Author Name • 11-Apr-02

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Author Name • 11-Apr-02

  1. 1. Demand Driven Supply Network TM : Turning Risk Management Into a Positive Message John Mallon Director Supply Chain Solutions ON Semiconductor
  2. 2. Agenda <ul><li>About ON Semiconductor </li></ul><ul><li>Phase 1 2000 - 2003 Tactical Planning Optimization </li></ul><ul><li>Phase 2 2004 – 2006 Flexibility and Scenario Management </li></ul><ul><li>Phase 3 2007 – 2010 Collaborative Risk Management </li></ul><ul><li>Summary </li></ul>
  3. 3. Focus Segments and Customers It is ON Semiconductor’s stated goal to be the leading supplier of premier power solutions worldwide
  4. 4. ON Supply Chain Solutions 2000 2003 2007 2005 2009 PHASE 3 <ul><li>Internal optimization </li></ul><ul><li>Real time order scheduling </li></ul><ul><li>Synchronized corporate and factory planning </li></ul><ul><li>Arms distance contracts </li></ul><ul><li>Inventory buffer management </li></ul><ul><li>Sell-Through planning </li></ul><ul><li>Two-tier optimization (lean projects) </li></ul><ul><li>Scenario management </li></ul><ul><li>Flexibility contracts </li></ul><ul><li>Shared demand scenarios and risk profiles (real demand collaboration) </li></ul><ul><li>Network optimized supply plans </li></ul><ul><li>Event driven management </li></ul><ul><li>Fulfillment contracts, shared risks/benefits </li></ul>PHASE 1 PHASE 2 <ul><li>Internal optimization </li></ul><ul><li>Real time order scheduling </li></ul><ul><li>Synchronized corporate and factory planning </li></ul><ul><li>Arms distance contracts </li></ul><ul><li>Inventory buffer management </li></ul><ul><li>Sell-Through planning </li></ul><ul><li>Two-tier optimization (lean projects) </li></ul><ul><li>Scenario management </li></ul><ul><li>Flexibility contracts </li></ul><ul><li>Shared demand scenarios and risk profiles (real demand collaboration) </li></ul><ul><li>Network optimized supply plans </li></ul><ul><li>Event driven management </li></ul><ul><li>Fulfillment contracts, shared risks/benefits </li></ul>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.
  5. 5. Agenda <ul><li>About ON Semiconductor </li></ul><ul><li>Phase 1 2000 - 2003 </li></ul><ul><li>Phase 2 2004 – 2006 Flexibility and Scenario Management </li></ul><ul><li>Phase 3 2007 - 2010 </li></ul>
  6. 6. PHASE 2 – Minimize Revenue Risk from Demand Obfuscation <ul><li>Investment in i2 Inventory Optimizer in 2004/05 </li></ul><ul><li>Investment in i2 Scenario Planner in 2006 </li></ul>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
  7. 7. 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
  8. 8. Primary benefits Manage inventory & delinquent revenue <ul><li>Measure inventory and days of supply </li></ul><ul><li>Days of outstanding delinquency </li></ul><ul><li>Maintain best-in class service </li></ul>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 %
  9. 9. <ul><li>About ON Semiconductor </li></ul><ul><li>Phase 1 2000 - 2003 </li></ul><ul><li>Phase 2 2004 - 2006 </li></ul><ul><li>Phase 3 2007 – 2010 Collaborative Risk Management </li></ul><ul><ul><li>The Risks and Costs Ahead </li></ul></ul><ul><ul><li>Scenario Planning Saves The (Supply Chain) World </li></ul></ul><ul><li>Summary </li></ul>Agenda
  10. 10. 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
  11. 11. The Risk of Satisfying Opportunities at Your Customer <ul><li>Technology Platforms </li></ul>
  12. 12. 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%
  13. 13. <ul><li>About ON Semiconductor </li></ul><ul><li>Phase 1 2000 - 2003 </li></ul><ul><li>Phase 2 2004 - 2006 </li></ul><ul><li>Phase 3 2007 – 2010 </li></ul><ul><ul><li>The Risks Ahead </li></ul></ul><ul><ul><li>Scenario Planning Saves The (Supply Chain) World </li></ul></ul><ul><li>Summary </li></ul>Agenda
  14. 14. 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
  15. 15. 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
  16. 16. 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
  17. 17. Consensus Plan Generation Probability Curve Revenue Likelihood Discrete Revenue Events
  18. 18. 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
  19. 19. Challenges to Collaborative Risk Management <ul><li>Trust </li></ul><ul><ul><li>Can we Agree on the Benefits of separating the whip from the “bull” ? </li></ul></ul><ul><ul><li>Can we get over the lack of trust in sharing business scenario data ? </li></ul></ul><ul><ul><li>What types of T’s and C’s will be set for different Demand Strata ? </li></ul></ul><ul><li>Definition of Processes </li></ul><ul><ul><li>Need supply chain communities to keep working it </li></ul></ul><ul><ul><li>Need standards bodies to drive approach </li></ul></ul><ul><li>Systems to Communicate </li></ul><ul><ul><li>How will the strata and risk levels be identified in the data sets ? </li></ul></ul><ul><ul><li>Need standards work around the multiple “demand scenarios” and “demand strata and confidence levels” </li></ul></ul><ul><li>Systems to Create the Visibility </li></ul><ul><ul><li>APS type solutions - pegging of demand types </li></ul></ul><ul><ul><li>Management of Demand Strata within corporations – visible to partners </li></ul></ul><ul><ul><li>Formal modeling of business scenarios, with risk sharing strategies to assure supplier readiness. </li></ul></ul>
  20. 20. In skating over thin ice, our safety is in our speed. —Ralph Waldo Emerson
  21. 21. Thank You

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