Telerex is the safest choice
Atos Worldline Project
Management summary of main conclusions and recommendations
Nowadays the market of electronics product is growing fast with dynamic changes and fierce
competition. In order to make the business stay on top of the rivals, it is vital to keep alert
and adapt to the changes in the market for every serious player.
This report is to investigate the possibility to enhance the supply chain for the customer Atos
Worldline by finding out what the problem is, what the possible solutions are, and how to
implement it, throughout variable research methods such as desk research, questionnaires,
interviews, and business visit report.
The research has drawn attention to the fact that the main problem to affect to the
flexibility of the production line output is the product’s long lead time and production line
capacity. Further investigation reveals that the long product lead time is because of the
imbalance of industry structure to cause the long time for raw material sourcing, and the
complexity of the supply chain itself which requires good cooperation amongst many
industrial partners. The problem of production capacity is due to the bottleneck in the
factory’s manufacturing process.
The implementation plan is, one hand, to let the supplier keep stock for the component that
are difficult to source and to reduce the lead time from 12 weeks to 8 weeks for raw
materials that have the longest lead time to, on the other hand, transfer the task to the
supplier to increase their own production capacity by investing in the skilled workers,
machinery, and equipment to achieve the target output of 12,000 units. These two actions
are on the goal of minimizing financial consequence and lowering the inventory cost.
It comes up with the flexibility of production output that can be improved by increasing
production quantity output and shortening product lead time. The supply chain of this
project can run more efficiently and effectively.
It is recommended:
To improve the relationship with supplier by centralized purchasing
That the new conditions on the written contract need to be formulated
That there’s early participation for purchaser in project
TABLE OF CONTENTS
1.1 Project background information............................................................. 4
1.2 Problem definition...................................................................................6
2. Project internal analysis
2.1 Purchasing activities analysis..................................................................7
2.2 Purchasing portfolio management.........................................................9
2.3 Competitive advantage and Core competence of the organization......11
2.4 Stakeholder analysis ..............................................................................12
2.5 Financial analysis....................................................................................14
2.6 product analysis......................................................................................15
3. Project external analysis
3.1 TFT industry market analysis..................................................................19
3.2 EU economy and culture analysis...........................................................23
4. SWOT and action planning............................................................................... 24
List of references..................................................................................................34
Telerex Nederland B.V is a private holding company founded in 1970 and it located in Breda
in the Netherlands and Antwerp in Belgium. Telerex is a technical distributor of electronic
products for the OEM1 market in the Benelux. It has a central warehouse in Breda and
bounded warehouses in Hong Kong and Taiwan. Because of the advanced ICT infrastructure,
it is able to make worldwide logistics. It has 80 employees with Revenue 26.7 million EURO
My function in Telerex as International purchaser and responsible for Fast East and great
China, where are in main language of Mandarin, since I am a native Mandarin speaker. I have
been working in this function for 8 years. Telerex’ purchasers are mainly for downstream
procurement activities, such as the purchase order placing, lead time controlling, logistics,
and so on.
Atos Worldline is the industry leader in business and payment transactional services and
solution in Europe. Meanwhile, they also sell their own payment terminals. According to
Atos Worldline's application, Telerex provided the product solution and designed a
customized TFT-LCD 2.8 inches Display for their payment terminals. Telerex chose its own
supplier Powertip to produce this product, which is a Taiwan manufacturer for TFT-LCD2
product in midstream manufacturing process.
OEM:original equipment manufacturer
Thin Film transistor liquid crystal display
In the downstream manufacturing process of TFT-LCD product, Atos Worldline uses the
Toshiba Singapore for electronic assembling because of its good brand image.
Due to the geographical reason, it reduces the shipping cost and transportation time to
make direct shipment from Taiwan to Singapore. Therefore, Telerex made the decision to
make cross trading shipments. The supplier delivers the goods into Telerex forwarder’s
warehouse locally in Taiwan or Hong Kong. The forwarder makes sure all the necessary
procedures by using Telerex documents. Due to the Delivery term as FOB, Toshiba’s
forwarder will pick up the goods from the forwarder's warehouse.
