confoe field service 2006 outsourcing 2006-03

Confoe, Inc.Confidential Proprietary

Confoe Inc.

Outsourcing in Volatile Marketplaces:Lessons from the Semiconductor Industry

March 21, 2006

Michael Fritsch, COOTom Lipscomb, President

[email protected]

877-253-9637

Speed-Flexibility-ExecutionAlignment to Alliances


S4: Outsourcing in Volatile Marketplaces–Lessons Learned fromthe Semiconductor Industry

Start Time:3:15PMEnd Time:4:15PMDescription: The semiconductor industry is one of today’s most volatile

marketplaces. This has required great companies to learn how to meet thatvolatility with minimal disruption to their workforces and operations. Theyknow how to avoid the costs of overstaffing while avoiding the delays andcustomer dissatisfaction of understaffing.

You will learn how best to:• Rapidly shift resources to the right place at the right time• Ramp-up and Ramp-down of capabilities and resources with less disruption• Target the right skill level for the right job• Create the proper balance of fixed and variable costs

You will also learn the most successful workforce outsourcing techniques.These include:• Workforce Planning and Modeling• Outsourcing Strategies• Global Staffing Alignment• Loan Labor/Cross-Leveling Techniques• Effective use of Overtime and Utilization• Targeted Training and CertificationThese techniques brought a 2x-3x improvement in workforce flexibility for onefortune 500 semiconductor company.


Storm Warnings

“Massive layoffs are usually associated withdecaying sectors like Detroit or perenniallytroubled industries like airlines. But some of thebigger job cuts these days are coming from thehigh tech world of pharmaceuticals. Drugcompanies have announced 70,000 job cuts inthe last three years-17% of the workforce andmore than the entire previous decade.”

“Storm Warnings” Forbes Magazine March 13, 2006


Agenda

Introduction: Volatility in theSemiconductor Industry

Deciding What to Outsource-Core versus Context

7 Steps for Outsourcing aTechnical Workforce

Discussion/Questions


Semiconductor Volatility

Semi volatility requires rapid capacity changes Semi Tool/Capital Equipment Manufacturers (CEM) faced the largest

challenges Outsourcing became a vital tool

– Foundry Model– Technical Workforce Outsourcing

CEM and Semiconductor Sales

-60.0%

-40.0%

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Year

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cent

eC

hang

eF

rom

Pre

viou

sYe

ar


Core Competencies - Definition

Based on work by Prahalad and Hamel

Are:• Multiple Integrated, Interrelated Skills• Enables Access to Wide Variety of Markets• Differentiators that are Difficult to Imitate• Contribute to End Product Benefits

Are Not:• R&D Investment Levels• Vertical Integration• Cost Distribution/Sharing


Semi Technical Workforce

Chip Equipment (CEM)Technical Workforce

Major CostComponent

Critical path forcapacity

Core AND contextSignificant portion of

total workforce


7 Steps for Outsourcing a Technical Workforce

1. Develop your overallworkforce and staffingstrategy

2. Analyze the elements andnature of the work

3. Build the workforce model4. Build the outsourcing model5. Identify and qualify

outsourcingproviders/partners

6. Execute your workforcestrategy

7. Monitor results and makecorrections


Step 1: Workforce/Staffing Strategy

Overall BusinessStrategy

Goals of theenterprise

Current EnvironmentCurrent ResultsDesired ResultsOutsourcing “one part

of the strategy” “Flexible Workforce

Strategy”


Step 2: Analyze the Work

Macro ActivitiesMicro ActivitiesCore versus

ContextSkill Level/Skill Set

InventoryVolatility Index


Core:• BD• R&D• Design• Manufacturing

Context:• Food Services• Janitorial Services• Office Maintenance

Core v. Context



Context:• Food Services• Janitorial Services• Maintenance


Context:• Manufacturing• Food Services• Janitorial Services• Maintenance

Core becomes Context


Core Products

Markets Markets Markets

Products Products Products Products Products Products

CoreCompetency

CoreCompetency

CoreCompetency

CoreCompetency

Outsourcing&

Core Competencies


Skill Level/Skill Set Inventory

The complex requirements of yourtechnical workforce can be difficultto understand

Categorize those requirements byskill level and skill type

In this example we characterizedthe work in to:

– 4 Skills Levels– 3 Skill Categories

Further Definition: ProductLine/Product Segment categoriesof work

Balance granularity with ease ofuse


Volatility Index: Demand Visibility/Stability

How much lead-time doyou have for the work athand?

How much warning ofdemand changes do youhave?

How fast could the workstart and stop based onthe market?

