Transforming Supply Chain Bhawnesh Mathur

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  • Transforming Supply Chain Bhawnesh Mathur

    1. 1. Transforming Supply Chain Bhawnesh Mathur Arrow Electronics, Inc.
    2. 2. Agenda <ul><li>Introduction to Arrow Electronics, Inc. </li></ul><ul><li>Industry Dynamics and Their Impact on Customer Needs </li></ul><ul><li>Transforming Arrow’s Supply Chain Through an End-to-End Approach </li></ul><ul><li>Summary and Q&A </li></ul>
    3. 3. Introduction to Arrow Electronics, Inc. <ul><li>Distributor of Electronic Components and Computer Products </li></ul><ul><ul><li>Founded in 1935 </li></ul></ul><ul><ul><li>Headquartered in Melville, New York </li></ul></ul><ul><li>Global Player in Electronics Supply Chain </li></ul><ul><ul><li>53 Countries </li></ul></ul><ul><ul><li>600 Suppliers </li></ul></ul><ul><ul><li>150,000 Customers </li></ul></ul><ul><ul><li>Annual Sales of $11 Billion </li></ul></ul>Supplier OEM ODM Contract Manufacturer
    4. 4. Arrow’s Vision Statement
    5. 5. Agenda <ul><li>Introduction to Arrow Electronics, Inc. </li></ul><ul><li>Industry Dynamics and Their Impact on Customer Needs </li></ul><ul><li>Transforming Arrow’s Supply Chain Through an End-to-End Approach </li></ul><ul><li>Summary and Q&A </li></ul>
    6. 6. Industry Dynamics Have Greatly Complicated the Electronics Supply Chain Supply Chain Complexity Multi-Site Purchasing & Manufacturing Increasing Regional & Global Competition Growth in Differentiated Components Numerous e-Business Options Continuing Consolidation Trends Increasing Product Variety Environmental Compliance Requirements Shrinking Product Lifecycles
    7. 7. This Complexity Has Caused Customer Needs to Evolve from Few and Simple … Quote Parts Powering the supply chain Engineering Purchasing Manufacturing Tech. Discovery Design Activity Prototype Develop. Complex Supply Chain Negot. Supply Chain Order Mgmt Traditional Parts for Dollars Ordering Spot Buying Excess Buying & Selling Inbound Logistics Mfg End of Life Customer Functions & Needs A R R O W
    8. 8. … To Many and Complex ! Engineering Purchasing Manufacturing Tech. Discovery Design Activity Prototype Develop. Complex Supply Chain Negot. Supply Chain Order Mgmt Traditional Parts for Dollars Ordering Spot Buying Excess Buying & Selling Inbound Logistics Mfg End of Life Customer Functions & Needs A R R O W Engineering Parametric search Environmental data Risk assessment Part change notification VMI / SMI 3PL Services Programming Assembly Kitting & turnkey Collaborative forecasting Inventory bonding Supply chain visibility SC Mgmt Outsourcing e-Business
    9. 9. To Meet Customer Needs, Arrow Has Transformed Itself Into a Supply Chain Solutions Provider Arrow Electronics, Inc. Global Supply Chain Service Related Revenue '80 3% 17% '90 38% '95 54% '00 64% '03 69% '04 71% '05
    10. 10. Agenda <ul><li>Introduction to Arrow Electronics, Inc. </li></ul><ul><li>Industry Dynamics and Their Impact on Customer Needs </li></ul><ul><li>Transforming Arrow’s Supply Chain Through an End-to-End Approach </li></ul><ul><li>Summary and Q&A </li></ul>
    11. 11. Arrow’s Chain Management Approach Starts with Delighting Customers . . . Plan Plan Plan Suppliers Customers Delighted Customer Suppliers’Distributor of Choice Connected With Supply Chain Excellence Connected With Goals: . . . Which is Empowered By Supply Chain Excellence and Preferred Supplier Relationships Source Make Deliver Source Make Deliver Source Make Deliver
    12. 12. Delighting the Customer Customer Segmentation Critical Tools & Services Differentiated Tools & Services
    13. 13. Arrow Uses a Customer Segmentation Framework to Understand Customer Characteristics . . . SUPPLIER CONCENTRATION High Low Low High Parts for Dollars Standard Solutions Tailored Solutions SUPPLY CHAIN SOPHISTICATION Price of Admission <ul><li>Low: </li></ul><ul><li>Little appreciation for SC </li></ul><ul><li>Do not invest in SC </li></ul><ul><li>High: </li></ul><ul><li>SC critical to success </li></ul><ul><li>Invest in SC </li></ul><ul><ul><li>High: </li></ul></ul><ul><ul><li>Core supplier base </li></ul></ul><ul><ul><li>Value partnerships </li></ul></ul><ul><ul><li>Low: </li></ul></ul><ul><ul><li>Many suppliers </li></ul></ul><ul><ul><li>Do not value partnerships </li></ul></ul>