My role in this project of Atos Worldline is a project coordinator. Not only is my task for
purchasing activities, but also a contact window for the World line's subcontractor Toshiba,
because of language and culture advantage. In term of this multi-functional task, it requires
the purchaser, on one hand, to control the progress of production and manage deliveries
from the supplier side, and on the other hand, to meet the customer's requests for
improving and postponing the deliveries. In general, it is a difficult task to balance all the
parties’ interests and to make smooth operation flow.
In this report, it only focuses on the supply chain between the supplier Powertip and Telerex.
This project began on Oct 2012. It takes about 8 months for customer to finally approve on
the testing samples. The first official purchase order was placed on 20th May 2013 with
quantity 60,000 units TFT-LCD displays. The project is ongoing.
The total expenditure on the project is 1,575,000 US Dollars
Telerex supports the project by using a single commodity that is 2.8 inches thin transistor
liquid display with customized design from Atos Worldline.
Atos Worldline is B2B and project based business. For example, in 2015, Worldline has a new
project in Middle East. Only for this single project, it requires a large demand which cause
need of 50K units (TFT-LCD display) suddenly and sharply. The yearly planning for 2015 was
only 60K and now it become 110K in total. On the other hand, it is difficult for the supplier to
meet the demanding changes.
The problem definition is what and how to do from purchase side to improve the output
flexibility of commodity for Atos Worldline project in term with minimizing with inventory
and financial risk.
Reduce product lead time from 12 weeks into 8 weeks
Increase production capacity from 6k/8k monthly into 10k/12k
2. Project Internal Analysis
2.1. Purchasing activities analysis
According to the Data from Telerex ERP system, it gives a clear overview for this project from
Purchase point of view. The project began in May 2013. It was difficult to build up the
logistic channels because it is direct shipment from Taiwan to Singapore. Telerex forwarder
DHL Global Forwarding makes sure to use Telerex document for the shipments and export
declaration in order to protect the commercial confidential information. In May 2014, the
purchase prices per unit have been dropped from 7.5 US Dollars into 6.75 US Dollars due to
learning curve on the mass production and the movement of production in mainland China.
Accordingly the production line capacity is largely increased. However, the quality issues
happened in the production in China. It has been found out the white spots and black dots
on display panel during the assembling in Toshiba. It is about 36,000 units finished products
shipped back to Powertip Taiwan for sorting out and problem identification. Throughout
investigation and 3D report analysis, there are no clear answer for the problem causes/roots
and solution to prevent the detective parts. From Powertip side, they said the problem is
because of the quality of the glass from their glass suppliers and the manufacturing process
is not mature in the plant China. In consider of field failure would be a big disaster for World
Line. Finally, the solution is to move the production line back to plant in Taiwan and
Powertip will guarantee 100% for the field failure. Since production line back to Taiwan,
there is no quality issues happened again. However the capacity of production line is not
enough to support the project.
In overview, in the total purchase expenditure of 1,575 million US Dollars, there are 5
purchase orders with 45 purchase lines and 58 times shipments. The yearly contract order is
for quantity 60,000 units. On the Purchase Order, there are 12 purchase lines with quantity
5,184 units and with specific delivery schedules. Due to The package per carton is 288 units,
every purchase line has quantity 5,184units which is equal to 18 cartons. Telerex made the
agreement with supplier and subcontractor for delivery batch of 5,184 units. However, for
the first 2 orders, 38 times shipments are against 24 purchase lines. For the third purchase
order, the number of the shipment is less than purchase lines with 5 against 6. It shows the
efficiency of the shipment is improved. From this point of view, you can see the first order
with less experience and the second order with 21 times shipment because of the quality
issues it caused the pressure on the supply and demand sides. As the consequence, there
are a lot of partial and urgent shipments arranged.
For the delivery performance of Powertip, in total of 47 delivered shipments, there are 10
times not on time, which is 21.3%. In term of delivery days, there are 188 days earlier
delivered than original requested delivery dates. In order to make a realist on the vendor
performance, this measurement is in respect of product lead time of 12 weeks. For project
base, it is around 78.17% on time delivery and 188 days earlier delivery in total.
