Transforming Supply Chain Bhawnesh Mathur

transcript

Transforming Supply Chain

Bhawnesh Mathur

Arrow Electronics, Inc.

Agenda

• Introduction to Arrow Electronics, Inc.

• Industry Dynamics and Their Impact on Customer Needs

• Transforming Arrow’s Supply Chain Through an End-to-End Approach

• Summary and Q&A

Introduction to Arrow Electronics, Inc.

• Distributor of Electronic Components and Computer Products

– Founded in 1935

– Headquartered in Melville, New York

• Global Player in Electronics Supply Chain

– 53 Countries

– 600 Suppliers

– 150,000 Customers

– Annual Sales of $11 Billion

Supplier OEM

ODMContract

Manufacturer

Arrow’s Vision Statement

Agenda

• Summary and Q&A

Industry Dynamics Have Greatly Complicated the Electronics Supply Chain

Multi-SitePurchasing & Manufacturing

Increasing Regional &

Global Competition Growth in

Differentiated Components

Numerouse-Business

Options Continuing Consolidation

Trends

Increasing ProductVariety

EnvironmentalCompliance

Requirements

Shrinking Product

Lifecycles

Supply Chain Complexity

Quote Parts

This Complexity Has Caused Customer Needs to Evolve from Few and Simple …

Powering the supply chainPowering the supply chain

Engineering Purchasing Manufacturing

Tech.Discovery

DesignActivity

PrototypeDevelop.

ComplexSupplyChain

Negot.

Supply Chain Order Mgmt

Traditional Parts for Dollars

Ordering

SpotBuying

ExcessBuying &Selling

InboundLogistics

Mfg End of Life

Customer Functions & Needs

A R R O WA R R O W

… To Many and Complex!

Engineering Purchasing Manufacturing

Tech.Discovery

DesignActivity

PrototypeDevelop.

ComplexSupplyChain

Negot.

Supply Chain Order Mgmt

Traditional Parts for Dollars

Ordering

SpotBuying

ExcessBuying &Selling

InboundLogistics

Mfg End of Life

Customer Functions & Needs

A R R O WA R R O W

EngineeringParametric search

Environmental dataRisk assessment

Part change notification

VMI / SMI3PL ServicesProgramming

AssemblyKitting & turnkey

Collaborative forecastingInventory bonding

Supply chain visibilitySC Mgmt Outsourcing

e-Business

To Meet Customer Needs, Arrow Has Transformed Itself Into a Supply Chain Solutions Provider

Arrow Electronics, Inc.Global Supply Chain Service Related Revenue

Agenda

• Summary and Q&A

Arrow’s Chain Management Approach Starts with Delighting Customers . . .

PlanPlan

Source Make Deliver Source Make Deliver Source Make Deliver

PlanPlan PlanPlan

Suppliers Customers

Delighted Customer

Suppliers’Distributor of Choice

Connected With

Supply Chain

Excellence

Connected With

Goals:

. . . Which is Empowered By Supply Chain Excellence and Preferred Supplier Relationships

Delighting the Customer

Customer Segmentation

Critical Tools & Services

Differentiated Tools & Services

Low:• Little appreciation for SC• Do not invest in SC

High:• SC critical to success• Invest in SC

SUPPLIERCONCENTRATION

High:• Core supplier base• Value partnerships

Low:• Many suppliers• Do not value

partnerships

HighLow

Parts forDollars

Standard Solutions

TailoredSolutions

SUPPLY CHAIN SOPHISTICATION

Price ofAdmission

Arrow Uses a Customer Segmentation Framework to Understand Customer Characteristics . . .

SC SOPHISTICATION

SUPPLIER CONCENTRATION

Partsfor

Dollars

Standard Solutions

HighLow

Priceof

Admission

TailoredSolutions

Simple

Low-Cost

Complex

Sophisticated

Services/Tools

Sales/Support Model

LeverageServices

MinimizeServices

Service Approach

. . . And to Define Specific Service Strategies

Arrow Has Developed a Segment-Aligned, Differentiated Tool & Service Portfolio

Standard Solutions

Price of Admission

Tailored Solutions

• VMI / SMI• In-plant store• Staffed terminal• New product introduction• Supply chain outsourcing• Integrated systems• Total cost analysis

• Collaborative forecasting• Bonded inventory• Consignment• Auto-replenishment• Kitting & turnkey• On-line decision support • Business Needs Analysis

• VMI / SMI• Electronic communications

• On-line part search• On-line buying

Examples

Parts for Dollars

Customer Background

• Provider of audio / visual control and automation systems

• Annual sales of $90 million

• Overhauling its supply chain

Customer Objectives

• Reduce and standardize global raw material costs

• Enhance external design support

• Reduce design-to-manufacturing cycle time

• Improve continuity and flexibility of supply

• Limit supply chain liability and risk

Customer Strategy• Utilize Arrow to manage all

component sourcing globally

• Integrate Arrow with internal engineering, procurement, planning and EMS management processes

• Consolidate to a single EMS provider with multiple locations; allow a profit on labor only

