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  • Hello, My name is …. I’m very pleased to have this opportunity to share with you the roadmap of progress at ON Semi. It’s a great honor to have this opportunity to share our thoughts with such an outstanding group of high tech industry leaders in supply chain management. We hope that this presentation will stimulate some creative discussions during the rest of the conference, with both your peers and with i2. “ Famous Quote ?” Before I get started I’d first like to say “How about those Phoenix Suns?”
  • In the next 30 minutes I’ll cover this 4 sections during the presentation. Where ON started, Where ON Is today, and Where WE are going. I say we because the next period in supply chain evolution is much more about what WE do together than what we each have done individually. I have a lot of slides to cover in 30 minutes, so I’ll move very quickly on the first two sections and slow down in the second half.
  • Driving Product Innovation with these segments and customers. They are each leaders in their field for applications that drive our Power Management solutions. We will also use these companies as the primary drivers of customer centric supply chain programs
  • After the year 2000, we implemented a foundation of solutions from i2 bringing great value to ON semi. Optimized production plans and real time order scheduling were profound capabilities fundamentally improving our supply chain performance. This phase was primary about Tactical Planning Optimization. In the current phase, we started wrestling with issues related to variability and lack of visibility. We will spend a bit of time shortly discussing what ON Semiconductor is doing for Inventory Planning and Scenario Planning. Also of note in this phase has been the focus on Flexibility agreements from our customers. In Summary, this phase of our improvement has been focused on Flexibility Management, and Scenario Management. The third phase lays on the road ahead. This phase will be focused in optimizing the collective performance of ON in conjunction with our partners. At ON Semi, we are calling this phase Collaborative Risk Management (Yes, I just used the supply chain “C” word”)
  • Now I will take a few minutes to discuss strategies ON Semiconductor is using to address Flexibility models and Scenario Management
  • To address these issues, ON Semi has pursued two new significant projects in the past few years. The first, was Inventory Optimization. This is an i2 solution that was brought to market under a joint development program with ON Semi and Texas Instruments. The focus of this solution is maximum service at minimal safety stock. The second program planning to go live through out 2006, is the Scenario Planning Solution. This solution is also under joint development between i2 and ON Semiconductor. The focus of this solution is to rapidly analyze possible futures, to speed capacity decision making.
  • Shown here is the classic Planning Funnel, broken into 3 different stages – Business Palnnng, Tactical Planning, and Execution. The core solutions we implemented in Phase 1 provide an excellent foundation to execute each of these processes with speed and quality. However, the fundamental problem of variation and flexibility were not well addressed. We needed a way to connect together this internal business processes and at the same time, provide solutions to the flexibility and variability problem. In the Short horizon, Inventory is an affordable approach to solve this problem, and so this is where the Inventory Optimization solutions Bridges the Gap between Tactical Planning and Execution. As you move further into the view of the future, inventory is not an affordable solution, and so capacity planning is the lever we can use to compensate. Thus, we see the Scenario Planning solution as the Bridge between the S&OP process, and the tactical planning process, providing capacity alteratives within which to perform Tactical Planning.
  • We have had some significant business results again during this second phase, demonstrated by these 2005 metrics. Read the Metrics Recently ON Semiconductor submitted our application to the Computer World Awards for IT achievements. We are proud to announce that ON Semiconductor has been awarded Laureate Status from the 2006 Computer World awards for outstanding IT and Supply Chain achievements, based on these efforts over the past few years. This award could not have been achieved without our close partnership with i2, and we thank them for nominating us into this award.
  • The road ahead presents some big challenges. In this section I’ll discuss some of the plans at ON Semi, and present some thoughts about where all of us in this room might go together.
  • The Demand-driven supply network model has evolved through work with thought leading companies. The first two stages of evolution focuses on supply chain excellence, while the second phases focus on being demand-driven and building supply networks while collaborating and orchestrating with customers and partners. The companies that are furthest along talk to us about the need for organization, measurements (Key Performance Indicators) that evolve through the journey, for technology that aligns with the emerging strategic business imperative, and most importantly and hardest, the development of a new culture. It is one thing to be demand driven, but it is another to have a culture that is supply capable; product groups that work seamlessly with supply and demand in which the customer is truly central. This is where enabling technology can play an important role. So when talking about being demand-driven, really speaking about influencing and shaping demand.
  • Here we have listed many of the sources of risk that could be considered in a Scenario Planning process. All of these risks fall into 3 categories. Magnitude Uncertainty, Timing Uncertainty, Variability Uncertainty. The challenge is to quantify these in a way useful within supply chain tools, and then have tools that tell you the impact of these changes. In the end, we can’t have much impact on the risk from occurring, but we can be prepared in advance when it does happen. There is a quote about “Stuff Happens” We prefer the quote that says. “ Good Luck happens when opportunity meets preparation” By Scenario analysis in advance, we can plan for success with our customers by having preplanned for some of their business opportunities
  • Supply Scenarios 2H 06 Constrain/unconstrain – S&OP weekly Editing Yields and BOM - Network improvements Demand Scenarios 1H 07 – 09 Supply Scenarios can be managed within the 4 walls of our company, but Demand Scenarios our best managed jointly between the supplier, and our customers. Can you break your demands into high and low confidence? Will you be able to show this separation to your suppliers? Business Scenarios 2H 07 -09 Profit Optimized Capacity Planning Shared Scenario planning across mutliple enterprises
  • At ON Semi, we envision a future where Scenario Planning at OEM and Component level could enable the next major breakthrough supply chain synchronization Unpredictable demand, but known demand scenario’s OEM – Marketer ! Size of Box represents Richness of information Bullet Points
  • Reasons for Timing: Aggressive forecaster Timing because of customer who is always optimistic
  • At ON Semi, we envision a future where Scenario Planning at OEM and Component level could enable the next major breakthrough supply chain synchronization Unpredictable demand, but known demand scenario’s OEM – Marketer ! Size of Box represents Richness of information Bullet Points
  • Ralph Waldo Emerson “ Do not go where the path will lead, Go instead where there is no path and leave a trail” For all of us in this room, WE are the ones who will forge new paths in the coming years. At ON Semi, we look forward to working with our customers who want create this new path in High Tech Supply Chains.

