World Class Adaptive SCM

VP Sangwook Cho, A.T. Kearney

July 11, 2008

2

Agenda

SCM Cases

• Korea

• Global

What is Adaptive SCM?

Methodology of Adaptive SCM

3

SCM Cases - Korea

‘97 ‘99 ‘01 ‘03 ‘05 ‘07

•SCM

•GSCM

•

•GSCM

•FP

•GSCM

•APS Pilot

•APS

•SCM

• Template

• -

••

“”

“ SCM ”

“SCM ”

“ ”

•MP Pilot

Conventional SCM Integrated SCM SCM

AB

• Delivery

Supply Performance

• Top Rule•

A

•SCM

•, SCM

B

국내의 경우 10여년 전부터 SCM의 역사가 시작되었으나, 현재까지성공적인 성과 획득 및 지속적인 혁신을 하는 회사는 극소수임

SCM History

4

SCM Cases - Global

• SCM

–Visibility Demand / Supply Balancing SCM

•

• Platform Stage PLC

–Engine / ATO

–Gap

‘95 ‘99 ‘01 ‘03 ‘05 ‘07

•Global SingleERP

•Engine/ATO Concept Design

•Demand-SupplyBalancing

•CPFR

•Post Eng.

“Demand /Supply

”“Engine / ATO

”“Global

OperationVisibility ”

“SCM ”

LogisticsCrisis

‘97

•Engine/ATO •Realization

•Product Performance Tracking•Early Supplier Involvement Program•i-Hub

Global Leading SCM Company C사는 1995년 Logistics Crisis 이후 지속적인 SCM 고도화 활동을 통하여 SCM 경쟁력을 확보함

C SCM History

5

What is Adaptive SCM?

New Adaptive Supply Chain Thinking

Conventional IntegratedSupply Chain Concept

•Supply Chain(Simplicity)

•End-to-end Supply Chain

• Product Group Level

•SKU Level

•• Constraint

•Decouple (BTS1) / ATO)

• Supply Chain Point Zero

• IT Tool• IT Tool

• , /

Readiness Constraint

,

•Model Suffix Complexity

,

• VisibilityReliability

이러한 국내외에서의 A.T. Kearney의 경험에 비추어 고객의 요구 및해당 비즈니스 특성과 환경 변화에 맞는…

1) Build to Stock

Status

6

Performance measures

• 99% delivery accuracy to first commitment

• 90% delivery accuracy to customer request

• Order response in minutes

• Quality in ppm

• Ability to customise rapidly with high reliability

• Low % supply chain cost to sales

Adaptability measures

AgilityThe speed with

which the systemcan adapt to theoptimal cost and

service

ResponsiveSpeed that cansatisfy changingmarket demands

LeanMinimizingwaste in allactivities

Time Cost

Quality

IntelligenceMaximizing use of all information

• Product availability at point of sale

• Total supply chain inventory

• Lowest supply chain cost of the total supply chain

• Time for a permanent 20% uplift in volume

• Time to adjust costs to an X% volume decline

• Flexibility on the week –50% ?

• Time to introduce a new product in the TTC process

• Supply chain lead time

What is Adaptive SCM?

Adaptive SCM의 특징은…

7

What is Adaptive SCM?

Speed

Reliability

Flexibility

(Collaboration)

Feasible Single S&OP

Lean OperationCost

Supply Chain

Supply Chain

World Class Adaptive SCM

SCM

Order To Delivery Lead TimeLead Time

… Adaptive SCM으로의 새로운 Paradigm 변화가 필요함

Adaptive SCM World Class Adaptive SCM

Illustrative

8

Adaptive SCM 추진 방법론

SCM SCM SCM

SCM

Roadmap VOC

•• VOC •

SCM

/

/ Gap

/

War Room / Quick Win

• Day-To-Day • KPI Tracking

/KPI

Roadmap

Adaptive SCM 추진 방법론

9

Adaptive SCM 추진 방법론의 특징

• War Room Control–Daily-to-Day Quick Fix

• KPI –

• VOC • In-depth • KPI SCM Roadmap

SCM

• Rule /•

Adaptive SCM 추진 방법론 – 특징

••• Plan-Do-Check-Act Cycle

10

사업 전략 및 핵심 고객의 명확한 VOC 파악을 통해 개선 요구 역량정의

EOL Collaboration

Order Flexibility

Delivery

Product Quality

Price Protection

Price Competitiveness

Brand Impact

Exclusivity

Low importance (relative)

High importance (relative) • CPFR1) Meeting

• Communication

•

•

•Visibility

•( : 6 )

Visibility

•

•Launch Support

Adaptive SCM 추진 방법론 – 사업 전략 및 핵심 고객 VOC 조사

Illustrative

1) Collaborative Planning, Forecasting and Replenishment: Interviews, ATK European Mobile Operator Survey, 2006

Critical Success Factors* – Vendors Relationship

VOC

11

In-depth 벤치마킹을 통한 역량 평가 및 개선 기회 도출

Adaptive SCM 추진 방법론 – SCM 경쟁력 평가 및 역량 진단

SCM Gap

16A.T. Kearney X/mm.yyyy/00000

• The company’s R&D strategy is closely aligned with corporate strategy and strictly guides portfolio decisions.