In the average, Powertip has 4 days earlier delivery for each single purchase line.
(See in Appendix A)
2.2. Purchasing portfolio management
2.2.1 Product differentiation
1) The single product expenditure is ranked the Number 2 in 2014
2) Expenditure on this single commodity is 539,905 US Dollars
3) The total purchasing expenditure is 1,575,000 US Dollars
4) The company revenue is about 26, 7 million EURO in 2014
The commodity is high value in the total of purchasing expenditures.
Power tip is the list of Telerex top suppliers. Telerex has other TFT-LCD panel suppliers
such as Winstar, Zytronics, General touch, Multi-inno and more. Nowadays in Taiwan
and mainland China, there are numerous TFT-LCD Panel suppliers and the competition is
fierce. According to interview with Telerex TFT Product manager Wesley Wit, the
average margin for Taiwanese factories is only 5/6%.
In general, the supply risk is low. The specification of 2.8 inches TFT-LCD Panel is
standardized with slight modification.
Through the analysis of the product differentiation and supplier risk, this commodity can
be identified as leverage products.
2.2.2 Supplier preferencing analysis
This analysis is from the supplier's point of view to see how important Telerex is and how to
positioning Telerex in their map.
Relative value in 2014
Powertip sales revenue for TFT is 13,240,930 US Dollars
The total sales revenue for TFT to Telerex is 539,905 US Dollars
With 4.1% of total TFT revenue of Powertip, Telerex is a middle size customer for Power tip
with an average value.
According to the questionnaire from Powertip, Telerex is an attractiveness customer for
power tip with average score of 3.21 out of maximal score 5. (See the Appendix B)
With 4.1% of total TFT revenue from Powertip, Telerex is a medium sized customer.
Therefore, according to analysis of the supplier preference, it turns out that Telerex is
between the development customer and core customer for Powertip.
In a word, Telerex has a good position in the purchase portfolio with the leverage products
and the development customer. One hand, Telerex has a lot choices on the market for this
product. On the other hands, Telerex is a valuable customer for Powertip in a high
2.3 Competitive advantage and Core competence of the organization
Telerex has rich accumulated industrial experience for Benelux OEM market. The strong
sales and technique engineering team is being able to understand customers’ application
and propose to the most appropriate products and solutions together with pre and after
sales supports and services. On one side, Telerex is using 8 Lake Group integrated ERP3
system and CRM4 platform and market tools for distribution channels. On the other side, it
builds up long term stable partnership with class manufactures. Furthermore, due to its
advanced ICT5 infrastructure system, it makes worldwide logistics and warehousing. Telerex
is private holding company with strong financial holding since 1970 with AAA financial status.
Telerex has stable growth on its revenue and sustainable development of the organization
which has all compliance with European regulations in respect with environmental
(8 Lake Group: Telerex is one of the company in 8 Lakes Group which owned by family De
The organization is expanding with a health and strong finance status.
In 2007, new sister company Mechatronix found in Taiwan
In 2010,new building and warehouse in Minervum Breda
In 2010, merge Eltromat-> new name Eltrex motion
In 2012, acquisition CATS France, the largest MW6 distributor in France
In 2015-2016, new independent warehouse and logistic center Breda
In 2016, acquisition MDP Electronics France
3 ERP:Enterprise resource planning
4 CRM:customer relation management
5 ICT;information communication technology
6 MW:Meanwell is the second largest world producer for power supplier
2.4 Stakeholder analysis
In this stage, it elaborates the important stakeholders for this project and what are their
drivers and expectations for the purchasing process. (See in Appendix C)
After finding out that who are the stakeholders and their expectations, the next step is to
categorize them in the Stakeholder analysis map. There are two factors to measure the
importance of the stakeholders for the project, which are the power influence and the
interests from low to high arrangement in the matrix below.
Through the stage analysis, the key stakeholders are the account manage Jeff and sales
manager Koen. Therefore, purchaser needs more communications with the key
stakeholders and works more closely. Second important stakeholders are management
team in the Matrix map. Purchaser needs to meet their needs and expectation as close as
possible. Keep them informed the important outcomes instead of too frequent
reporting. For the stakeholders with low influence power and high interest, Purchase should
keep them informed well about the progress of the project and monitor them closely. The
stakeholders with low interest and low power, it requires limited monitoring or evaluation
but with a low priority.
