The document discusses the importance of the hybrid engineering supply chain. It distinguishes traditional supply chain management (SCM) from engineering supply chains, noting SCM overlooks engineering activities. There are two important cycles for products - the acquisition lifecycle and product lifecycle management. The hybrid engineering supply chain is important as it provides flexibility to connect facilities globally as needed. It also helps companies maintain innovation capabilities as outsourcing increases complexity. Pioneering companies like Apple are reengineering acquisition lifecycles through their supply networks.

1. A Human Centric Laboratory
Interview with
Dustin Mattison
3rd July, 2012
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2. A Human Centric Laboratory
Engineering Supply Chain(ESC)
1. How do you distinguish between
traditional SCM and the engineering
supply chain?
2. What are the two important cycles before
a finished product appears to the
customer?
3. Can you talk about the importance of the
hybrid engineering supply chain?
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3. A Human Centric Laboratory
1.How do you distinguish between
traditional SCM and the engineering
supply chain?
3
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4. A Human Centric Laboratory
Traditional SCM
• A Demand-Supply process of
managing
– Plan levels of aggregation and
information sources
– Source locations and products
– Make production sites and
methods
– Deliver channels, inventory
deployment and products
– Return locations and methods
• Biz transaction (activities)
– Procurement, Logistics to
response to Sale
Source: Supply Chain Council
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5. A Human Centric Laboratory
Traditional SCM Considers Engineering as
Corrective Action of Quality Return
• Quality Return is only engineering level transaction in SCOR as reversed
PO in Biz transaction
• Product/process integration between buyers and suppliers are off-the-book
operation till surface up to return process in SCOR
• Engineering is buried behind quality, delinquency, cost, capacity etc.
Source: Supply Chain Operations Reference (SCOR®) model Overview - Version 10.0
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6. A Human Centric Laboratory
Supply Chain Deep Behind SCOR
Sale Product Component Material
Design 100% 60% 80% 20%
Demand-
Assembly 0 80% 20% 10%
Supply
Process 0 20% 80% 90%
|
Multiple
industries blue-collar
manufacturing
Asset-heavy
supply
| Asset-lite |
offshore or
chain
FAE
Customer outsourcing
|
Piecewise
organization
|
Sale /channel
outsourcing
| Current Supply Chain Management |
Figure 1: An illustration of three- phases outsourcing toward distributed organization
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7. A Human Centric Laboratory
SCOR Over Simplified Complexity Involved
Production Chain
• A finished goods (Product such as Mobile phone, PC, etc) to customer is
root of the chain network covering multiple industries
– Component and material industries
– Design, Assembly, Process industries
• When the supply chain is going more fragmented, process inter-
dependence between the nodes is increasing
– Problem behind Quality, delinquency, cost, and capacity
– Out of Procurement, Supplier Relationship, IT capability to handle under SCOR
assumption
• Consequence
– Turn strategic outsourcing a high risk activity due to over estimated the under layer risk of
distributed organization when crossing industries
– Low degree of freedom of strategic outsourcing. It has very few natural partition in supply
chain. CEO either keep the entire biz, sell them all off, or move them out to somewhere can
justify the cost
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8. A Human Centric Laboratory
2.What are the two important cycles
before a finished product appears
to the customer?
