Supply Chain Optimization for Consumer Electronics Manufacturer

Supply Chain Optimization

forConsumer Electronics

Manufacturer

Solution OverviewJuly 2003

Agenda

Value Basic Hi-tech Consumer Electronics &

OEM Manufacturing Challenges i2 Solutions APS vs. ERP/MRPII Customer Case Studies

Value Basics

Business conditions change, the fundamentals do not

ROAROA ==RevenueRevenue ExpenseExpense

AssetsAssets

Market ShareMarket Share

Customer Satisfaction Customer Satisfaction

Agenda



Challenge #1:Challenge #1: Value Chains are Value Chains are ComplexComplex

N-tiered trading partners across geographies andN-tiered trading partners across geographies andlong lead times characterize the CE industrylong lead times characterize the CE industry

CentralCentralDesignDesign BBBB

CCCC

EuropeEuropeMfg & SalesMfg & Sales

RetailRetail

RetailRetail

USAUSAMfg & SalesMfg & Sales

Multi-NationalMulti-NationalCentral Mfg.Central Mfg.

Distributed SalesDistributed Sales

Multi-DomesticMulti-DomesticDistributed Mfg.Distributed Mfg.Distributed SalesDistributed Sales

CentralCentralDesign,Design,

ManufactureManufacture

BBBB

CCCC

RetailRetail

RetailRetail

EuropeEuropeSalesSales

USAUSASalesSales

Agenda



Introducing valuechain management

Value chain management

is a business approach to continuously

increase efficiency in the value chain by

reducing complexity,

increasing visibility and

increasing velocity

via innovative planning and execution.

Value Chain ManagementPhilosophy for i2 solutions and services

Response Buffers

Integrated SCM

Module Configured ProductSub-Assy

Plan

Push

Push

Raw Mat.

Pull

Customer OrderPull

1. “Forecast to Plan” Availability of right level of inventory in the response buffers

(Demand Planning 需求计划 ,Master Planning主计划 )

2. “Order to Delivery”Fast order fulfillment cycle /

Fast reaction to changes

(Order Configuration,Order Promising 订单承诺 ,Factory Planning 生产计划 )

Custom Products

“Standard” Products

Key:

SCM Process Overview

Demand Planning需求计划

Order Promising订单承诺

Factory Planning生产计划

Master Planning主计划

Unconstrained Forecast

Constrained Supply

ERP OE

Commit Request

Demand Demand CollaborationCollaborationERP Mfg

Purchase and Work Orders

Inventory and WIP

Supply Supply CollaborationCollaboration

Orders

Allocations & ATP

Production Plan

Stock and Demand Orders


Order Configuration


Demand Planning

Order Promising

Factory Planning

Master Planning


Constrained Supply

Oracle OE

Commit Request

Demand Demand CollaborationCollaboration

Oracle Mfg


Inventory and WIP


Orders

Allocations & ATP

Production Plan



Order Configuration

Demand Planning 需求计划Objective:Objective: Single company wide Single company wide

statement of future demandstatement of future demand

Frequency:Frequency: Weekly, Weekly, Monthly Monthly

Processes:Processes:

• Multi-dimensional customer and Multi-dimensional customer and product grouping product grouping

• Statistical forecasts and “PickBest”Statistical forecasts and “PickBest”• Baseline forecastBaseline forecast• Top-down, Bottom-up and Middle-out Top-down, Bottom-up and Middle-out

forecast adjustmentsforecast adjustments• Attach-rate planningAttach-rate planning• New product introductionNew product introduction• Event planningEvent planning• Consensus forecastingConsensus forecasting

Demand Planning 需求计划 : Multidimensional Representation

Dimensions: Product (Group), Customer (Group) and Time Data Measures: Historical Data, Forecast, Computations Views in Each Dimension: Sales, Distribution, Channel, etc.