Early stage involvement of the stakeholders is vital important to make a successful project,
because it give an overview and throughout understanding of the project and align
strategies to meet all parties interests as close as possible.
2.5 Financial analysis
From the financial point of views, there are five points to evaluate a project.
The payment term from the supplier as long as possible
The payment term for customer as short as possible
The credit limit from supplier as high as possible
Low Capital cost
Cost of opportunity
Supplier with good finance status and reputations
Long run relationship with the classical suppliers
This project is with sales revenue 1,782 million US Dollars with margin only 10.41% in
overall. The turnover is large, but with a low margin.
The payment term from Powertip to Telerex and from Telerex to Toshiba are both with 30
net days. So Telerex doesn’t bear financial consequence for the project. Telerex doesn’t
invest any machinery for this project. So it does not have any capital cost.
The average value of single purchase line is 27,155 US Dollars. The single product
expenditure is Number 2 in Telerex. The overall head cost is 2%. It can conclude the project
is with low cost of opportunities with high efficiency.
In the respect of the low margin, low financial risk, no capital cost, low opportunity cost, and
large turnover, this project is considered to with the high attractiveness and the high
efficiency for Telerex.
(See in Appendices A)
2.6 Product analysis
2.6.1 Cost structure of the product and product knowledge
The product for this project is Thin Film Transistor Liquid Crystal Display with size of the
screen 2.8 inches.
In order to have a deep scope of understanding of the project, it is necessary to analyze on
the product in the prospective of cost structure and manufacturing process.
In TFT panel industry, the material cost takes place of around 60%i of its total cost.
Back-light units: 33%
Color filter: 19%
Array glass substrate: 8%
Back-light inverter: 7%
From FPD7 Materials Report of Display Search, from the period 2004 to 2009, the material
portion on the TFT-LCD Panel is between the lowest rate of 53.3% and the highest rate of
63.2%. In the average, the material cost is 60%. This number is transparency in TFT-LCD
industry. Instead, the labor cost is 6%
which takes a small part of the total cost.
2.6.2 Manufacturing Process
In TFT-LCD manufacturing process, there are three levels such as:
upstream material components manufacturing
midstream panel manufacturing
downstream product application channel
7 FPD:Flat Panel Display
In the stage of material upstream, it is mainly about sourcing the raw materials such as
glass substrate, polarized film, color filter, back lights module, drive IC, and extra. The
second is the panel manufacturing process. The third one is to use the midstream
product into application. In our project, our supplier power-tip plays the role on the
midstream product manufacturing. Toshiba Singapore is responsible for downstream
In the term of midstream panel manufacturing, it also can be distinguished into three
TFT circuit array engineering
Top Bottom Cell engineering
The TFT circuit array engineering is about semiconductor fabrication.
The second stage cell engineering is the most important process, because it terminates the
yield rate of the TFT-LCD panel. The difficulty of this stage is the technology and technique of
integrating the different material components. So it requires the producer to accumulate
rich field and practical experience in cell engineering and manufacturing.
The third step is the module assembling. The fabrication method is not particularly difficult
but this process is not possible automatic. For example, the quality of the panel is evaluated
by human visual inspection. It requires the inspector to memorize a lot of instructions and
field working experience to define what kind problems they are. This is a hard work with a
lot of concentrations. In another word, firstly, the workers have to search defects and
secondly, they needs to define problems in order to analyze if the problem is from black
lights or the glass and extra. Nowadays, automated systems are more accurate and quicker
on visual search than Humans, but for the task of decision making and analyzing, human
inspectors is the only solution according to the technology so far.