• The company regularly revisits R&D strategy according to corporate strategy, however its linkage to portfolio decisions is not explicit.

• R&D strategy is partially aligned with corporate strategy and focuses on short-term or imminent issues.

• Ad-hoc tactical meetings instead of clearly-defined R&D strategy guide R&D project selection and prioritization.

Alignment With R&D Strategy

• The portfolio committee mainly consists of CXO-level executives, leverages cross-functional task force to look at portfolio recommendations from each SBU, and balances the interests against corporate strategy across different SBUs.

• The company has a structured set of selection criteria, but heavily towards strategic impact and resource constraints with insufficient financial evaluations.

• The company follows structured, transparent process for R&D project selection, however with a basic set of data and analysis.

Stage III – Established

• Each SBU has a formal cross-functional task force determining gross R&D investment and portfolio decisions, however without appreciation of the interests of other SBUs.

• The company has a minimum set of criteria for project selection and prioritization.

• The company has a minimum procedures to carry the R&D project selection, but no activity/ template in place to dictate comprehensive analysis and to establish transparency.

Stage II – Developing

• A centralized, widely-represented portfolio committee is fully empowered and accountable for portfolio decisions.

• The criteria for R&D project selection and prioritization creates optimal balances among strategic impact, financial consequence, technology aspiration, and resource constraints.

• The R&D project selection process is transparent and data-driven, and well balances the interest from both SBU and corporate

Stage IV – Best Practice

• The portfolio decisions at SBU level relies on a loosely-organized team.

Portfolio Committee

• The R&D project selection does not have explicit criteria and is mainly dependent on the subjective judgment of selection committee.

Project Selection Criteria

Project Selection Process • The company uses ad-hoc meetings instead of formal process for R&D project selection.

Stage I – Rudimentary

Stages of Excellence – Portfolio Management

Portfolio Management – Summary of Characteristics

Stage of Maturity

Key Dimension

Client Rolls Royce

Source: Client Management Workshops / Interviews; Industry expert interviews; A.T. Kearney “Stages of Excellence” analysis

5A.T. Kearney X/mm.yyyy/00000

Alignment With R&D Strategy

1 2 3 4

Portfolio Management – Portfolio decision is mainly made at SBU level, with little involvement and monitoring from the corporate

Project Selection Process

Project Selection Criteria

Portfolio Committee

Source: Client Management Workshops / Interviews; Industry expert interviews; A.T. Kearney “Stages of Excellence” analysis

R&D Capabilities Diagnostic

“Stages of Excellence” Evaluation Preliminary

• Portfolio decisions are not closely linked with R&D strategy; decisions are primarily at the discretion of individual management

• The Technology Center is responsible for drafting annual development plan, including new technology research, technology platform, and product planning. However, the Planning Unit at the Technology Center has not gained credibility from Product Divisions and they do not have the authority to influence the product planning at Product Divisions level.

• At CDMA Product Division, the Product Operating Committee is responsible for reviewing and endorsing annual product planning drafted by its own marketing unit. Monthly following meetings are target for execution.

• The Corporate Operating Committee decides on annual R&D budget for each Product Division based on their applications. Each Product Division decides on budget for each product line.

• Each Product Line decides on internal projects, while Product Division decides on projects that cross several product lines.

• Formal template exists for project applications, however is not strictly followed in company wide.

• Projects sponsored by the Technology Center sometimes needs approval from Corporate Operating Committee.

• There is no mechanism (both process and organization) at corporate level to review/monitor the performance of selected R&D projects

• The corporate level lacks of objective criteria to select R&D projects• At Product Divisions, project applications are reviewed based on R&D investment, ROI,

alignment with corporate and SBU development, required resources, etc.