Author Name • 11-Apr-02 Author Name • 11-Apr-02 Presentation Transcript

  • Demand Driven Supply Network TM : Turning Risk Management Into a Positive Message John Mallon Director Supply Chain Solutions ON Semiconductor
  • 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
  • Focus Segments and Customers It is ON Semiconductor’s stated goal to be the leading supplier of premier power solutions worldwide
  • ON Supply Chain Solutions 2000 2003 2007 2005 2009 PHASE 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 1 PHASE 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.
  • Agenda
    • About ON Semiconductor
    • Phase 1 2000 - 2003
    • Phase 2 2004 – 2006 Flexibility and Scenario Management
    • Phase 3 2007 - 2010
  • 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 OSCAR SM , The ON S upply C hain AR chitecture Inventory Optimizer Optimize inventory in Supply Chain Demand Planner Best available demand information Master Planner Semi-weekly supply-demand match Demand Fulfillment Accurate real-time order promising Corporate Planner Capacity alignment by business Scenario Planner Evaluate options for possible futures VMI Manager EDI Driven Replenishment
  • Synchronization and closing the loop Continuous management to manage variability Inventory Optimization Scenario Planning Inventory is the risk shock absorber between execution and tactical planning….. Capacity is the risk shock absorber between tactical and strategic planning Tactical Planning Execution Strategy  Business Planning  S&OP Capacity Inventory Product Demand Financial
  • Primary benefits Manage inventory & delinquent revenue
    • Measure inventory and days of supply
    • Days of outstanding delinquency
    • Maintain best-in class service
    Days of Delinquent Revenue 25% Reduction 14% Reduction DOS Internal Inventories 87 Days 85 Days 78 Days 77 Days 75 Days 1% Increase Direct OTD %
    • 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
  • The DDSN Capability Model Culture Technology Continuous Improvement Measurement Organization Business Process Orchestrating Collaborating Anticipating Reacting Level 4 Level 3 Level 2 Level 1 Supply Chain Excellence DDSN Excellence 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 Embedded or Early/Mutual Mutual Internal/Unilateral Firefighting Continuous Improvement Network Visibility Narrow Visibility Asynchronous Ad Hoc Information & Data Management Network Collaboration External Cooperation Internal Cooperation Silos People, Organization & Culture Concurrent Process Synchronized Process Cascading Process Independent Process & Controls Design-in Mitigation Shared Mitigation Unilateral Limitation Limited Management Risk & Contract Management Partner Aligned Internally Aligned Documented/Explicit Reactive Business and Supply Chain Objectives & Metrics Level 4 -External Integration Level 3 - Synchronized Level 2 - Explicit Level 1 - Implicit ePM
  • The Risk of Satisfying Opportunities at Your Customer
    • Technology Platforms
  • The Risk of Satisfying Opportunities at Your Customer Target Flex Buffer - Capacity Flex Buffer -Inventory 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 % Flexibility 5% 10% 15% 20% 25% 30% % Margin Impact 20% 15% 10% 5%
    • 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
  • Using Scenarios To Enable Collaborative Risk Management Intra-Prise Busines Scenarios Enter-Prise Phase4 Customer Scenario Forecast Demand Scenarios Customer High Confidence Forecast Consensus Forecast Supply Scenarios 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
  • Leading OEMs are: “Grabbing the Bull-Whip By The Horns” Some OEM’s have exited the “Demand Synchronization” responsibility 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 Retail Retail Retail Retail Retail Leadership OEM’s audit suppliers to assure they have capability to comply and not just signing agreements. Data Exchanges Disty OEM EMSI EMSI ODM 3PL ODM Design 3PL SEMI Disty OEM EMSI EMSI ODM 3PL ODM Design 3PL SEMI
  • Collaborative Scenario Planning: A Major Supply Chain Breakthrough to Manage Synchronization Todays B2B Single Number Forecast Poor Accuracy Updated Weekly Simple Contracts 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 Scenario Planning 10 % 50 % 90 % OEM (Original Equipment Marketer) Retail Point Of Sale Promotion Plans Marketing & Business Plans S & OP Planning Procurement
  • Consensus Plan Generation Probability Curve Revenue Likelihood Discrete Revenue Events
  • 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 Sales Planning Order Planning Allocated Capacity- Monthly Supplier Planning NPI, Capacity and Inventory Planning (Scenario’s) Internal Supply Chain Planning and Execution CPFR Model
  • 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.
  • In skating over thin ice, our safety is in our speed. —Ralph Waldo Emerson
  • Thank You