Cus

tom

er

Time

Product: SKU 1000

Geography: Central

Time: Week 30, FY 02

Data: Historical Shipments

Product


Demand Planning

Order Promising

Factory Planning

Master Planning


Constrained Supply

Oracle OE

Commit Request


Oracle Mfg


Inventory and WIP


Orders

Allocations & ATP

Production Plan



Order Configuration

Master Planning 主计划Objective:Objective: Near-term to long-term Near-term to long-term

constrained inventory and capacity constrained inventory and capacity plan to determine key material and plan to determine key material and production plansproduction plans

Frequency:Frequency: Weekly Weekly

Processes:Processes:• Forecast NettingForecast Netting• Inventory Stock PlanningInventory Stock Planning• Demand PrioritizationDemand Prioritization• Planning BOM (from Demand Planning)Planning BOM (from Demand Planning)• Multi-Site SourcingMulti-Site Sourcing• Demand-Supply MatchingDemand-Supply Matching• ECN, obsolescence and parts ECN, obsolescence and parts

substitution managementsubstitution management• Key Material Supplier AllocationsKey Material Supplier Allocations

Supply constrained plans features

Planning Any number of tiers in the

supply chain Manufacturing lead times,

detailed modeling of resources; mfg. lot sizes

Transportation modes and lead times; transportation lot sizes

Supplier relationships/contracts (flexibility, splits)

Exception-workflow Exception Window categorized

with filters

Material supply planning Evaluation of alternatives:

suppliers, modes, capacity, parts Evaluation of usage: Usage by end-

item, end-item-group, location/site Automated allocation of

constrained capacity/material: Priority based, fair-share, bands

Inventory planning Time-based safety stock

depending on mean and variance of supply, demand and customer service levels

Automated mean and variance calculations based on history

Preview demand and inventory coverage features

Preview Plans in aggregate or detail focusing on: Demand Inventory Capacity Operations Procurement Shipping

Drill down capabilities

IterateView exceptions, creating scenarios and what-if comparison to create final supply

plan

1. Problems are managed by exception via the

‘Problem Window’ and visible by category. All

constraints are simultaneously considered.

Create initial plan

Master Planning: Create Optimal Plan

2. Complex bill-of-materials and pegging match demands to

material and capacity, allowing root causes (true constraints) to

be identified

MaterialRequirements

CapacityRequirements

ATP Allocations

3. Strategies and simulations are

targeted at resolving problems with

defined business rules. One example is to collaborate with suppliers on material

exceptions.

Finalize and Publish Plan


Demand Planning

Order Promising

Factory Planning

Master Planning


Constrained Supply

Oracle OE

Commit Request


Oracle Mfg


Inventory and WIP


Orders

Allocations & ATP

Production Plan



Order Configuration

Order Promising 定单承诺Objective:Objective: Optimal real-time quotes and Optimal real-time quotes and

commits to orders based on component commits to orders based on component ATP allocations to customersATP allocations to customers

Frequency:Frequency: Real-time Real-time

Processes:Processes:• Customer prioritizationCustomer prioritization• Allocation policy management Allocation policy management • Manual re-allocationsManual re-allocations• Order backlog managementOrder backlog management• Order quote and confirmation by policyOrder quote and confirmation by policy

• ASAP, Partials, Partial with ratiosASAP, Partials, Partial with ratios

Order Promising 定单承诺 : Example Allocation Policies

Customer Group B

All CustomersAll Customers

Customer Group A

Account B1 Account B2

Fixed Split

Priority

FCFS

Fair Sharex y

ba

Retain ATP

Order Promising:Allocations Management

Allocate available supply of capacity and

materials across customers and products

Allocation planning

Define allocation rules:

Customer prioritiesAllocation levelsRetain and Split

Rules

Define Product and Customer hierarchies

and sourcing rules

Rules can be defined at each level of the product and customer hierarchy

Allocations can be made by resource capacity, material group or

specific item and location.

ATP can be defined across a variable

time horizon

Example ATP ConsumptionBasic Example - Finished Goods

Channel

TimeSupply

20 20 20 20 20

W 1 W 2 W 3 W 4 W 5

Account Group

10 10 10 10 10 Country

5 5 5 5 5 Top

10 Units XFull Delivery

10

Product CDMA Allocated ATPProduct CDMA Allocated ATP

0010


0

0

00

0


Channel

Sub Assembly

SubAssembly

Product A

Component

Component

Component

AssemblyCapacity

Request

Order Promising: Multi Level Component ATP Consumption

Step-wise finished good, subassembly and capacity ATP checks and consumption of allocations

Forward projected to a completion date

AssemblyCapacity

Differentiators & customer benefits order promising

Allocations workbench FCFS, member rank, product rank,

fixed split, per committed Inventory can be re-allocated on-

line Allocation rules can be overridden Allocation acceptance

Committed qty Consumes allocated Over-consumption applies to ATP Cumulative committed

