Post on 24-Jan-2016
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Author Name • 11-Apr-02
Demand Driven Supply NetworkTM :
Turning Risk Management Into a Positive Message
John Mallon
Director Supply Chain Solutions
ON Semiconductor
Stanford John Mallon JM22
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
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Focus Segments and Customers
It is ON Semiconductor’s stated goal to be the leading supplier of premier power solutions worldwide
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ON Supply Chain Solutions
2000 2003 20072005 2009
PHASE 3PHASE 3
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
Shared demand scenarios and risk profiles (real demand collaboration)
Network optimized supply plans
Event driven management
Fulfillment contracts, shared risks/benefits
PHASE 1PHASE 1 PHASE 2PHASE 2
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
Shared demand scenarios and risk profiles (real demand collaboration)
Network optimized supply plans
Event driven management
Fulfillment contracts, shared risks/benefits
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.
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Agenda
• About ON Semiconductor• Phase 1 2000 - 2003• Phase 2 2004 – 2006 Flexibility and Scenario Management• Phase 3 2007 - 2010
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PHASE 2 – Minimize Revenue Risk from Demand Obfuscation
• Investment in i2 Inventory Optimizer in 2004/05
• Investment in i2 Scenario Planner in 2006
ON has uniquely combined principles of Advanced Planning, Lean Manufacturing, and
Stochastic Methods to create OSCARSM ,
The ON Supply Chain ARchitecture
Inventory OptimizerOptimize inventory
in Supply Chain
Demand PlannerBest available
demand information
Master PlannerSemi-weekly
supply-demand match
Demand FulfillmentAccurate real-time
order promising
Corporate PlannerCapacity alignment
by business
Scenario PlannerEvaluate options for
possible futures
VMI ManagerVMI ManagerEDI Driven ReplenishmentEDI Driven Replenishment
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Synchronization and closing the loopContinuous management to manage variability
Tactical Planning ExecutionStrategy Business Planning S&OP
Capacity Inventory Product
Demand
Financial
Inventory Inventory OptimizationOptimization
ScenarioScenarioPlanningPlanning
Inventory is the risk shock absorber between execution and tactical planning…..
Capacity is the risk shock absorber between tactical and strategic planning
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Primary benefitsManage inventory & delinquent revenue
• Measure inventory and days of supply
• Days of outstanding delinquency
• Maintain best-in class service
5.2
4.4
3.63.3
3.9
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Q3'04 Q4'04 Q1'05 Q2'05 Q3'05
Days of Delinquent Revenue
25% Reduction
14% Reduction
DOS
Internal Inventories
$205
$193
$176
$172 $173
Q3'04 Q4'04 Q1'05 Q2'05 Q3'05
87 Days
85 Days
78 Days 77
Days75
Days
1% Increase
Direct OTD %
92%91% 91% 92% 93%
Q3'04 Q4'04 Q1'05 Q2'05 Q3'05
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• 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
Agenda
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The DDSN Capability Model
Culture
Technology
Continuous Improvement
Measurement
Organization
Business Process
OrchestratingCollaboratingAnticipatingReacting
Level 4Level 3Level 2Level 1
Supply Chain Excellence
DDSN Excellence
ePMLevel 1 - Implicit
Level 2 - Explicit
Level 3 - Synchronized
Level 4 -External Integration
Business and Supply Chain Objectives & Metrics
Reactive Documented/Explicit
Internally Aligned
Partner Aligned
Risk & Contract Management
Limited Management
Unilateral Limitation
Shared Mitigation
Design-in Mitigation
Process & Controls
Independent Cascading Process
Synchronized Process
Concurrent Process
People, Organization & Culture
Silos Internal Cooperation
External
Cooperation
Network Collaboration
Information & Data Management
Ad Hoc Asynchronous Narrow Visibility
Network Visibility
Continuous Improvement
Firefighting Internal/Unilateral
Mutual Embedded or Early/Mutual
The ESC Maturity Model
Collaboration Maturity
ON Semi has mastered Supply Chain Excellence, and the AMR DDSN model shows the way for the next generation of improvements
The ESC Maturity Model provides detailed insight into opportunities for improvement in business collaboration
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The Risk of Satisfying Opportunities at Your Customer
Technology Platforms
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Target
Flex Buffer - Capacity
Flex Buffer -Inventory
The Risk of Satisfying Opportunities at Your Customer
% Flexibility 5% 10% 15% 20% 25% 30%
% Margin Impact
20%
15%
10%
5%
Due to the Cycle Times of Production within Semiconductor, Flexibility models require the use of inventory and capacity buffers
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.