    14. 14. . . . And to Define Specific Service Strategies SC SOPHISTICATION SUPPLIER CONCENTRATION Parts for Dollars Standard Solutions High Low Low High Price of Admission Tailored Solutions Simple Low-Cost Complex Sophisticated Services/Tools Sales/Support Model Leverage Services Minimize Services Service Approach
    15. 15. Arrow Has Developed a Segment-Aligned, Differentiated Tool & Service Portfolio Standard Solutions Price of Admission Tailored Solutions <ul><li>VMI / SMI </li></ul><ul><li>In-plant store </li></ul><ul><li>Staffed terminal </li></ul><ul><li>New product introduction </li></ul><ul><li>Supply chain outsourcing </li></ul><ul><li>Integrated systems </li></ul><ul><li>Total cost analysis </li></ul><ul><li>Collaborative forecasting </li></ul><ul><li>Bonded inventory </li></ul><ul><li>Consignment </li></ul><ul><li>Auto-replenishment </li></ul><ul><li>Kitting & turnkey </li></ul><ul><li>On-line decision support </li></ul><ul><li>Business Needs Analysis </li></ul><ul><li>VMI / SMI </li></ul><ul><li>Electronic communications </li></ul><ul><li>On-line part search </li></ul><ul><li>On-line buying </li></ul>Examples Parts for Dollars
    16. 16. Case Study: Tailored Solutions Customer Background <ul><li>Provider of audio / visual control and automation systems </li></ul><ul><li>Annual sales of $90 million </li></ul><ul><li>Overhauling its supply chain </li></ul>Customer Objectives <ul><li>Reduce and standardize global raw material costs </li></ul><ul><li>Enhance external design support </li></ul><ul><li>Reduce design-to-manufacturing cycle time </li></ul><ul><li>Improve continuity and flexibility of supply </li></ul><ul><li>Limit supply chain liability and risk </li></ul>Customer Strategy <ul><li>Utilize Arrow to manage all component sourcing globally </li></ul><ul><li>Integrate Arrow with internal engineering, procurement, planning and EMS management processes </li></ul><ul><li>Consolidate to a single EMS provider with multiple locations; allow a profit on labor only </li></ul><ul><li>Direct the EMS provider to procure components exclusively from Arrow </li></ul><ul><li>Institute a centralized VMI hub </li></ul><ul><li>Manage product life cycle throughout the supply chain </li></ul>
    17. 17. Case Study: Tailored Solutions Freight Forwarder Freight Forwarder Arrow Inc. Arrow Project Manager/On Site Team EMS Site 1 Thailand EMS Site 4 USA Proto CM USA Other Distributor 2 Distributor 1 Local NF Sources Arrow FAEs NF Eng Support Design Eng EMS Site 2 Malaysia EMS Site 3 Juarez Freight Forwarder Customer Components Forecasts/POs Gatekeeper Forecasts/POs POs (Assy) Invoice/Payment Invoice/Payment POs (Assy)
    18. 18. Case Study: Tailored Solutions <ul><li>Supply Chain Services </li></ul><ul><li>Single global logistics provider </li></ul><ul><ul><li>Franchised & non-franchised </li></ul></ul><ul><ul><li>NPI & production </li></ul></ul><ul><li>Design and materials management support </li></ul><ul><ul><li>FAE support </li></ul></ul><ul><ul><li>Inside sales & material planners onsite </li></ul></ul><ul><ul><li>VMI at EMS sites </li></ul></ul><ul><li>Information services </li></ul><ul><ul><li>Arrow Collaborator </li></ul></ul><ul><ul><li>Arrow Risk and Alert </li></ul></ul><ul><ul><li>Shared Pro-Series </li></ul></ul><ul><li>Customer Benefits </li></ul><ul><li>NPI process </li></ul><ul><ul><li>Design cycle reduced from 12 to 6 weeks </li></ul></ul><ul><li>Supply chain costs </li></ul><ul><ul><li>Customer raw turns virtual; moving to 10 at EMS network </li></ul></ul><ul><ul><li>Planning and purchasing resources reduced </li></ul></ul><ul><li>Supply chain performance </li></ul><ul><ul><li>Liability reduced 60% </li></ul></ul><ul><ul><li>Finished goods availability dramatically increased </li></ul></ul><ul><li>Total First Year Savings $3+ Million </li></ul>
    19. 19. Differentiated Tool Example: Arrow Collaborator
    20. 20. Differentiated Tool Example: Arrow Collaborator
    21. 21. Differentiated Tool Example: Arrow Risk Manager Find Similar Part Parameters Customer Notes Data Sheets Cross References PCN Notices
    22. 22. Achieving Supply Chain Excellence Flawless Execution Global Processes Common IT Platform