Forecast qty Frozen,current,planning

time horizons

Differentiators & customer benefits order promising

More realistic promises Increased customer service Increased strategic relationships

with key customers Honor business priorities

for increased profits


Demand Planning

Order Promising

Factory Planning

Master Planning


Constrained Supply

Oracle OE

Commit Request


Oracle Mfg


Inventory and WIP


Orders

Allocations & ATP

Production Plan



Order Configuration

Factory Planning

Objective:Objective: Short-term, detailed Short-term, detailed procurement and production plans procurement and production plans

Frequency:Frequency: Daily Daily

Processes:Processes: Order prioritizationOrder prioritization Fully pegged material allocation Fully pegged material allocation Exception managementException management Procurement reschedulingProcurement rescheduling ECN, obsolescence and parts ECN, obsolescence and parts

substitution managementsubstitution management Assembly and multi-stage coordinationAssembly and multi-stage coordination Work-order schedulingWork-order scheduling Material pick-list generationMaterial pick-list generation

New Factory Planning Approach

Concurrent Planning A solution that will simultaneously plan all variables together Capacity plans must be developed concurrently with material

plans if feasible plans are to be realized Multi-Directional Propagation

Vertically and Horizontally Across all planning dimensions

Automatic Exception Resolution Expand the Planning Problem Speed Co ordinates the plan such that the WIP is minimum Minimize lateness

Material Capacity

Demand

Demand Order plan shows full detailed order pegging

Automatically balance the loads on individual resources


Demand Planning

Order Promising

Factory Planning

Master Planning


Constrained Supply

Oracle OE

Commit Request


Oracle Mfg


Inventory and WIP


Orders

Allocations & ATP

Production Plan



Order Configuration

Demand and Supply Collaboration

Objective:Objective: Real-time planning and Real-time planning and information sharing between partner’s information sharing between partner’s supply chains for rapid propagation of supply chains for rapid propagation of accurate informationaccurate information

Frequency:Frequency: On-line and Cyclical On-line and Cyclical

Processes:Processes:• Forecast request and commitForecast request and commit• PR and PO creationPR and PO creation• PO status trackingPO status tracking• PO / ASN / Receipt matchingPO / ASN / Receipt matching• VMIVMI• Exception managementException management• Multiple buyer to multiple supplier Multiple buyer to multiple supplier

workflowsworkflows

Role-based communication of forecasts and events and resolution of exceptions

Both buyer and supplier share a common, dynamic view of

requirements vs commits and exceptions (mismatches) that

need to be addressed

Messages can be attached to a collaboration object (item,

site, supplier) and propagated via alerts or e-mail

Data measures, phases, exception tolerances and workflows are defined by

collaboration groups

Exception-based workflows are supported by a dynamically updated problems and

alerts summary of collaborations

Demand / Supply Collaboration

Agenda



SUPPLIERS

PURCHASING

Acknowledge-ment of the

problem

Example: Imbalances caused by a delay of supply

Imbalances:

1. Late supplier of B created unexpected available capacity for period m

2. Create capacity shortage for period m+1 since CO A is competing the capacity in period m+1

3. Delay of production order affects the distribution plan

4. Delay of distribution plan forces breaking delivery promises made to customer earlier

5. Other components (C and E) for CO A arrives on time and sitting in the factory waiting for B Increased WIP/inventory

We need this supply B for Customer Order A

Consequently, find out each of these imbalances a few days later due to lack of speed and visibility Make the problem even worse

(Bull-Wip effects)

CUSTOMERS

SUPPLIERS

PURCHASING PRODUCTION PLANNING

CUSTOMER SERVICE

FINANCE

Acknowledge-ment of the

problem

Evaluation of the financial impact of

the changes

Acknowledgement to selected customers

Negotiation with Suppliers of related components to delay

shipments

Any delay in the replanning process eventually results in lower operational performance

Review of Production plans

Capacity adjustments

Review of delivery programs

D+? D+??D

D+???

D+?????D+????

Example: Maintain a Permanent Balance Between Demand and Supply

Sequential Planning-with optimized silos, leading to long planning cycle times and infeasible plans.

Typical Planning Cycle within ERP

Time

MRPMRP Trans.Trans.

CRPCRPMPSMPS

DPDP

Planning Best Practices

Time

MRPMRP

Trans.Trans.