For Powertip, they do the visual inspection by humans only. The visual check process costs 3
minutes in average for a skilled and experience worker. The cost of the skilled workers is 5
US Dollars per hour. This is a bottleneck for the production of Powertip. If one worker is
working 8 hours per day and 20 days per week. The output per person per month is
60/3*8*20=3200pcs. They only got three visual inspection equipment, the maximal output
capacity is 9600pcs (3200x3) monthly. This is only ideal and perfect condition if all the
processes go well and all the raw materials are in house. Moreover, Powertip only has one
heat seal machine. This is also limited the production capacity. For example, before Chinese
new year in Feb 2015, in order to catch up with the customer needs, Telerex has paid
expediting fees for the production about 2,700 US Dollars for extra working swifts of 540
hours working. 8
In general, the process and theory of TFT is not difficult, but how to manage manufacturing
cost and control the yield rate is the key element to evaluate the capability of a supplier.
Furthermore, the manufacturing process of TFT is complex. It gets involved of a group of
manufactures, foundries, and fabrications, and distributors working together from different
countries. Therefore, it will be presented for the TFT industry's layout and structure,
specialization, and technology trend in countries in the coming section.
8Source: The information from the visit report of the business development manager Koen.
3. Project External Analysis
3.1 TFT industry market analysis
In 2011, TFT-LCD market touched the ground and it rebound in 2012 and in a growth trend.
The product development is mainly focusing on Oxide TFT panel and LTPS TFT (Lower
temperature poly silicon). From 2011 to 2016, the total TFT capacity is increasing from 200
to 270 million square meters.iii
There are 4 major players in TFT-LCD industry worldwide.
The first one in TFT-LCD industry is Japan from 1992 to 1994. They invested 8 firms for 2-2.5
generation TFT-LCD production lines. Before 2000, Japan is the biggest producer in the TFT-
LCD industry with hold of 49.5% global market. In 2001, Korean firms took over the Japanese
in the first place internationally with 40.5% comparing with 33.5% of Japanese firms.iv
After 2004, Taiwanese firms stay stably a strong position in the second place after the
Korean in the world. In 2015, the largest production capacity is predicted to be in Mainland
South Korea is leading in TFT-LCD industry in the term of the advanced technology, mature
manufacturing experience, good industry structure, and the well-known Brands such as
Samsung and LG Philips. Samsung is highly self-independent TFT Producer which can achieve
in house production and self-supporting for its upstream components and technology. For
example, two of the Top 5 largest IC producers, which are Samsung Semiconductor and
Lusem, are mainly supporting for Samsung and LG.
However, according to the latest technology market tendency, Samsung has invested largely
on OLED (AMLED) product. It turns out that it is not very successful due to the high cost and
the yield rate.
Japan withdrew the large production and emphasized on technology R&D. For example, the
new product is called Low temperature Poly Silicon LTPS TFT-LCD. Meanwhile Japan is taking
control of components and manufacturing equipment. Even though it is a conservative
approach, it avoids the price war during the fierce competition. Meanwhile, it dedicates to
work on their production technology royalty earnings.
China is the new player in this market with the competitive advantage of low labor cost,
large financial subsidiary from Chinese government, and huge domestic demand. The type of
Chinese TFT firms are similar to the Korean firms with corporate group management and
vertical integrated supplier chain and manufacturing process. They are big firms with
abundant investment. For example, BOE Technology Group Co Ltd in located in Heifei city
China and found in 1993, the first quarter of 2015 is with net project 1000 million RMB
which is equal to 125 million Euro with 162.2 Billion
RMB market Capital. TFT industry in
China has been booming rapidly and the output of TFT panel is anticipated to be the largest
in the world in 2015.
For this project, Powertip is a Taiwan TFT firm. Therefore, let us take a close look at TFT
industry in Taiwan.
The structure of TFT industry is vertically disintegrated. As it elaborated above, there are
three stages such as upstream raw material, midstream manufacturing and downstream
application product. It gets involved a large number of small and middle size companies in
this manufacturing process and supply chain in each stage because of product
specialization. The companies spreading in supply chain map are not in good balance. There
are too many firms in the area with low technology involvement, and in contrast, too little
firms in the area with high technology involvement. It also causes long lead time for those
components with the small number of suppliers.