FLEXIBILITY MODELS
FLEXIBILITY COST
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• 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
Agenda
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Intra-Prise
Bu
sin
esS
cen
ario
s Enter-Prise
Phase4
Customer Scenario Forecast
Using Scenarios To Enable Collaborative Risk Management
Dem
and
Sce
nar
ios
Customer High Confidence Forecast
Consensus Forecast
Su
pp
lyS
cen
ario
s
Structural Changes to BOM
Editing cycle times/yields
Down time – Holiday or Planned
Swap Capacity
Capacity Edits: Base, Min, Flex capacity
Constrain/Unconstrain Resources Phase 1
Phase 2
Phase3
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Leading OEMs are: “Grabbing the Bull-Whip By The Horns”
Disty
OEM
EMSIEMSI
ODM3PLODM
Design
3PL
SEMI
Some OEM’s have exited the “Demand Synchronization” responsibility
Disty
OEM
EMSIEMSI
ODM3PLODM
Design3PL
SEMI
Successful OEM’s are “Re-engaging” to manage the Drum Beat
Leader’s Become excellent at Demand Consolidation and Stratified Forecasting
Leaders are supplying Tier 1,2,3 visibility of Stratified
Forecasts
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.
Leading Semi Suppliers are committing to the Drum Beat PLUS Flex Models
Material Flow
Information Flow
RetailRetail
Retail
Retail
Retail
Leadership OEM’s audit suppliers to assure they have capability to comply and not just signing agreements.
Data Exchanges
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Collaborative Scenario Planning: A Major Supply Chain Breakthrough to Manage Synchronization
Todays B2B
Single Number Forecast
Poor Accuracy
Updated Weekly
Simple Contracts
OEM (Original Equipment Marketer)
Retail
Point Of Sale
Promotion Plans
Marketing &
Business PlansS & OP
PlanningProcurement
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
ScenarioPlanning
10 %
50 %
90 %
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Consensus Plan Generation
Quarter Forecasted (Q): Q2 2004 PTI2 : P? Fcst Date 3/15/2004
Q(-3) Sell Through Revenue 10 10 10 10 10Q(-2) Sell Through Revenue 11 11 11 11 11Q(-1) Sell Through Revenue (Current Projection) 13 13 13 13 13Baseline CDP for Q (From DP) 14 14 14 14 14
0 0 0 0 0.5510.0
11.0
13.0 as of
14.0 as of
as of
as of 3/15/2004
Causes of revenue delta between Q(-1) and QUnlikely
DownsidePossible
DownsideBase
AssumptionPotential Upside
Unlikely Upside
"Probability" 5% 20% 50% 20% 5%
Prod1 Design Win at CTM1 (almost certain) 0.00 0.50 0.50 0.80 1.00Prod2 Design Win at CTM2 (low probability) 0.00 0.00 0.00 1.00 1.00Recover market Share at CTM3 on prod3 (0.20) 0.00 0.50 0.80 1.00ASP Degradation (0.10) (0.10) (0.05) 0.00 0.05Seasonal Volumes at CTM4 0.70 0.70 0.70 0.90 1.20CTM5 end of production on Appli1 (0.30) (0.30) (0.30) (0.30) (0.30)Miscellaneous Design Wins on Family1 0.00 0.20 0.50 0.60 0.70Quality Issue on Prod4 at CTM5 (0.50) (0.40) (0.30) (0.10) 0.00
Q Sell through Revenue Forecast (Nominal) 14.55 14.55 14.55 14.55 14.55Forecast Profile 12.6 13.6 14.6 16.7 17.7
% Delta from Nominal -13% -7% 0% 15% 21%
Delta from Nominal (1.95) (0.95) 0.00 2.15 3.10
0% 5% 25% 75% 95%100% 95% 75% 5% 0%
Current Forecast (from sales)Final Sell Through Revenue Forecast Consensus:
Q(-3) Sell Through RevenueQ(-2) Sell Through RevenueQ(-1) Sell Through Revenue (Current Projection)Baseline CDP for Q (From DP)
13.6
14.6
16.7
00.10.20.30.40.50.60.70.80.9
1
10 11 12 13 14 15 16 17 18
Probability Curve
Revenue Likelihood
Discrete Revenue Events
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Leveraging the CPFR Model (Collaborative Planning, Forecast and Replenishment)
DIST EMSI
Program Forecast - Monthly
Demand Pull
Weekly, Daily
Bus Plan/ Contract
Semi-Annual, Quarterly
Demand Scenario
ON OEM
Account Planning
NPI, Capacity and Inventory
Planning(Scenario’s)
Internal Supply Chain Planning and Execution
Business Planning
SalesPlanning
OrderPlanning
Allocated Capacity- Monthly
SupplierPlanning
NPI, Capacity and Inventory
Planning(Scenario’s)
Internal Supply Chain Planning and Execution
CPFR Model
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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.
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In skating over thin ice, our safety is in our speed.
—Ralph Waldo Emerson
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Thank You