• There is no clear role/responsibility at corporate level for portfolio decision• There is a formal portfolio committee at each Product Division

Key Rationale for Client Ratings

ClientRolls Royce

• R&D, , , , SCM

• SOE1)

• Best Practice SOE Gap

• Gap SCM

• Workshop SCM Gap

1) Stage of Excellence, A.T. Kearney Framework

12

SCM KSF KPI

Seasonality

Delivery

BP (KPI/ )

• Planning L/T

• Global

• Demand

•

•

•

’07

x

xx

xx%

xx%

xx%

xx%

xx%

BP(’07)

x

xx

xx%

xx%

x%

xxx%

xx%

’08

xx%

x

xx

xx%

xx%

xx%

xx%

’09

xx%

x

xx

xx%

xx%

x%

xx%

’10

xxx%

x

xx

xx%

xx%

x%

xx%

명확한 KPI 및 역량 혁신 목표 설정

Adaptive SCM 추진 방법론 – SCM 혁신과제 도출 및 Roadmap 설계

13

명확한 KPI 및 역량 혁신 목표 중심의 SCM 고도화 추진 Roadmap 정의

SCM ’07

’09

SCM

’08

CollaborationBreakthrough

PerformanceBreakthrough

Control Breakthrough

• Rule, , SCM

•

SCM

’10

•Reliability

• Daily SCM

• /On Time in Full

•Demand Shaping

• PLC , SCM

Time

BP

70%, Level 3

85%, Level 4

100%, Level 5

95%, Level 4.5

Adaptive SCM 추진 방법론 – SCM 혁신과제 도출 및 Roadmap 설계

SCM Road MapIllustrative

14

구조적 개선을 위한 혁신 과제 설계 및 현업 주도의 과제 추진

Adaptive SCM 추진 방법론 – 혁신과제 상세설계 및 추진

Key Executives

PMO

A 1

B 2

D 4

E

F

G

H 5

C 3

15

신속한 개선을 위한 War Room 운영 / Quick Win 과제 실행

Adaptive SCM 추진 방법론 – War Room 운영 / Quick Win 과제 실행

Day-to-Day

Follow-up KPI

War Room(Cross-functional

)

• Issue Root Cause

– Issue Issue

•– Cross-functional

Daily

• KPI /

–KPI

Quick Win

• “ ”

16

명확한 KPI 목표 설정과 집요한 모니터링 수행

Xxxxxx

38%75%

xxxxxxxxxx

xxxx

99%

xxxx

xxxxxx

xxxxxxxxxx

xxxx

xxxxxxxxxx

xx

xxxxxxxx

xxxxxxxxxx

xx

xxxxxxxxxx

xxxxxxxx

58*US**

UK/FS

Xxxx

xxxx

60N/A

xx

xx

xx

xx

xx

7/307/23

xx

xx

xx

xx

xx

’07 7

N/A

xx

xx

xx

N/A

xx

N/A

6 *

xx

xx

xx

xx

xx

8/6

xx-xxxxW/O Full Kit (%)

Xx102%

xxxxxxLead Time ( )

Xx110%

xx136%

xxxxxxxx(%)

Status

98%

91%

83%

85%

Status

103%

92%

80%

72%

Xx

Xx

Xx

Xx

10/2210/1510/8

xx

xx

xx

xx

9/249/179/10

xx

xx

xx

xx

xx

8/27

xx

xx

xx

8/20

xx

xx

xx

8/13 10/19/3

’07 10’07 9’07 8

xx

xx

xx

xx

KPI

(%)

(%)

(%)***CPFR Pilot

(%)Weekly Global

S&OP

KPI

Status: 100%~ 80%~100% ~80%

Adaptive SCM 추진 방법론 – War Room 운영 / Quick Win 과제 실행

KPI Dashboard / / TrackingIllustrative

17

전 조직 내재화를 통한 일하는 방식의 변화

Adaptive SCM 추진 방법론 – 프로세스 내재화

SCM Culture Shaper Dynamics Model (CSDM)

R & R Tool & System

R & R Tool & System

/

•• /

• , W/S•KPI

Good

Bad

Copyright 2008 by A.T. Kearney Korea LLCThis report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from A.T. Kearney Korea LLC. This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion. A.T. Kearney Korea LLC is an associated firm, operating independently under the A.T. Kearney name.

A.T. Kearney Korea LLC14Fl., KCCI Building45 Namdaemunro 4-ga, Jung-guSeoul, Korea 100-743

Phone : 02 6050 1100Fax : 02 6050 1065

www.ATKearney.comwww.ATKearney.co.kr

AMERICAS Atlanta l Boston l Chicago l Dallas l Detroit l Mexico CityNew York l Sao Paulo l Silicon Valley l Toronto l Washington D.C.

EUROPE Amsterdam l Berlin l Brussels l Copenhagen l Dusseldorf Frankfurt l Helsinki l Lisbon l London l Madrid l Milan l MoscowMunich l Oslo l Paris l Prague l Rome l Stockholm l StuttgartVienna l Warsaw l Zurich

ASIAPACIFIC

Bangkok l Beijing l Hong Kong l Jakarta l Kuala LumpurMelbourne l Mumbai l New Delhi l Seoul l ShanghaiSingapore l Sydney l Tokyo