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Focus on Fundamentals INVENTORY SUPPLY

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Focus on Fundamentals INVENTORY SUPPLY

  1. 2. Focus on Fundamentals Symphony focuses on three supply chain fundamentals that drive key financial elements for each company INVENTORY SUPPLY COST ASSETS REVENUE PROFIT
  2. 3. Mission Statement <ul><li>Provide strategic supply chain expertise to high technology companies in order to meet the following financial and operational goals: </li></ul><ul><li>Enhanced revenue potential through demand </li></ul><ul><li>management and supply assurance and flexibility </li></ul><ul><li>2. Increased profitability through structured, </li></ul><ul><ul><li>consistent, and aggressive approach towards </li></ul></ul><ul><ul><li>total cost reduction and management (price, </li></ul></ul><ul><ul><li>cost of acquisition) </li></ul></ul><ul><li>Reduced inventory investment through optimized </li></ul><ul><li>inventory management programs </li></ul>
  3. 4. Outsourcing OEM Challenges <ul><li>Lack of robust link between outsourcing strategy and company financial goals </li></ul><ul><ul><li>Capability of outsourcing partners </li></ul></ul><ul><ul><li>Contract terms and conditions </li></ul></ul><ul><li>Off balance sheet financial risk in supply chain is unknown </li></ul><ul><ul><li>How forecasts are used to secure material </li></ul></ul><ul><ul><li>How much value is added at critical stages in manufacturing </li></ul></ul><ul><li>Resource limitations to address items above </li></ul><ul><ul><li>Operational priorities take away time from addressing important, non-urgent projects </li></ul></ul><ul><ul><li>Staffing limitations do not provide necessary bandwidth to address these critical issues </li></ul></ul>
  4. 5. Impact on OEM <ul><li>Liability surprises </li></ul><ul><ul><li>Strained relationship with outsourcing partner </li></ul></ul><ul><ul><li>Organizational repercussions due to cash impact </li></ul></ul><ul><ul><li>Ability to meet customer delivery commitments </li></ul></ul><ul><ul><li>Hasty selection of another outsourcing partner </li></ul></ul><ul><ul><li>Damage to reputation in industry </li></ul></ul><ul><li>Low confidence in financial projections </li></ul><ul><ul><li>Noticeable gap between projected vs. actual </li></ul></ul><ul><ul><li>Difficulty in scaling business for future growth or decline </li></ul></ul><ul><ul><li>Sporadic quarterly financial performance </li></ul></ul>
  5. 6. Supply - Revenue <ul><li>Common Problems </li></ul><ul><ul><li>Supply Shortages </li></ul></ul><ul><ul><li>Unexpected end-of-life notices </li></ul></ul><ul><ul><li>Long lead-times without flexibility </li></ul></ul><ul><ul><li>Capacity limitations </li></ul></ul><ul><li>Potential Solutions </li></ul><ul><ul><li>Supply agreements that provide upside flexibility with calculated inventory risk </li></ul></ul><ul><ul><li>Strategic stock at low-cost points to facilitate last-minute customization and short lead-times </li></ul></ul><ul><ul><li>Supplier management tools to improve performance (delivery, quality …) and information (part obsolescence, supply constraints) </li></ul></ul><ul><ul><li>Effective forecasting techniques to drive business </li></ul></ul><ul><ul><li>New tools to identify and address “last part” deficiencies </li></ul></ul>
  6. 7. Inventory - Assets <ul><li>Common Problems </li></ul><ul><ul><li>Order policies and system parameters drive unneeded inventory investment </li></ul></ul><ul><ul><li>Full exposure to purchase order quantities and prices based on lead-time </li></ul></ul><ul><ul><li>Little or no supplier flexibility on reschedules and cancellations </li></ul></ul><ul><ul><li>Long or inaccurate lead-times </li></ul></ul><ul><ul><li>Unclear inventory exposure beyond PO’s </li></ul></ul><ul><li>Potential Solutions </li></ul><ul><ul><li>Consistent and calculated use of forecast and ordering policy </li></ul></ul><ul><ul><li>Inventory ownership and exposure placed further upstream in supply chain (i.e. demand pull programs, WIP inventory) </li></ul></ul><ul><ul><li>New reporting tools and processes to predict and mitigate inventory problems </li></ul></ul><ul><ul><li>Lead-times reduced to minimum levels based on mfg. cycle times and delayed customization </li></ul></ul>
  7. 8. Cost - Profitability <ul><li>Common Problems </li></ul><ul><ul><li>Material cost reductions not in line with or ahead of market </li></ul></ul><ul><ul><li>Little or no guidance at design phase for use of recommended suppliers and technologies – missed leverage opportunities </li></ul></ul><ul><ul><li>“ Quote and Go” approach to negotiations with suppliers </li></ul></ul><ul><ul><li>Excessive focus only on price and not enough on cost of acquisition (total cost) </li></ul></ul><ul><ul><li>Cost drivers not clearly understood throughout supply chain </li></ul></ul><ul><li>Potential Solutions </li></ul><ul><ul><li>Long-term agreements that provide creative value throughout supply chain </li></ul></ul><ul><ul><li>Structured negotiation planning and timing with each partner </li></ul></ul><ul><ul><li>In-depth knowledge and proactive management of the strategic commodities that are critical to your product </li></ul></ul><ul><ul><li>Robust contract terms and conditions that allow for “pass through” cost reductions </li></ul></ul><ul><ul><li>Cost management programs that lead to reduction of total cost </li></ul></ul>
  8. 9. Symphony’s Value <ul><li>Development of an outsourcing strategy that is tied to key financial metrics </li></ul><ul><ul><li>Revenue </li></ul></ul><ul><ul><li>Inventory </li></ul></ul><ul><ul><li>Profitability </li></ul></ul><ul><li>Selection or development of outsourcing partner based on long-term needs </li></ul><ul><ul><li>Technology capabilities </li></ul></ul><ul><ul><li>Business acumen </li></ul></ul><ul><ul><li>Systems and processes </li></ul></ul><ul><ul><li>Management mind-share </li></ul></ul><ul><li>Contract development and negotiation </li></ul><ul><ul><li>Exposure definition </li></ul></ul><ul><ul><li>Pricing methodology </li></ul></ul><ul><ul><li>Service and support </li></ul></ul><ul><li>Supply chain risk assessment </li></ul><ul><ul><li>What-if scenarios </li></ul></ul><ul><ul><li>Contingency planning </li></ul></ul>
  9. 10. Example: Cable Modem Mfr. <ul><li>Hired by COO to drive down cost and reduce outsourcing inventory exposure </li></ul><ul><li>Selected outsourcing partner </li></ul><ul><li>Developed and negotiated contract </li></ul><ul><li>Transitioned business </li></ul><ul><li>Result: </li></ul><ul><li>Reduced inventory risk </li></ul><ul><ul><li>Plan for long lead-time components </li></ul></ul><ul><ul><li>Delayed customization through postponement </li></ul></ul><ul><li>Lower total cost </li></ul><ul><ul><li>Price </li></ul></ul><ul><ul><li>Warranty repairs </li></ul></ul><ul><li>Revenue upside protection </li></ul><ul><ul><li>Detailed plans to back-up the capability requested </li></ul></ul><ul><ul><li>More effective forecasting process </li></ul></ul>

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