For example, in glass array substrate process, there are only 5 firms. They are two Japanese
firms Aashi Glass Fine Technology and Taiwan Nippon Sheet Glass. One American firm is
called Corning. The other two Taiwan companies are China Optoelectronics and Picvue
Another key component is IC which is needed in the module engineering process. Taiwan
firms already have mature experience on IC manufacturing industry. For example, The
Taiwan Company Novatek is the large-area display driver IC market with 28%vii market share,
and second place in the small and medium size in first quarter of 2014. However, for control
IC, there are always in lack in the market. So Taiwan companies have to sourcing globally.
In TFT industry, an absolute competitive advantage is the good combination of speed to
market, cost, price, quality, and flexibility. Taiwan TFT producers are mainly located in
the science-based industrial park in Tainan9. There are numerous suppliers for upstream and
downstream manufacturing. It provides a big platform to make customized product, service
Tainan is in south of Taiwan
and after sales support. The introduction of the new product in the market is below average.
The product quality, manufacturing cost control, and sales price are in average in the
standard of the market.
In this project, a Taiwan supplier is a suitable choice. For industrial usage, the requirement of
new technology is low. For example, it is not comparable for the resolution and functionality
of a navigation in the car and IPhone 6. However, the flexibility of design is rather important
for industrial TFT usage. So the main focus is on the price, product quality, and flexibility of
the product. In this project, the current purchase price is 6.5USD which is considerable low
in the market. For the RMA in last 3 months, they are only 152pcs defective units with the
total quantity 24000pcs. So the field success rate is 99.37%.
However, the longest lead time component drive IC is 75 days. Powertip is sourcing this part
from a Taiwanese company called I Love innovation TEK with the part number ILI9341.
According to Powertip, it costs them 6/8 weeks only for upstream raw material sourcing and
another 4/6 weeks for them to manufacture the raw material into finished products. That is
how to come out with lead time 12 weeks for TFT product. From this point of view, it shows
the likelihood to improve on the product lead time from material sourcing and
3.2 EU Economy and culture analysis
Gradually and slowly growth in European Economy
Low oil price
Low interest rates
Low inflation rates
Good economy growth in USA
China's economy growth slowing down
Low oil price is an important factor to boost European economy and worldwide.
The weak Euro creates less import and more export. Therefore, it helps the domestic
It gives more job opportunities in the market and less unemployment rates and higher wage.
GDP10 of EU has been increasing very slowly but gradually from 2009 to 2015 and expected
in growth trend.
HICP11 inflation is low with 0.6 and 0.2 in 2014 and 2015.viii
10 GDP : Gross Domestic Product
11 HICP : Harmonised Index of Consumer Prices
4. SWOT Analysis and action plan
Collecting all the positive and negative factors from Project internal and external analyses, it
comes out the SWOT Matrix. (See Appendix D)
How to use the strengths to maximize the opportunity, opportunity to minimize the
weakness, strength to prevent the threats, and to avoid when weakness meet threats. This is
the philosophy to convert the SWOT to actions. It can generates 4 actions such as, strengths
and opportunities action, strengths and threats action, weakness and threats action, and the
weakness and threats action.(See Appendix E)
Strengths and opportunities action:
Work closely with the supplier to maintain and enlarge current project
New product and application in the market
Strengths and threats action:
Early preparation to avoid long lead time problem
Improve communication with stakeholders
Improve the factory production capacity
Opportunities and weakness action:
Maintain the current purchase price
Weakness and threats action:
Less frequent shipments to save the freight cost
Reduce personnel administration cost
The action plan to do is reduce the long lead time, accurate forecasting, and improve
capacity, which are vital important factors to fill in the gap between two variable parameters
forecasting and less flexible production. The forecasting is for sales to stay alert with the
progress of the project of Atos Worldline.
For improving the Flexibility of TFT product, it is very difficult due to all the analysis in the
article about the industry structure and complexity of manufacturing. It looks the mission
impossible. However, overcoming challenges is what the winner do.
When we place order to Powertip the standard lead time is 12 weeks for TFT production.