CRPCRP

MPSMPSDPDP

MRP II Does Not Solve Feasibility Problems

Today

Planned Order

Customer Order

Planned Order

t

End item

Assembly

Component

Raw material 1

Order Due Date

Module

!MRP planning run will flag local material MRP planning run will flag local material availability problem, but won’t solve itavailability problem, but won’t solve it

Planned Order

Planned Order

Planned Order

Manual Resolution

Today

Planned Order

Customer Order

Planned Order

t

End item

Assembly

Planned Order Component

Raw material 1

Order Due Date

Module

!Manual resolution aims Manual resolution aims at local feasibilityat local feasibilitybut not optimisationbut not optimisation

Planned Order

Planned Order

WIP

APS Propagates Forward and also Co Ordinates Production

Today

Planned Order

Customer Order

Planned Order

t

End item

Assembly

Planned Order - New

Component

Raw material 1

Order Due Date

ModuleProduction Delayed to Production Delayed to co ordinate the co ordinate the assemblyassembly

Planned Order

Planned Order

Planned Order - old

APS Finds alternates to reduce lateness

Today

Planned Order

Customer Order

Planned Order

t

End item

Assembly

Planned Order

Component

Raw material 2

Order Due Date

Module

Planned Order

Planned Order

Raw material 1

MRP assumes infinite Capacity, Need to RUN CRP to Know capacity Problems

Today

O1-1 Customer Order 1

O1-2

tOrder Due Date

O2-1

O2-2

Customer Order 2

Res1

Res2

Res3

CRP will flag capacity problemsbut won’t solve it.

Manual Resolution of Capacity Issues

Today


O1-2

tOrder Due Date

O2-1

O2-2

Customer Order 2

Res1

Res2

Res3

Manual resolution leads to local feasibilitybut not optimisation

WIP

APS solves Capacity Issues and Co Ordinates Production around Bottleneck

Today


O1-2

tOrder Due Date

O2-1

O2-2 - new

Customer Order 2

Res1

Res2

Res3

Order Delayed if capacity available to Reduce WIP

O2-2 - old

Current Practices: MRP/Spreadsheet

Infeasible Solutions Infinite material and capacity Fixed lead time with “fat’ safety

factors Assumption of capacity in MRP

Lack of Speed Database-centric Sequential process

Not Web-centric Non-collaborative Difficult to integrate

Lack of Optimization Local optimization, if any

Lack of Visibility Unidirectional propagation

of events Minimal exception reporting

Lack of Flexibility Difficult representation Unrealistic due date quoting No “what-if” simulation capabilities Lack of user friendliness

Agenda



Who is LG Electronics ?

Over 26,000 emplyeesOver 26,000 emplyees LOB : Display & Media, Appliance, Mobile handset, LOB : Display & Media, Appliance, Mobile handset,

SystemSystem 100+ Sales Sites100+ Sales Sites 68+ Manufacturing Locations68+ Manufacturing Locations Over 38 R & D LabsOver 38 R & D Labs U$D 12.8 Bil. in Sales in 2001U$D 12.8 Bil. in Sales in 2001 U$D 0.4 Bil in Net Income in 2001U$D 0.4 Bil in Net Income in 2001

Why SCM ? (Continued)

To concurrently plan over all business functions- Sales, Marketing, Manufacturing, Procurement and Logistics

To reduce obsolete inventory over entire supply chain like sales subsidiaries, DCs and warehouses

To minimize planning cycle time To handle demand plan and supply plan simultaneously To commit weekly forecast from Big OEM buyers To establish infrastructure for e-Transformation

LG Electronics was also required

What did we do ? (Continued)

Confirm M+2 Production Plan (Daily, Lot #)

Sales Planning

Sales Planning

Global PSI

Meeting

Global Sourcing Status

Confirm M+1 Production Plan(Daily, Lot #)

Plan Review Meeting

Plan Review Meeting

Sales

Planning & Admin.

Material

Global Prod. Support

Manufacturing

Production Engineering

Design

Oversea MfgSubsidiaries

Organization 2 5~6 10~12 12~14 15~17Days

No Visibility on actual forecast

Some Data is more than a week

oldManual Global

production allocation is

manual lacking speed & accuracy

Manual production

plan for each Manufacturin

g Site

As-Was …

Global Sourcing Status

Global Inventory Status


Sales Planning

Feedback toSales

Confirm Production Plan

DispatchPurchasing Plan

Plan Review Meeting

Sales

Planning & Admin.

