Creating Supply Chain Flexibility

1. Driving Supply Chain Flexibility Creating Supply Chain Flexibility Chris Armbruster mail@chrisarmbruster.com | @CAArmbruster | 224.430.2046

2. SUPPLY CHAIN TRENDS REQUIRE FLEXIBILITY Modern supply chain trends can introduce inefficiencies: • Additional trading partners increase latency • Global supply chains increase complexity • Redundant judgments exacerbate demand uncertainty

3. WASTE Is NeverTolerated

4. THE CHOICE IS OURS or

5. “The quest for certainty blocks the search for meaning. Uncertainty is the very condition to impel man to unfold his powers.” --Erich Fromm UNCERTAINTY It’s the Driving Force Behind Flexibility

6. It is commonly known that signals degrade as demand propagates up the supply chain. Ultimate Customer Foundry Chip Maker EMS • DEMAND UNCERTAINTY • It Can Be Measured and Mitigated

7. UltimateCustomer Foundry Chip Maker EMS Net Effect Latency Amplification Interference + + = 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.

8. Visibility and CollaborationImprove the Demand Signal FLEXIBILITY Must Do the Rest

9. INTELLIGENCE STRATEGY SPEED SPEEDLIMIT + + Make FlexibleSupply Chains

10. BUSINESS INTELLIGENCE Potential Waiting To Be Tapped Notwithstanding its fickle nature, uncertainty can be understood, characterized, bounded and modeled. • The data exists, but must be mined for meaningful information. • Business intelligence is a key input to developing a relevant fulfillment strategy.

11. Certainty Window Time Risk Risk Execution Window • Speed of information stretches certainty window • Speed of operations shrinks execution window SPEED It Is All About Aligning Windows

12. 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 Strategy Start with the customer, of course.

13. CASE STUDY Semiconductor Manufacturer

14. SUPPLY CHAIN Package Assembly & Test Wafer Fabrication Circuit Assembly Weeks Days Hours

15. Market Error Forecasts are often based on uncertain markets. Propagation Error As demand propagates up the supply chain, the demand signal degrades. BUSINESS INTELLIGENCE Helps Manage Uncertainty +Error -Error +Error

16. Market Error Forecasts are often based on uncertain markets. Propagation Error As demand propagates up the supply chain, the demand signal degrades. Works Hand-in-Hand with Visibility & Collaboration -Error +Error Visibility & Collaboration Flexibility FLEXIBILITY +Error

17. 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 DEMAND PROFILING In this case, 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. Demand Certainty Probability

18. Lean Manufacturing Shrink Execution Window for Package Assembly & Test Operations to Fit Inside Certainty Window Certainty Window Time(Weeks) Package Assembly & Test Cycle Time Y0 Y1 Y2 Y3 Y4 Speed Aligns Windows

19. FAST PLANNING & LOGISTICSCOMPLIMENT LEAN FACTORIES 24 Hour Planning Cycle JIT Fulfillment & Delivery

20. 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 SUPPLY CHAIN FLEXIBILITY STRATEGY Customer RequirementsFlexibility, Responsiveness, Security Business IntelligenceDemand Profiling Leading Indicators SpeedLean Manufacturing Logistics Supply Chain Architecture Insource Assembly & Test Outsource Wafer Fabrication

21. 48 Hour 3PL Partnership Multiple MfgLocations 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 Integrated Strategy Delivers Buffers for Flexibility, Response andSecurity Buffers for Flexibility, Response and Security LeanMfg Demand Collaboration Supply Collaboration DailyPlanning Statistically Profiled MAXIMUM PERFORMANCE

22. BENEFITS REALIZED 100% 10 Shipping Performance to Customer Request Date Inventory Velocity (Turns) 90% 9.5 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 Year 3 Year 1 Year 2 Year 4

23. “Organizations fall short of their potential by accident, but they become world-class on purpose.” Share on LinkedIn Share on Twitter Chris Armbruster mail@chrisarmbruster.com | @CAArmbruster| www.chrisarmbruster.com | 224.430.2046