The upstream sourcing for raw material costs 6 /8 weeks. Thus Powertip could prepare the
difficult and long lead time components in advance about 10Kpcs. Firstly, the product is
nearly close to the standardized product with only slight modification according to its
specification. Therefore, it is with little risk to prepare the raw material because the supplier
can use the raw material for other production line and other customers, even there is no
future order from us. Secondly, Semiconductor component has longer life cycle than finished
product. Thirdly, the raw material is with less value than the finished product. Overall, it is a
good idea to keep the difficult and long lead time parts in stock. Furthermore, it saves the
production cost such as electricity and manpower. Overall, it is with less inventory and
financial risk to keep the raw materials than keep stock for finished products.
For example, if the longest Lead time of driver IC is 11 weeks, Powertip must have already
kept stock for this parts because of the total lead time 12 weeks for the finished product.
Thus it is possible to let them keep more stock. Therefore, there is the possibility to improve
the lead time, only if the supplier is willing to help and share all the information with you,
which depends on the cooperation level between two organizations.
4.1 Action one. Shorten product lead time from 12 weeks into 8 weeks
What to do:
The upstream sourcing for raw material is 6 /8 weeks. The Driver IC is for 75days. Thus
Powertip could prepare the difficult and long lead time components in advanced about
Who to do: Rui Zhu with organization support and committed
How to do:
1. Negotiation with Powertip to keep more stock for long lead time and difficult parts.
2. If not, ask the customer to pay the cost of raw material in advance to improve the
product lead time.
3. If not, review with Telerex management team to pay the raw material parts with a
guarantee from customer in any condition customer must pay the amount which Telerex
paid for the raw material cost.
Time line: one month
The maximal financial consequence with no financial risk for 10K raw material is
10,000*6.75USD*60%=40,500USD.The minimal savings is 40% of 27,000USD
Action two: Improve the monthly output from 6/8K into 12K
How to do:
Production capacity can be improved by planning extra working swifts, more workers, and
Cost per person per month: 5USD/per hour *8hours*20days=800USD
Output per person per month: 20 output/hour*8hours*20days=3200pcs
In case of sudden increase on demand, the customer could pay for 800USD extra person cost
for output 3200pcs.
What to do:
The action is for factory to increase their own capacity to adapt the big demand.
1. Increase one heat seal machine.
2. Recruit one skilled and experience visual inspector
Time line: This one is under process and it can be done in the end of June 2015.
Who to do: Rui Zhu
What to do: Weekly check on Friday for the progress
Annual financial cost for the factory: 800USDx12monthes=9600USD
Financial saving and equal value to Telerex is 9600USD per year.
Action three: Stakeholders communication and better forecasting
Who to do: Jef and Danny field sales and inside sales and Rui Zhu Purchaser
Time schedule: Monday in every two weeks
What to do: meeting for the project progress and following up forecasting
How to do: face to face meeting, telephone, emails and so on.
Every good journey starts from the first step and in every story people hope to have a happy
ending. This report is aiming to research and analysis for Telerex’ customer Atos project to
improve the process in the supply chain by its rich industrial distribution experiences and
As stated above, the project runs with a large turnover (1.71 million USD), low margin
(10.41%), good delivery performance and low financial risk. The product lead time is long,
due to the complex manufacturing process and vertically disintegrated industry structure in
Taiwan. Firstly, it causes long time for upstream material souring. Secondly, Taiwan has to
outsource the components with high technology involved from Korea and Japan because
they are mainly focusing on R&D. Thirdly, the supply chain requires smooth operation flow
from a lot of cooperation from supplier in different stages in the channel. Hence, the
product is a low margin commodity with 60% raw material cost, with labor cost and margin
for the Taiwanese supplier only occupies a small proportion. In this project, Telerex has a
good position with their supplier Powertip because Telerex is a development customer with
a leverage product. However, high growth of project itself in 2015 puts huge pressure on the
whole supply chain from the beginning (raw material suppliers) to the end (assembling
companies). Moreover, the bottleneck of the production line in the factory results in some
challenges as well. The TFT market is growing globally and Europe’s economy is recovered
from the crisis of 2009. On the other side, the highly increasing costs from suppliers in Far
East countries and weak Euro brings difficulty to import business into Europe.