Material

Global Prod. Support

Manufacturing

Production Engineering

Design

Oversea MfgSubsidiaries

Organization 2~3 4~5Days

Direct InputFrom

Global Sales Sites

Timely & Accurate

StatusGlobal

Optimization Between Demand &

Supply

As-Is …1

Speedy Information Sharing &

Automated Global production allocation


• Production Plan for each Plant

• Output Data from GSCP

Benefits earned

Global VisibilityGlobal Visibility Collaboration Collaboration

InfrastructureInfrastructure Optimal Global Optimal Global

Demand & SupplyDemand & Supply Optimal Resource Optimal Resource

AllocationAllocation

Overall Inventory Level : Overall Inventory Level : ▼ 50%▼ 50%

Manufacturing Cycle Time : Manufacturing Cycle Time : ▼ 33%▼ 33%

Planning Cycle Time : Planning Cycle Time : Month Month ▶ ▶ WeekWeek

OTD Rate : 60% OTD Rate : 60% ▶ 80%▶ 80%

Forecast Accuracy : Forecast Accuracy : 70% 70% ▶ 85%▶ 85%

QualitativeQualitative QuantitativeQuantitative

APS implementation status at Samsung

GBM Vendor ModulesMemory i2 technologies MP, DP, DF, FPAMLCD i2 technologies MP, DP, DF, FPSysLSI i2 technologies MP, DP, DF, FPVDD i2 technologies MP, DP, DF, FPLiving i2 technologies MP, DP, DF, FPWireless i2 technologies MP, DP, DF, FPODD i2 technologies MP, DP, DF, FPPrinting i2 technologies MP, DP, DF, FPDVS i2 technologies MP, DP, DF, FPSystem Consumer i2 technologies MP, DP, DF, FP

SCM Vision for Samsung Global Planning Systems and Organization

Account Teams Generate Sales / Market Products Verifies Product Availability Accepts Orders Monitors Execution Keeps Customer Informed Non- Strategic Customer Forecast Suppliers

Plant ProductionPlant ProductionSchedulingScheduling Line Level SchedulingLine Level Scheduling Weekly Fab StartsWeekly Fab Starts Daily A/T Starts Daily A/T Starts

Unconstrained Forecast Forecasted Demand Actual Order Demand

Command Center Strategic Inventory Planning Allocation of Production Forecast Development Production Planning ATP Issues Resolution Set Sales Goals

ATP

StrategicInventory

Plan

Production Plan Tactical :Weekly & Daily

Allocation Plan Strategic Monthly Sales Plan / Goals

Logistic Center Distribution Execution Invoicing

Historical Demand Recent Customer

Demand/Trends Strategic Customer Demands

Act

ual

Dem

and

Sale Allocation

Key Objectives

Improve Customer Service Improve on-time delivery of complete orders Reduce lead times Improve Order Tracking – Early warning of late orders Fast and accurate quoting of promise dates (real-time ATP) Dynamic allocation of production capacity

Reduce Inventory Costs Reducing Manufacturing cycle time reduces WIP Enhance deployment and/or reduce inventory levels overall Reduction in excess and obsolete inventory

Improve Throughput and Utilization of Production Capacity Synchronize front- and back-end processes Improve synchronization of material and capacity constraints

Defining Business Releases

CapacityPlanningProductionPlanning

ATP/Allocation

PurchasePlanning

ForecastingInventoryMgmt.

TransportationManagement

Low Medium High High++

Strongest

Least Strong

Importance to Samsung

Stre

ngth

of

i2 T

rade

Mat

rix™

Sol

utio

n12

3

4DetailedScheduling

DetailedScheduling

SEC SemiconductorSCM Project Overview

Global Global Production Production PlanningPlanning

DemandDemandFulfillmentFulfillment

(AATP)(AATP)

Sep. 1997 – June 1998 Global Production Planning

June 1998 – Oct. 1998 Project Tuning

April 1999 – July 1999 1st Phase of Demand Fulfillment

Aug. 1999 – Dec 19992nd Phase of DF (CTP)

BR1 BR2 BR3

DemandDemand

ManagementManagement

High High AvailabilityAvailability

FactoryFactoryPlanningPlanning

April 2000 – August 2000Demand Management for HQ

Sept. 2000 – Current High Availability Factory Planning

BR4SIASIA

Global Production Planning Review

Major Paradigm Shifts

Site Planning(Front-End, Back-End)(Decentralized)

Capacity-Driven Planning

Product Line Planning(Back-End Planning)(Centralized/Top-Down)

Demand-Driven Planning(Backward/Order Driven)

Global Production Planning Review

Major Benefits Reduced Planning Cycle Time

From Monthly to Weekly

Improved / Early Warning of Planning Problems Improved Capacity Utilization Reduced Inventories Improved On-Time Delivery

End of Presentation

Documents

Supply Chain Optimization for Consumer Electronics Manufacturer