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Supply Chain Reality Show VandeVate Supply Chain Logistics

Supply Chain Reality Show VandeVate Supply Chain Logistics . January 24, 2006. Purpose To share a “Live” Case study with you that illustrates how International Logistics and Distribution must evolve to support and meet the needs of dynamic complex Global Supply Chains. Expected Outcome

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Supply Chain Reality Show VandeVate Supply Chain Logistics

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  1. Supply Chain Reality Show VandeVate Supply Chain Logistics January 24, 2006

  2. Purpose To share a “Live” Case study with you that illustrates how International Logistics and Distribution must evolve to support and meet the needs of dynamic complex Global Supply Chains. Expected Outcome Understanding of an Overall “Supply Chain Logistics” Project and the importance of Logistics to drive operational efficiencies, reduce lead time, and capture savings.

  3. AGENDA • ADTRAN - Company Overview • Reality Show Set UP • Theme • The House • The Location • The Cast • The Challenges the Cast must overcome • The ROI analysis • Q&A

  4. The Network Access Company

  5. Corporate Statistics • FY2004 Revenue: $455 Million • FY2004 Net Income: $75.4 Million • 17 Years of profitable growth • Employees: ~1,600 total • Headquarters: Cummings Research Park, Huntsville, Alabama • Sales office throughout the US • In-house and outsourced manufacturing (China) • NOTE: Released Earnings Today

  6. Earnings History * 1994—2004 Annual EPS ** 2004 2002 2000 1998 1996 1994 *Excludes gain on sale of securities **Excludes investment impairment charges

  7. Adtran Products Module Assembly Cards Plug In Cards Chassis, Routers Access shelves-Cabinets

  8. Proven Track Record ADTRAN Market Share 93% 87% 70% Domestic Domestic Domestic DDS Circuits ISDN Extension HDSL Deployment 39% 46% 46% Worldwide Worldwide Worldwide Enterprise TDM IAD Enterprise DDS DSU/CSU Enterprise T1 DSU/CSU Sources: Gartner Dataquest, internal company estimates

  9. Solid Customer Base CarrierGlobalEnterprise

  10. Supply Chain “Reality Show” Theme Locate a fine-tuned, process driven, efficient, well established best in class “domestic distribution” process, unplug a piece of it, take it 8,000 miles to a foreign land, plug it back up, teach it a foreign language, expose it to the elements and see if it can increase operational efficiencies, reduce customer lead times, and drive cost reductions.

  11. Supply Chain “Reality Show” The House A Two Room House Room One: 85,000 square foot room used for Finished Goods Room Two: 75,000 square foot room used for RMS & Kitting

  12. Supply Chain “Reality Show” Location Existing location for 16 Years, Huntsville Alabama Proposed location for the Future, Hong Kong

  13. Supply Chain “Reality Show” The Cast of Characters Finished Goods Direct Ship – Bypass Huntsville distribution Direct Fulfillment – Hold inventory in HKG vs HSV Raw Materials 3PL Distribution-Warehousing service provider

  14. Supply Chain “Reality Show” Challenges to Overcome • Locate and find a suitable house, 3PL service provider • Throw everyone together in the house • Mix in import-export complexities, terms of delivery, EOR-IOR • Add Corporate Tax liability burden (17% HKG vs 36% US) • Non Resident offshore status vs stand-a-lone Hong Kong Entity • 13 Hr time difference, language barrier • Logistics-Transportation problems (capacity, rate variances, damage) • Inventory management and reporting (inventory mgt, liability, loss) • IT-ERP interface/integration-support dedicated and public lines • SOP and 3PL training for FG and RMS ERP sales order entry • Prepare Business case with ROI and get Sr. Mgt Buy-in • 3PL Contract, legal review, mutual language-partnering vs adversarial • Negotiating Rates • Sarbanes Oxley audit review, controls

  15. 3PL Distribution in Hong Kong Finished GoodsROI Analysis Direct Ship Direct Fulfillment

  16. ROI Summary • Annual Savings = low to mid six figures • Break Even Analysis = 20,000 units • Volume Analysis • Cost Analysis • RFP-3PL Analysis • FG Internal Distribution Cost Analysis • SWOT • DS Logistics Flow Chart • DF Logistics Flow Chart • Qualitative Analysis

  17. ROI AnalysisRaw Materials Drop Ship Rogue TurnKey

  18. ROI Analysis • Annual Savings = low to mid six figures • Freight Lane Analysis Inbound-Outbound Ocean/Air • Oracle Report to Data Mine out of ERP • 3PL DC Cost Analysis • Internal DC Cost Analysis • Customs-Tax Impact on Duties/Fees/Taxes • Pallet-Carton Volume Analysis • SWOT • Logistics Flow Process

  19. Conclusion You are the Sr. Management of ADTRAN What is your decision now with regard to my recommended change? Do we proceed with the new HKG Remote DC or do you kill the idea and we continue to ship through our existing HSV DC? Revenue Savings mid to high six figures

  20. Quotables “ There is nothing so useless as doing efficiently that which should not be done at all” • Peter Drucker

  21. Q & A

  22. Thank You!

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