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MGB-282Supply Chain Management      Flextronics                    By:                          Jose Vega                 ...
Agenda         1             • Flextronics Overview         2             • CM, CDM and ODM Timeline         3            ...
Global Supply Chain Enabler                ~$24 Billion in Annualized Revenue      200,000+ Employees Globally; 20,000 Log...
Service ModelDesign. Build.                                                                  Ship.                        ...
Powerful Flextronics Differentiator                Americas                           Europe                             A...
Customers*
Products*
Agenda         1             • Flextronics Overview         2             • CM, CDM and ODM Timeline         3            ...
• Original Electronics Manufacturer (OEM)  – “Turnkey”: they did everything                    Manufacturing,   Product De...
Birth of EMS OEMs start outsourcing to Electronics  manufacturing Services (EMS) in the 80s into the  90s. Why?    1. Core...
Industry in 1980s into 90s          OEM       • Product Design                                       • Manufacturing,     ...
EMS Industry Growth in 90s• OEM growth, especially in electronics, meant  more outsourcing to EMS for their manufacturing ...
Two Segments of EMS firmsContract Design and Manufacturing(CDM)   Product Design and      Contract Manufacturing (CM) Engi...
Original Design and Manufacturing• As EMS firms tested the CDM model and became more vertically  integrated upstream, they...
Agenda         1             • Flextronics Overview         2             • CM, CDM and ODM Timeline         3            ...
Top CM Firms - Sales                            $20,000                            $18,000                            $16,...
Top CM Firms - Profit Margin                       10.0%                         5.0%                         0.0%Profit M...
Top ODM Firms - Profit Margin                    20.0%                    18.0%                    16.0%                  ...
Yr/Yr Sales Growth - CM vs. ODM                   50%                   40%                   30%Sales Growth (%)         ...
15.0%                    Average Profit Margins - CM vs. ODM          10.0%Profit Margin (%)                    5.0%      ...
Cell Phone Comparison          $80                    $80              $78                $75  $80                        ...
Key Issues to consider for an ODM    Hiring and developing new people    The location of the design department    Relat...
Cost & Benefits of becoming an ODM   Benefits       Aligned       Agile   Costs       Added risk
Agenda         1             • Flextronics Overview         2             • CM, CDM and ODM Timeline         3            ...
IDC’s EMS and ODM Revenue Growth Forecast                        US$B                     $350                            ...
Growth Potential & Market Position                                     TOTAL         FLEX          FLEX MARKET FLEX Portfo...
ODM and EMS Markets                        Ethernet switches & routers1   INFRASTRUCTURE      Broadband access            ...
Q&AThank You !
Flextronics Supply Chain Management
Flextronics Supply Chain Management
Flextronics Supply Chain Management
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Flextronics Supply Chain Management

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Flextronics and Supply Chain Management Presentation. This presentation is about Flextronics and how they moved from the CM -> CDM -> ODM servcies. Very interesting to see that they are very good at ODM at this time.

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Flextronics Supply Chain Management

  1. 1. MGB-282Supply Chain Management Flextronics By: Jose Vega Rob Blakely Suresh Madhuvarsu
  2. 2. Agenda 1 • Flextronics Overview 2 • CM, CDM and ODM Timeline 3 • Key Case Issues 4 • Beyond the Case