    23. 23. Arrow Has Established a Clear Set of Core Global Strategic Priorities <ul><li>Voice of the Customer </li></ul>Arrow’s Strategic Priorities <ul><li>Back to Basics </li></ul><ul><li>Operational Excellence </li></ul><ul><li>Talent Development </li></ul><ul><li>Understand customer needs and experiences </li></ul><ul><li>Transform findings into action </li></ul><ul><li>Execute the fundamentals flawlessly (e.g., perfect order, responsiveness, ease of doing business) </li></ul><ul><li>Be the industry’s service leader </li></ul><ul><li>Have the industry’s most effective & cost efficient supply chain </li></ul><ul><li>Attract, retain and develop the right talent </li></ul><ul><li>Reward performance </li></ul>Objectives
    24. 24. Innovation Is Managed Through a Proven Continuous Process Improvement Model Analysis Design Development Deployment Ideas Concept Specification Test Plan Deployment Plan Metrics Execution Monitoring Feedback Lead Significant Participation Global Business Units Global Business Units IT Supply Chain Global Business Units Global Business Units Deployment Supply Chain Global Business Units Continuous Process Improvement Supply Chain Supply Chain IT Deployment Business Supply Chain
    25. 25. Becoming the Distributor of Choice Integrated Processes & Systems Collaborative Forecasting & Inventory Optimization Unique Global Supply Chain Models
    26. 26. Real-Time Process Integration With Suppliers 2A1 2A10* 2A13** Product Information Forecast/ Inventory Quote/ Price & Availability Order/ Order Mgmt Advanced Ship Notice Backlog Invoice / Invoice Status Payment w/ Bank Notice Demand Creation 4A2 4A4 4A5 4D1 3A4 3A7 3A8 5D3 5D5 3A6 3B2 3Bx** 3C3 3C4 3C6 3C6** 5C1 5C2 5C3 5C4 3A1 3A2 5D1 Done Done In Dev Done Done Done Done Done TBD Arrow’s “Concept to Cash” RosettaNet Program * Piloted, ** Under investigation
    27. 27. Real-Time Process Example: Order Management <ul><li>Real-Time standard </li></ul><ul><li>Back-End integration </li></ul><ul><li>Collaboration rules </li></ul><ul><li>Controlled processes </li></ul>Latency Reduction Mechanisms Traditional EDI Model Order Batch Processing Error Rework Sub line Rework Post ship Rework 40% 2-4 hrs 60% in 24 hrs 2-4 days 2-4 days <ul><li>Schedule dates in 24 hrs at best </li></ul><ul><li>Manual process on split line items </li></ul><ul><li>Many acknowledgement failures </li></ul><ul><li>Iterations of reschedules </li></ul><ul><li>Lost window of selling visibility </li></ul>Up to 2 weeks Advanced RN Model <ul><li>Acknowledgements within minutes; rapid exception resolution </li></ul><ul><li>Immediate visibility to all ship dates </li></ul><ul><li>No acknowledgement failures </li></ul><ul><li>Stabilized schedules, improved productivity </li></ul>Order Real-time Rework 80% 2-4 min 20% in 24 hrs Over 90% Reduction
    28. 28. Agenda <ul><li>Introduction to Arrow Electronics, Inc. </li></ul><ul><li>Industry Dynamics and Their Impact on Customer Needs </li></ul><ul><li>Transforming Arrow’s Supply Chain Through an End-to-End Approach </li></ul><ul><li>Summary and Q&A </li></ul>
    29. 29. Summary <ul><li>Industry dynamics have and will continue to change customer needs and Arrow’s supply chain role </li></ul><ul><li>Arrow’s supply chain management approach starts with delighting customers . . . </li></ul><ul><li>. . . Which is empowered by supply chain excellence and preferred supplier relationships </li></ul><ul><li>Success is a journey </li></ul>
    30. 30. The Ultimate Goal of Arrow’s Journey is to Increase Shareholder Value <ul><li>Enhanced customer service </li></ul><ul><li>Improved inventory utilization & productivity </li></ul><ul><li>Best-in-class customer relationships </li></ul><ul><li>Differentiated service capabilities </li></ul><ul><li>Best-in-class strategic supplier partnerships </li></ul><ul><li>Unique supply chain models </li></ul>Supply Chain Impacts . . . & Shareholder Value Increased Capital Efficiency Increased Profit Increased Shareholder Value All Financial Metrics . . . Appropriate Working Capital Reduced Fixed Capital Increased Revenue and Margin Appropriate Cost Model
    31. 31. Our Journey is Underway! Arrow Stock Performance Past 3 Years 2003 2004 2005
    32. 32. Thank You!

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