data and Flex Models Updated As Needed - > Execution Daily, Planning Semi- Weekly, Scenario Monthly, Events Inbetween Simple Contracts -> Flex Contracts Sharing Risk on Scenario’s 10 % 50 % 90 %

17. Consensus Plan Generation Probability Curve Revenue Likelihood Discrete Revenue Events

18. Leveraging the CPFR Model (Collaborative Planning, Forecast and Replenishment) ON OEM CPFR Model Account Planning Supplier Planning Bus Plan/ Contract Business Planning Semi-Annual, Quarterly Program Forecast - Monthly NPI, Capacity and Inventory Planning (Scenario’s) NPI, Capacity and Inventory Planning (Scenario’s) Sales Planning Allocated Capacity- Monthly Demand Scenario Internal Supply Chain Planning and Execution Internal Supply Chain Planning and Execution Demand Pull Weekly, Daily Order Planning DIST EMSI

19. Challenges to Collaborative Risk Management • Trust • Can we Agree on the Benefits of separating the whip from the “bull” ? • Can we get over the lack of trust in sharing business scenario data ? • What types of T’s and C’s will be set for different Demand Strata ? • Definition of Processes • Need supply chain communities to keep working it • Need standards bodies to drive approach • Systems to Communicate • How will the strata and risk levels be identified in the data sets ? • Need standards work around the multiple “demand scenarios” and “demand strata and confidence levels” • Systems to Create the Visibility • APS type solutions - pegging of demand types • Management of Demand Strata within corporations – visible to partners • Formal modeling of business scenarios, with risk sharing strategies to assure supplier readiness.

20. In skating over thin ice, our safety is in our speed. —Ralph Waldo Emerson

21. Thank You