Throughout all research and analysis, in order to improve the flexibility of the product
output, on one side, the supplier needs to keep stock for the long lead time raw material and
difficult to source parts on the financial consequence of our customer. On the other side,
supplier should recruit one high skilled visual inspector and more equipment to enlarge their
production line capacity. Based on these facts, the product lead time can be improved from
12 to 8 weeks and production capacity will be enlarged into from 6,000/8,000 units to
12,800 units in three months. This can indirectly generate an annual saving of 9,600US
dollars for Telerex. The ideal approach to improve the output production flexibility of supply
chain is to bear no risk on inventory and financial level. The milestone we will have to
achieve is to cut the costs out of the supply chain, instead of moving the costs into any other
6.1 Centralized purchasing from one supplier
Telerex should consider Powertip as a very important business partner. Two companies
should have more cooperation on a strategic level. Telerex could centralize purchasing the
product from Powertip instead of narrowly focusing on one single order's margin. Telerex
could have even better purchase prices by centralizing purchase. Even more, Telerex could
become the only distributor for Powertip in the Benelux and beyond. On the other side,
Powertip could provide more new product knowledge training and technical support for new
markets and new applications even in the same market.
6.2 New conditions on new contract
Some additional conditions on the contract for the customer must be clear rules to obey.
For urgent delivery, if the customer needs product earlier than the confirmed lead time, they
have to pay the expediting cost (even for the year contract order).
For quantity 3200pcs, they have to pay 800 US dollars extra. The maximum quantity is
19600pcs per month.
The customer only can postpone the deliveries with more than 3 months, because within 3
months the production is in progress and all the materials are bought, and working shifts are
planned. The customer must buy the finished products within the next 3 months or take the
financial consequence. They are all to be mentioned clearly on the formal contract.
These conditions and rules can be applied to similar project based business as well.
6.3 Earlier participation and more involvement for purchaser
The early involvement of the purchase department is more important than when the
problem occurs. To solve an urgent problem, it takes a lot more extra money and working
hours, compared to early problem identification & problem avoidance.
It suggests to get a purchaser involved in stakeholder meetings in the beginning of project in
order to have better understanding of the scope, the objectives of the project and the
knowledge related to it. On the other hand, a purchaser could bring in the ideas and
suggestions from a supply chain point of view for a more realistic and measurable approach
to achieve the goals. Overall, it is suggested that a purchaser could understand and integrate
all the stakeholders’ expectation and interests and implement these into all the specific
actions for overall benefits of the entire origination instead of a narrow approach.
I would like express my thanks from heart to the person who are on the list to provide me
help and support from their business schedule.
Ritchy Olij, operation manager Telerex, who is participant this project report from all the
beginning to the end.
Koen van group, sales manager and business development manager Telerex, who is provide
the product and market knowledge.
Yannic De Coninck, director and owner of 8 Lake Group, who will be present as exterminator
for project presentation.
Wesley Witte, TFT display product manager Telerex, who is product me the product
Ramses van den Berg, group finance controller 8 Lake group, who is provide the finances
data and project evaluation from finance point of views
Liuqian Zhang, Master of Finance University of California San Diego, report checks
Sander Mertens, Business intelligence Telerex, who support the technique for Matrix and
graphs, and report checks
Sean Sidney trainer for DPE from Purspective
Gerida van Wijk, Support Purspective
Jessie Liang, sales from Powertip, support material from Powertip
Specially thanks for my wife Yu Ding and my Son Tian you Zhu’s supports for the last 6
List of reference
i Steve Jurichichi,2006,PFD Material report, Retrieved
ii TFT LCD Panel Manufacturers Need to Cut Raw Materia
, September 20, 2007, AM Eastern Daylight Time, Retrieved from
iii Santa Clara, California, September 9, 2013,Retrieved from
iv ITRI IEK ITIS Project:2002 Flat screen display annual report(In Chinese)
v The prediction for TFT production capacity, 2015, retrieved fromhttp://www.cordial-
vi Boe Technology Group issues Q1 2015 net profit outlook, Thursday, 9 Apr 2015, Retrieved
vii SANTA CLARA, CALIF., October 9,2014,press release, Retrieved from
viiiEuropean commission, European Economic Forecasting,2015,Retrieved