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Atos Worldline Project I Rui Zhu Telerex


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Atos Worldline Project I Rui Zhu Telerex

  1. 1. 1 Telerex is the safest choice Atos Worldline Project Author:RuiZhu Businessaddress: TelerexNederland B.V Minervum 7139 4817ZN Breda
  2. 2. 1 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
  3. 3. 2 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
  4. 4. 3 TABLE OF CONTENTS 1. Introduction 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 5.Conclusions........................................................................................................29 6.Recommendations.............................................................................................31 Acknowledgment .................................................................................................33 List of references..................................................................................................34 Appendices...........................................................................................................35
  5. 5. 4 1. Introduction 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 in 2014. 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. 1.1Project background 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. 1 OEM:original equipment manufacturer 2 Thin Film transistor liquid crystal display
  6. 6. 5 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.
  7. 7. 6 1.2Problem definition 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. Purchase Objectives  Reduce product lead time from 12 weeks into 8 weeks  Increase production capacity from 6k/8k monthly into 10k/12k
  8. 8. 7 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.
  9. 9. 8 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)
  10. 10. 9 2.2. Purchasing portfolio management 2.2.1 Product differentiation  Relative cost 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.  Supplier risk 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.
  11. 11. 10 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.  Telerex' attractiveness 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 competition market.
  12. 12. 11 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 requirements. (8 Lake Group: Telerex is one of the company in 8 Lakes Group which owned by family De Coninck) 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
  13. 13. 12 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
  14. 14. 13 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.
  15. 15. 14 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)
  16. 16. 15 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%  Polarizer: 9%  Array glass substrate: 8%  Back-light inverter: 7%
  17. 17. 16 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% ii 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
  18. 18. 17 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 product application. In the term of midstream panel manufacturing, it also can be distinguished into three sub-divisions.  TFT circuit array engineering  Top Bottom Cell engineering  Module 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
  19. 19. 18 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.
  20. 20. 19 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 China.v 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.
  21. 21. 20 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 vi 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.
  22. 22. 21 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 Electronics. 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 9 Tainan is in south of Taiwan
  23. 23. 22 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 manufacturing.
  24. 24. 23 3.2 EU Economy and culture analysis Gradually and slowly growth in European Economy  Low oil price  Weak Euro  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 industry. 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
  25. 25. 24 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
  26. 26. 25 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
  27. 27. 26 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.
  28. 28. 27 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 10Kpcs. 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
  29. 29. 28 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 more machines. Cost per person per month: 5USD/per hour *8hours*20days=800USD Output per person per month: 20 output/hour*8hours*20days=3200pcs 9600+3200=12800pcs 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.
  30. 30. 29 5. Conclusion 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 solutions. 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
  31. 31. 30 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 parties.
  32. 32. 31 6. Recommendation: 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.
  33. 33. 32 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.
  34. 34. 33 Acknowledgements 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 knowledge. 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 months!
  35. 35. 34 List of reference i Steve Jurichichi,2006,PFD Material report, Retrieved from ii TFT LCD Panel Manufacturers Need to Cut Raw Materia , September 20, 2007, AM Eastern Daylight Time, Retrieved from Manufacturers-Cut-Raw-Material#.VTOo6ZMSlwYhttp:// iii Santa Clara, California, September 9, 2013,Retrieved from ction_forecast_to_overtake_ltps.asp 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 from vii SANTA CLARA, CALIF., October 9,2014,press release, Retrieved from _market_to_reach_7.3_billion_dollars_in_2018 viiiEuropean commission, European Economic Forecasting,2015,Retrieved from _en.pdf