  3. 3. Global Supply Chain Enabler ~$24 Billion in Annualized Revenue 200,000+ Employees Globally; 20,000 Logistics/Services ~120,000 Employees in Asia (~90,000 in China)Operating in 30 Countries; 27M Sq Ft of Capacity; 9 Industrial Parks
  4. 4. Service ModelDesign. Build. Ship. Service.• Flextronics employs over 4000 design • Flextronics runs 9 industrial parks • Flextronics is involved in doing BTO • Flextronics Global Services is the engineers. around the world focused on building and CTO for many of the most global repair leader for electronic• Flextronics owns 364 patents the worlds leading technology complex technology products in the products servicing 30M cell phones, products. world from industry leading 2M laptops, 9M PCBA’s, and 2M game companies such as Cisco, HP, Huawei, consoles phones per year.Capabilities Lenovo, RIM, Juniper, and many Capabilities • Global Services’ sites dedicated to• Industrial Design others. Service Parts Logistics process and ship • PCB/Flex Circuits• System Architecture over 12M spare parts for customers • Optomechatronics every year.• Mechanical Design Capabilities • LCD Displays• Embedded • Build-to-Order (BTO) System Design • Cables Capabilities • Configure-to-Order (CTO)• Software Systems • Machining • Repair/ Refurbishment and Warranty • Distribution and• Product Launch/NPI • Plastics Direct Fulfillment Support• DFx Services • Metal Fabrication • Outbound Logistics • Service Parts Logistics • SMT Assembly and Hubbing • Remarketing • System Integration • Retail Technical Services (RTS) and Final Test • Asset Recovery • Reverse Logistics
  5. 5. Powerful Flextronics Differentiator Americas Europe Asia Guadalajara, Mexico Tczew, Poland Chennai, India Juarez, Mexico East Hungary Doumen, PRC Sorocaba, Brazil West Hungary Shanghai, PRC Operations revenue breakout by country: 9 Month Sales % China $6,252,200 34% Mexico $2,665,900 15% U.S $2,531,400 14% Malaysia $1,808,500 10% Hungary $1,197,900 7% Other $3,714,700 20%Sustainable Growth – Limitless Scale, Repeatable Execution Total $18,170,600 100%
  6. 6. Customers*
  7. 7. Products*
  8. 8. Agenda 1 • Flextronics Overview 2 • CM, CDM and ODM Timeline 3 • Key Case Issues 4 • Beyond the Case
  9. 9. • Original Electronics Manufacturer (OEM) – “Turnkey”: they did everything Manufacturing, Product Design Distribution and Assembly, and and Marketing Sales Testing
  10. 10. Birth of EMS OEMs start outsourcing to Electronics manufacturing Services (EMS) in the 80s into the 90s. Why? 1. Core Competencies (Strategic): OEMs better and design and marketing. (better access to customer data?) 2. Economies of Scale (Economic): EMS firms could leverage their fixed assets more efficiently than the individual OEMs. 3. Broad Geographic Presence (both Strate and Econ): Reduced risks of OEMs from manufacturing in one place.
  11. 11. Industry in 1980s into 90s OEM • Product Design • Manufacturing, EMS Assembly, and Packaging OEM • Sales and Marketing
  12. 12. EMS Industry Growth in 90s• OEM growth, especially in electronics, meant more outsourcing to EMS for their manufacturing needs• EMS companies rapidly expanded, usually through the acquisition of underutilized OEM manufacturing plants (they don’t have economy of scale)• Many acquisitions involved companies with significantly cheaper labor (e.g., China) – as much as 75% cheaper compared to U.S. and Western Europe
  13. 13. Two Segments of EMS firmsContract Design and Manufacturing(CDM) Product Design and Contract Manufacturing (CM) Engineering Manufacturing and Packaging and Supply Chain Assembly Distribution? and Logistics
  14. 14. Original Design and Manufacturing• As EMS firms tested the CDM model and became more vertically integrated upstream, they started to infringe upon the territory of Original Design Manufacturers (ODM)• ODMs would initiate a new design and market the finished product to OEMs.• The model allowed ODMs to colocate design and manufacturing. The ODM already knows the design aspects of the manufacturing, so they can pass on that knowledge, which makes things more efficient. In the end you’re able to design something that you know you can manufacture efficiently and ultimately remain competitive.• After studying the model of ODM in Taiwan, Flextronics VP notices that because notebook computers are commoditized the OEMs feel comfortable purchasing completed products from ODMs
