Post on 22-Apr-2015
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transcript
By: Jose Vega Rob Blakely Suresh Madhuvarsu
MGB-282 Supply Chain Management
Flextronics
1 • Flextronics Overview
2 • CM, CDM and ODM Timeline
3 • Key Case Issues
4 • Beyond the Case
Agenda
Global Supply Chain Enabler
~120,000 Employees in Asia (~90,000 in China)
~$24 Billion in Annualized Revenue
200,000+ Employees Globally; 20,000 Logistics/Services
Operating in 30 Countries; 27M Sq Ft of Capacity; 9 Industrial Parks
Service Model
Design.
• Flextronics employs over 4000 design engineers.
• Flextronics owns 364 patents
Capabilities
• Industrial Design
• System Architecture
• Mechanical Design
• Embedded System Design
• Software Systems
• Product Launch/NPI
• DFx Services
Build.
• Flextronics runs 9 industrial parks around the world focused on building the worlds leading technology products.
Capabilities
• PCB/Flex Circuits
• Optomechatronics
• LCD Displays
• Cables
• Machining
• Plastics
• Metal Fabrication
• SMT Assembly
• System Integration and Final Test
Ship.
• Flextronics is involved in doing BTO and CTO for many of the most complex technology products in the world from industry leading companies such as Cisco, HP, Huawei, Lenovo, RIM, Juniper, and many others.
Capabilities
• Build-to-Order (BTO)
• Configure-to-Order (CTO)
• Distribution and Direct Fulfillment
• Outbound Logistics and Hubbing
Service.
• Flextronics Global Services is the global repair leader for electronic products servicing 30M cell phones, 2M laptops, 9M PCBA’s, and 2M game consoles phones per year.
• Global Services’ sites dedicated to Service Parts Logistics process and ship over 12M spare parts for customers every year.
Capabilities
• Repair/ Refurbishment and Warranty Support
• Service Parts Logistics
• Remarketing
• Retail Technical Services (RTS)
• Asset Recovery
• Reverse Logistics
Europe
Tczew, Poland
East Hungary
West Hungary
Americas
Guadalajara, Mexico
Juarez, Mexico
Sorocaba, Brazil
Asia
Chennai, India
Doumen, PRC
Shanghai, PRC
Sustainable Growth – Limitless Scale, Repeatable Execution
Powerful Flextronics Differentiator
Operations revenue breakout by country:
9 Month Sales %
China $6,252,200 34%
Mexico $2,665,900 15%
U.S $2,531,400 14%
Malaysia $1,808,500 10%
Hungary $1,197,900 7%
Other $3,714,700 20%
Total $18,170,600 100%
1 • Flextronics Overview
2 • CM, CDM and ODM Timeline
3 • Key Case Issues
4 • Beyond the Case
Agenda
• Original Electronics Manufacturer (OEM)
– “Turnkey”: they did everything
Product Design and Marketing
Manufacturing, Assembly, and
Testing
Distribution and Sales
Birth of EMS
OEMs start outsourcing to Electronics manufacturing Services (EMS) in the 80s into the 90s. Why? 1. Core Competencies (Strategic): OEMs better and
design and marketing. (better access to customer data?)
2. Economies of Scale (Economic): EMS firms could leverage their fixed assets more efficiently than the individual OEMs.
3. Broad Geographic Presence (both Strate and Econ): Reduced risks of OEMs from manufacturing in one place.
OEM • Product Design
EMS • Manufacturing,
Assembly, and Packaging
OEM •Sales and Marketing
Industry in 1980s into 90s
EMS Industry Growth in 90s
• OEM growth, especially in electronics, meant more outsourcing to EMS for their manufacturing needs
• EMS companies rapidly expanded, usually through the acquisition of underutilized OEM manufacturing plants (they don’t have economy of scale)
• Many acquisitions involved companies with significantly cheaper labor (e.g., China) – as much as 75% cheaper compared to U.S. and Western Europe
Two Segments of EMS firms
Contract Design and Manufacturing (CDM)
Product Design and Engineering
Supply Chain and Logistics
Contract Manufacturing (CM)
Manufacturing and Assembly
Packaging and Distribution?
Original Design and Manufacturing
• As EMS firms tested the CDM model and became more vertically integrated upstream, they started to infringe upon the territory of Original Design Manufacturers (ODM)
• ODMs would initiate a new design and market the finished product to OEMs.
• The model allowed ODMs to colocate design and manufacturing. The ODM already knows the design aspects of the manufacturing, so they can pass on that knowledge, which makes things more efficient. In the end you’re able to design something that you know you can manufacture efficiently and ultimately remain competitive.