• Direct the EMS provider to procure components exclusively from Arrow

• Institute a centralized VMI hub

• Manage product life cycle throughout the supply chain

Case Study: Tailored Solutions

Freight Forwarder

Arrow Inc.Arrow Project Manager/On Site Team

EMS Site 1Thailand

EMS Site 4USA

Proto CMUSA

OtherDistributor 2Distributor 1

Local NF Sources

Arrow FAEs

NF Eng Support

Design Eng

EMS Site 2Malaysia

EMS Site 3Juarez

Freight Forwarder

Customer

Components

Forecasts/POs

Gatekeeper

Forecasts/POs

POs (Assy)

Invoice/Payment

POs (Assy)

Case Study: Tailored Solutions

Supply Chain Services

• Single global logistics provider

– Franchised & non-franchised

– NPI & production

• Design and materials management support

– FAE support

– Inside sales & material planners onsite

– VMI at EMS sites

• Information services

– Arrow Collaborator

– Arrow Risk and Alert

– Shared Pro-Series

Customer Benefits

• NPI process

– Design cycle reduced from 12 to 6 weeks

• Supply chain costs

– Customer raw turns virtual; moving to 10 at EMS network

– Planning and purchasing resources reduced

• Supply chain performance

– Liability reduced 60%

– Finished goods availability dramatically increased

Total First Year Savings $3+ Million

Differentiated Tool Example: Arrow Collaborator

Find Similar Part Parameters Customer Notes Data Sheets

Cross References PCN Notices

Differentiated Tool Example: Arrow Risk Manager

Achieving Supply Chain Excellence

Flawless Execution

Global Processes

Common IT Platform

Arrow Has Established a Clear Set of Core Global Strategic Priorities

1. Voice of the Customer

Arrow’s Strategic Priorities

2. Back to Basics

3. Operational Excellence

4. Talent Development

• Understand customer needs and experiences

• Transform findings into action

• Execute the fundamentals flawlessly (e.g., perfect order, responsiveness, ease of doing business)

• Be the industry’s service leader

• Have the industry’s most effective & cost efficient supply chain

• Attract, retain and develop the right talent

• Reward performance

Objectives

Analysis Design Development Deployment

Concept

Specification

Test Plan

Deployment Plan

Metrics

Execution Monitoring

Feedback

Significant Participation

Global Business Units

IT Supply Chain

Global Business Units Deployment

Supply Chain

Continuous Process Improvement

Supply Chain Supply Chain IT Deployment Business Supply Chain

Innovation Is Managed Through a Proven Continuous Process Improvement Model

Becoming the Distributor of Choice

Integrated Processes & Systems

Collaborative Forecasting & Inventory Optimization

Unique Global Supply Chain Models

2A1 2A10*

2A13**

ProductInformation

Forecast/Inventory

Quote/Price &

Availability

Order/Order Mgmt

AdvancedShip

Notice

Backlog Invoice /InvoiceStatus

Paymentw/ Bank Notice

Demand Creation

4A24A44A54D1

3A43A73A8

5D35D5

3A6 3B2

3C33C43C6

5C15C25C35C4

3A13A25D1

Done Done In Dev Done Done Done Done Done TBD

Arrow’s “Concept to Cash” RosettaNet Program

* Piloted, ** Under investigation

Real-Time Process Integration With Suppliers

•Real-Time standard

•Back-End integration

•Collaboration rules

•Controlled processes

Latency Reduction Mechanisms

Traditional EDI Model Order

Batch Processing

Error Rework

Sub lineRework

Post ship Rework

40% 2-4 hrs 60% in 24 hrs

2-4 days 2-4 days

• Schedule dates in 24 hrs at best• Manual process on split line items• Many acknowledgement failures• Iterations of reschedules• Lost window of selling visibility

Up to 2 weeks

Advanced RN Model

• Acknowledgements within minutes; rapid exception resolution

• Immediate visibility to all ship dates• No acknowledgement failures• Stabilized schedules, improved productivity

Order Real-time Rework

80% 2-4 min 20% in 24 hrs

Over 90% Reduction

Real-Time Process Example: Order Management

Agenda

• Summary and Q&A

Summary

• Industry dynamics have and will continue to change customer needs and Arrow’s supply chain role

• Arrow’s supply chain management approach starts with delighting customers . . .

• . . . Which is empowered by supply chain excellence and preferred supplier relationships

• Success is a journey

The Ultimate Goal of Arrow’s Journey is to Increase Shareholder Value

• Enhanced customer service

• Improved inventory utilization & productivity

• Best-in-class customer relationships

• Differentiated service capabilities

• Best-in-class strategic supplier partnerships

• Unique supply chain models

Supply Chain Impacts . Supply Chain Impacts . . . . .

& Shareholder & Shareholder Value Value

Increased Capital

Efficiency

Increased Profit

Increased Shareholder

All Financial All Financial Metrics . . . Metrics . . .

Appropriate Working Capital

Reduced Fixed

Capital

Increased Revenue

and Margin

AppropriateCost Model

Our Journey is Underway!

Arrow Stock PerformancePast 3 Years

2003 2004 2005

Thank You!

Transforming Supply Chain Bhawnesh Mathur

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