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9. A Human Centric Laboratory
Cycles Before a Product
• 2 cycles: with technology & product only
– Acquisition Lifecycle invokes full
technology cycle from early research to
sustainment
• Ref to Defense Acquisition System -
DoD 5000 Process Life Cycle - DAP
• Best practice framework: DoD 4245.7-M
– Product life Cycle Management (PLM)
over Matured Technology Platform
• Wiki: entire lifecycle of a product from its
conception, through design and manufacture, to
service and disposal
• Industrial Supply Chain is less
complicated to DoD
– Acquisition lifecycle is rarely done over supply
chain, mostly in-house activities
– Apple is 1st Enterprise executes Acquisition A generic lifecycle of products
cycle over supply chain rewriting history
– All cases are different in activities level
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10. A Human Centric Laboratory
Changing Paradigm to Supply Network
Traditionally,
Acquisition
cycle are all in-
house activities
Last decade,
some companies
successfully
transformed into
supply chain:
Boeing: 787
TI: CMOS
Ford: automotive They all suffers a lot of pain but sure one of the
platform pioneers in their industries can hold position in next
Apple: i-series decade
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11. A Human Centric Laboratory
Example: DoD 5000 Process Life Cycle Framework
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12. A Human Centric Laboratory
The 2 cycles: Core Competency of Innovation
• Digitization is to transform the activities into a new more productive
workflow but not drop it
– From fully in-house to be connection-oriented virtual enterprises
– Innovation is effective execution to idea. Without that execution, that is
creativity makes no value to revenue in product company
• Dilemma of being failed to transform: can’t response to change,
finance instability due to asset-heavy
– TI vs. Motorola in semiconductor
– Apple vs. HP in connection platform
– Ford vs. GM in automotive
• Suggested Engineering SC to keep the capability
– SCOR vs. ESC coverage
– Keep strategic core component, the technology enabler(s)
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13. A Human Centric Laboratory
SCOR vs. ESC coverage
SCOR ESC
Short way Finished goods Semi-finished goods
Detail definition Biz level, source/Deliver as Operation level, basic unit is integrated
Input / Output of Make, apply operation of
to all industries Planning/Engineering/Quality
• Biz Transaction Only Biz Transaction Parallel to Biz Transaction, execute
transaction
•SC inter-dependence Assume NO Yes
•Quality Lagging as finance Leading to prevent quality event, put
performance inter-dependence under control, as
part of spec
•Engineering Assume NO Integration, Failure Analysis, Yield
enhancement etc
•Planning Demand-Supply continuity Demand-Supply continuity plus
inventory quality sampling, virtual Mfg
management
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14. A Human Centric Laboratory
3.Can you talk about the importance
of the hybrid engineering supply
chain?
14
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15. A Human Centric Laboratory
IT Evolution Maturity & Globalization
Turning Point
1. The world is confirmed to heading next level of outsourcing when Economic Policy
Institute (EPI) said statistics confirmed 1.4M jobs were created overseas by U.S.
companies, compared to 1M domestically in year Dec, 2010 (Scott, 2010). Majority
of employees growing is overseas or virtual.
2. China became world’s top manufacturing nation, ending 110 year US leadership at
May, 2011
3. U.S. reaches $14.3 trillion debt limit and his perfect credit rating was being
downgraded from AAA to AA+ with a negative outlook by Standard & Poor at Aug
5th, 2011, the first time ever.
4. Apple has surpassed oil group Exxon to become the world's most valuable
company by market capitalization at Aug, 2011;
5. e-commerce is confirmed a persistent activities conducting post-Internet economy
where Amazon (20.4%) sites visited by 1 in 5 global internet users, about 282
millions in June, 2011 following with eBay (16.2%) and Alibaba(11.3%) in China
(comScore, 2011).
6. Facebook value may soar over $100 Billion and Facebook set to reach 1 BILLION
users by 2012
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16. A Human Centric Laboratory
Challenges in new Game Plan
Governor from “doing
Competing the
nothing” to do
limited raw
something to hold job in
material
US
Raw ODM
Material (TWN) “Bretton Woods” system
broken at 70s’ and
deficit raised to $800B
at 2007, capital bubble
broken in 2008
Make Consumer
(China) (US)
Lock currency rate to Dollar, •Create new industry
30% GDP loan to market cycle (energy, genetic,
which drive over capacity in bionic,.. )
Make
MAKE, export price flat
(Engineering) •Build share facility to
balance from increasing improve cost structure
competition and increasing •Equal IT and global
cost in China* power between
enterprise and SME
Note(*): Giles Chance, “China and the Credit Crisis: The Emergence of a New World Order”
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17. A Human Centric Laboratory
Jobs Moving Back?