• After studying the model of ODM in Taiwan, Flextronics VP notices that because notebook computers are commoditized the OEMs feel comfortable purchasing completed products from ODMs
1 • Flextronics Overview
2 • CM, CDM and ODM Timeline
3 • Key Case Issues
4 • Beyond the Case
Agenda
1997 1998 1999 2000 2001 2002
Flextronics $640 $1,335 $3,952 $6,959 $12,109 $13,104
Solectron $3,694 $6,102 $9,669 $14,137 $18,692 $12,276
Celestica $2,006 $3,249 $5,297 $9,752 $10,004 $8,271
Jabil Circuit $987 $1,484 $2,238 $3,558 $4,330 $3,545
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
Tota
l Sal
es
(Mill
ion
s $
)
Top CM Firms - Sales
1997 1998 1999 2000 2001 2002
Flextronics 1.8% 1.6% 1.3% 2.3% -3.7% -1.2%
Solectron 4.3% 4.1% 3.6% 3.5% -0.7% -25.3%
Celestica -0.3% -1.5% 1.9% 2.1% -0.4% -5.4%
Jabil Circuit 5.3% 3.8% 3.8% 4.1% 2.7% 1.0%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
Pro
fit
Mar
gin
(%
)
Top CM Firms - Profit Margin
1998 1999 2000 2001 2002
Hon Hai 13.8% 12.8% 10.6% 8.5% 6.5%
Quanta 17.7% 12.3% 9.4% 10.6% 7.6%
Compal 13.1% 11.5% 8.0% 7.0% 6.8%
Acer 4.4% 5.7% 9.6% 1.1% 8.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Pro
fit
Mar
gin
(%
)
Top ODM Firms - Profit Margin
1999 2000 2001 2002
CM 42% 39% 24% -21%
ODM 29% 23% 28% 30%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Sale
s G
row
th (
%)
Yr/Yr Sales Growth - CM vs. ODM
1998 1999 2000 2001 2002
CM 2.0% 2.6% 3.0% -0.5% -7.7%
ODM 12.2% 10.6% 9.4% 6.8% 7.3%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Pro
fit
Mar
gin
(%
)
Average Profit Margins - CM vs. ODM
$0
$10
$20
$30
$40
$50
$60
$70
$80
CM CDM ODM Revenue $80 $80 $78
Cost $75 $72 $69
Profit $5 $8 $9
$80 $80 $78 $75
$72 $69
$5 $8 $9
Cell Phone Comparison
Key Issues to consider for an ODM
Hiring and developing new people
The location of the design department
Relationship with customers
Cost & Benefits of becoming an ODM
Benefits
Aligned
Agile
Costs
Added risk
1 • Flextronics Overview
2 • CM, CDM and ODM Timeline
3 • Key Case Issues
4 • Beyond the Case
Agenda
IDC’s EMS and ODM Revenue Growth Forecast
$191
$229
$267
$280
$233
$249
$274
$301
$329
$150
$190
$230
$270
$310
$350
2005 2006 2007 2008 2009 2010 2011 2012 2013
EM
S +
OD
M R
eve
nu
es
Source: IDC, Nov 2009
US$B
Growth Potential & Market Position
FLEX Portfolio TOTAL
MARKET
FLEX RANK
FLEX MARKET SHARE
TOP CUSTOMERS
INFRASTRUCTURE $34B No. 1 31% Cisco, Huawei, Ericsson
INDUSTRIAL $25B+ No. 1 14% App Materials, Siemens, Philips
MEDICAL $8B No. 2 10%
Boston Scientific, Medtronic, Agilent, Johnson & Johnson, Smith & Nephew
ODM COMPUTING $101B No. 7 1% HP, Lenovo, Dell
MOBILE & CONSUMER $44B No. 2 19%
RIM, LG, Microsoft, Sony, Philips, Kyocera, Motorola, Sharp, Toshiba
COMPONENTS $109B N.A 2%
Apple, RIM, Motorola, Honeywell, Cisco, Huawei
SERVICES (Excluding Freight) $22B N.A 7%
Apple, Dell, Verizon, Avaya, HP, Cisco, Juniper, Toshiba, Huawei
Source: IDC, Prismark, Micro-Tech Consultants, Display Search, TSR, Blumberg Advisory, FLEX estimates
1
ODM and EMS Markets
5
2
3
4
Ethernet switches & routers
Broadband access
equipment
Servers and storage
Customer premise equipment
Set-top boxes
Optical transport equip.
Telephone switching &
PBX equipment
INFRASTRUCTURE
Capital equipment
Appliances
Smart grid
meters/controls
Automotive
Aerospace
Defense
Energy/Solar
Self service –kiosks
Consumer diagnostic
devices
Diabetes products
Drug delivery devices
Lab/Life science equipment
Imaging & Patient monitoring
Diagnostic equipment
Disposable devices for
wound management
Catheters
Instrumentation
PC Desktop All-In-One
Desktop All-In-One
Notebooks
Servers
Storage
Netbooks
Smart phones
Cellular handsets
Data cards
Embedded modules
Digital cameras
Gaming consoles
Print & Copy
Security tags
Audio & Video
equipment
Including flat panel TVs,
DMPs and audio
accessories
INDUSTRIAL
MEDICAL
COMPUTING (ODM)
MOBILE & CONSUMER