  15. 15. Agenda 1 • Flextronics Overview 2 • CM, CDM and ODM Timeline 3 • Key Case Issues 4 • Beyond the Case
  16. 16. Top CM Firms - Sales $20,000 $18,000 $16,000Total Sales (Millions $) $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 1997 1998 1999 2000 2001 2002 Flextronics $640 $1,335 $3,952 $6,959 $12,109 $13,104 Solectron $3,694 $6,102 $9,669 $14,137 $18,692 $12,276 Celestica $2,006 $3,249 $5,297 $9,752 $10,004 $8,271 Jabil Circuit $987 $1,484 $2,238 $3,558 $4,330 $3,545
  17. 17. Top CM Firms - Profit Margin 10.0% 5.0% 0.0%Profit Margin (%) -5.0% -10.0% -15.0% -20.0% -25.0% -30.0% 1997 1998 1999 2000 2001 2002 Flextronics 1.8% 1.6% 1.3% 2.3% -3.7% -1.2% Solectron 4.3% 4.1% 3.6% 3.5% -0.7% -25.3% Celestica -0.3% -1.5% 1.9% 2.1% -0.4% -5.4% Jabil Circuit 5.3% 3.8% 3.8% 4.1% 2.7% 1.0%
  18. 18. Top ODM Firms - Profit Margin 20.0% 18.0% 16.0% 14.0%Profit Margin (%) 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 1998 1999 2000 2001 2002 Hon Hai 13.8% 12.8% 10.6% 8.5% 6.5% Quanta 17.7% 12.3% 9.4% 10.6% 7.6% Compal 13.1% 11.5% 8.0% 7.0% 6.8% Acer 4.4% 5.7% 9.6% 1.1% 8.1%
  19. 19. Yr/Yr Sales Growth - CM vs. ODM 50% 40% 30%Sales Growth (%) 20% 10% 0% -10% -20% -30% 1999 2000 2001 2002 CM 42% 39% 24% -21% ODM 29% 23% 28% 30%
  20. 20. 15.0% Average Profit Margins - CM vs. ODM 10.0%Profit Margin (%) 5.0% 0.0% -5.0% -10.0% 1998 1999 2000 2001 2002 CM 2.0% 2.6% 3.0% -0.5% -7.7% ODM 12.2% 10.6% 9.4% 6.8% 7.3%
  21. 21. Cell Phone Comparison $80 $80 $78 $75 $80 $72 $69 $70 $60 $50 $40 $30 $20 $9 $5 $8 $10 $0 CM CDM ODMRevenue $80 $80 $78Cost $75 $72 $69Profit $5 $8 $9
  22. 22. Key Issues to consider for an ODM  Hiring and developing new people  The location of the design department  Relationship with customers
  23. 23. Cost & Benefits of becoming an ODM Benefits  Aligned  Agile Costs  Added risk
  24. 24. Agenda 1 • Flextronics Overview 2 • CM, CDM and ODM Timeline 3 • Key Case Issues 4 • Beyond the Case
  25. 25. IDC’s EMS and ODM Revenue Growth Forecast US$B $350 $329EMS + ODM Revenues $310 $301 $280 $274 $267 $270 $249 $229 $233 $230 $191 $190 $150 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: IDC, Nov 2009
  26. 26. Growth Potential & Market Position TOTAL FLEX FLEX MARKET FLEX Portfolio TOP CUSTOMERS MARKET RANK SHARE INFRASTRUCTURE $34B No. 1 31% Cisco, Huawei, Ericsson INDUSTRIAL $25B+ No. 1 14% App Materials, Siemens, Philips MEDICAL Boston Scientific, Medtronic, Agilent, $8B No. 2 10% Johnson & Johnson, Smith & Nephew ODM COMPUTING $101B No. 7 1% HP, Lenovo, Dell MOBILE & CONSUMER RIM, LG, Microsoft, Sony, Philips, $44B No. 2 19% Kyocera, Motorola, Sharp, Toshiba COMPONENTS Apple, RIM, Motorola, Honeywell, Cisco, $109B N.A 2% Huawei SERVICES Apple, Dell, Verizon, Avaya, HP, Cisco, (Excluding Freight) $22B N.A 7% Juniper, Toshiba, HuaweiSource: IDC, Prismark, Micro-Tech Consultants, Display Search, TSR, Blumberg Advisory, FLEX estimates
  27. 27. ODM and EMS Markets Ethernet switches & routers1 INFRASTRUCTURE Broadband access equipment Servers and storage Customer premise equipment Set-top boxes Optical transport equip. Telephone switching & PBX equipment Capital equipment Automotive Energy/Solar2 INDUSTRIAL Appliances Smart grid meters/controls Aerospace Defense Self service –kiosks Consumer diagnostic Disposable devices for3 Lab/Life science equipment devices wound management MEDICAL Diabetes products Imaging & Patient monitoring Catheters Diagnostic equipment Drug delivery devices Instrumentation4 PC Desktop All-In-One Servers Netbooks COMPUTING (ODM) Desktop All-In-One Storage Notebooks Smart phones Digital cameras Audio & Video5 MOBILE & CONSUMER Cellular handsets Data cards Embedded modules Gaming consoles Print & Copy Security tags equipment Including flat panel TVs, DMPs and audio accessories
  28. 28. Q&AThank You !

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