• Government
– Jobs & Innovation Accelerator Challenge
$26 Million Multi-Agency Advanced Manufacturing Jobs and Innovation Accelerator Challenge
The Obama Administration announces a $26 million Advanced Manufacturing Jobs and Innovation Accelerator Challenge, a partnership between the U.S. Department of Commerce’s Economic Development Administration and
National Institute of Standards and Technology, the U.S. Department of Energy, the U.S. Department of Labor’s Employment and Training Administration, the Small Business Administration, and the National Science Foundation.
This initiative will assist the development and implementation of regionally-driven economic development strategies that support advanced manufacturing and cluster development. In addition to the six partnering agencies, the
initiative will leverage technical assistance from up to eight other Federal agencies…….
• Enterprises
– Apple wants to make products in U.S., but that's not so easy
Critics want Apple to manufacture more products in the U.S. CEO Tim Cook does, too. But there's a lot in the way.
• Reality
– Entire manufacturing ecosystem has been moved out and not easy to
come back
– Global market also needs global manufacturing capability either next to
customer or for taxation purpose
• Conclusion
– hybrid engineering supply chain to provide enough Degree of Freedom to
connect the facilities where it is when it needed
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18. A Human Centric Laboratory
Apple Re-engineering Acquisition Lifecycle
to Turn Hardware a 58% PFO Biz, HP 2.5%
1.EMS: Foxconn
Factory
1.EMS: Foxconn •2.In-house:A6
CPU design
Customer
Component
•Fabless;
Service
demand demand Samsung
Channel Employees Assembly 3.Participatory
customers
Production
1.EMS: Foxconn
Application ~7B paid
4.App Store capital in SC
<< Kill Microsoft’s value >>
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19. A Human Centric Laboratory
Challenges, Apple as Example
• Kill your patterns in long value chain
– Apply eliminates Microsoft’s value in Wintel value chain by creating Apps Store
• Re-engineering value chain
– Simplify value chain: ask Foxcon does more
– Take technology enabler: A6 CPU,
– Reserve capacity: hold ~7B paid capital in SC
• Right Human Capital
– Multiple disciplines expert on complicated engineering SC
– Cloud services also complicated engineering complex
– More challenge to SME when reaching oversea resource and hybrid ESC
• Some players phasing out
– ODM industry diminishing. Taiwan ODM only 0.5% of Apple cost structure
– Product company can't have vertical integration capability both in the 2 cycles
and services integration
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20. A Human Centric Laboratory
Significant Impact Area
• Rapid Changing Industries like Consumer
Market
• OEM (129$B)
• IC & EMS (395$B) going to merge due to
TSV(Through-Silicon Via) technology
• Terminal market ranking from Apple, HP,
to RIM, Lennova, Acer etc
• Rapid Changing Market in SC IT Market
• Cloud computing in SaaS sector like saleforce.com in Biz Transaction level will
continue to grow
• Loser: SAP
• New market in Hybrid Engineering SC shall grow
• Social based collaboration tool such as PM, office in the cloud
• 4PL players to support core Supply Chain Operation
• 3-15% of revenue vs. 2-3% of revenue in P&L BPO
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21. A Human Centric Laboratory
Supporting Infrastructure
• Academics
– Supply Chain System Engineering: Framework Transforming Value Chain in
Business Domain into Manageable Virtual Enterprise and Participatory
Production
– Not popular, still in single discipline mentality within SCOR scope
• Enterprises
– Pioneers such as Foxconn, Apple, Ford, TI, Boeing,..
– One-of-a-kind, lagging indicator to Management Science
• Government
– Lagging, should have training facility to rebuild broken chain of engineering
development ladder due to moving out manufacturing ecosystem
– Suggests to create “Distributed Manufacturing Center” which is share facilities to
industries to provide molding services, and bridge to oversea resources
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