Create 3-4 categories ofwork with similar volatility

Visibility and stabilitymight be quite different


Step 3: Workforce Model

Resource RequirementsProfile

Run Scenarios Financial Analysis

Example: 4000+ Technical Workforce

– 300+ Customer Locations– 26+ Account Organizations– 12+ Countries– 9+ Product Groups– 4-8 Skill Levels– 4 Volatility Categories


Step 4: Outsourcing Model

Labor Supply vs. Demand Integrated Supports Your StrategyExample: Flexibility Blocks

– Skill Level Mix– Where Controlled– Resource Type– Overtime Level/Hours

Worked– Loan Labor/Cross-Level

Targeted RFT Level– Bottom Demand– Average Demand

will show more of this model in Step 6


Skill LevelProduct Type

Self AssessmentSkill Level

CERTIFICATION

Cert dbCert db

Units/Revenueby Product Type

forecastforecastX =

SUPPLY

GAPGAP

TrainSkill LevelProduct Type

Loan LaborSkill LevelProduct Type

HireSkill LevelProduct Type

DEMAND

GAP FILL

=Capability Gapnow defined in

terms of Skill Level& Product Type

Model describesdemand in terms of

Skill Level &Product TypeTask Definition

by Skill Level

KnowledgeKnowledgeBaseBase

Capability Gap Fill (or Surplus)

OutsourceSkill LevelProduct Type


Step 5: Outsourcing Partners

Suppliers Identified Standard Due Diligence Key Questions

– Do they supply labor to any ofyour competitors? If so (and if itmatters), how is your intellectualproperty protected?

– How well does their culture fit withyours?

– Are they true partners or simplyvendors (and which do youprefer)?

– Is there diversification in othermarkets significant enough that indownturns they do not need tobecome a competitor simply tosurvive?

– Are they capable of meeting futureneeds as some the core skills oftoday become the contextualactivities of the future?


Outsourcing: Creating Competition

z

Manufacturing

Design for Manufacturing

Procurement

Marketing

The Waterfall Effect

Outsourcing “Creep”


Outsourcing: Creating CompetitionCEM and Semiconductor Sales

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Year

Percente

Change

From

Pre

viousYear

“Optimal”Staffing

If the Market Contracts… Who Does What?

YouYour OutsourcingPartner


Step 6: Execute

ChangeManagement

Key StakeholdersTransition Over

TimeUnderstaffed is

EasyOverstaffed is Hard


OpsFlexTM Flexible Workforce Example

100

400

300

200

100

Other

RFT

Div.

Account

Account

Region

Region 300200Division

employee control level

Peak

Average

Bottom

Headcount

Manufacturing

ABC Dept

XYZ Dept

Support Dept

Training Dept

Corp HQ

Workforce Cross Level


Step 7: Monitor and Correct

Integrate intoOperationalReviews

Metrics in Place Update Models

and Strategy asBusinessConditions Change

Annual StrategyReview

Run ModelsQuarterly


Discussion & Questions

For more information or Help With YourOutsourcing StrategyGo to: www.confoe.com or

E-mail: [email protected] or


Confoe Brings Results

Capital Equipment Suppliers Increase in utilization 10 – 15% Reduced time to competency 50% Installation cost reduction 40% Leveled regional performance (variation reduced) 40% Field Engineer admin time (reduced hrs/day) 2

– Auto generation of installation status reports– Direct link to deviation reporting– Project updates auto feed pay system

Improved Closed Loop Corrective Action– Response to customer (improved cycle time) 10X

Fab Owners (UMCi) Reduced trade labor hours for hook-up construction 15% Reduced time in daily planning meetings 60% Time to status fab daily 15 minutes UMCi Management administrative time reduction 20%


OEM Productivity• Synchronization of core order

fulfillment process & supportprocesses

• Transaction management atthe Work Management Unit,WMU level

We establish the structure and protocols required to “bridge the construction to production gap”

Customer Site• Confoe professional project

delivery as owner’s agent• OEM installs tools as individual

projects• Turnkey hook-up construction

capability

Company A

Company BCompany C Company D

Company E

Confoe Management ServicesAlignment to Alliances


OpsSync productsare tailored for easeof implementation,and the benefits arecumulative

1. The OpsSyncSM Product Family for OEMs

Immediate productivity gainsProfessional client reportsEfficient transitions between shifts

Improved resource utilization acrossclient sitesOptimum use of deployment teams

Reduced fixed costsIncreased revenue/headEffective outsourcing

Learning organizationReduced variabilityStreamlined infrastructure

2. FirstInWorldSM New Product Introduction for OEMsA vertical slice of the OpsSync capability focused on a new product.Designed to flatten the learning curve fab to fab

3. RapidRampSM for the Factory OwnerReduces the time and cost to ramp factories.

Confoe Service Products


R – Required B – Beneficial O - Optional

OpsLogFab

FocusClientFocus

GeoSync

GlobalSync

Assessment/Benchmark OpsAssess R R R R R R R R

New Product Introduction OpsNPI R O O O O

COF/Biz Process Mapping OpsAlign R R O O R R R

Governance/Change Mgt OpsChange R B B R R O R

Performance MgtIncentives/Metrics

OpsPerform R B B R R R R

Training , Crt, andDocumentation

OpsTrain B B O R R B

Workforce Planning &Staffing Strategy

OpsFlex O R R O B

Enterprise ApplicationsArchitechture

AppsArch B B B B R R R R

Application SelectionCriteria and Assessemnt AppsSelect B B B B R R B

Ops Center RapidCap R R R B B R R

AllianceOperational

Execution

AllianceSyncCapability

Product /Capability

NameRapidRamp

OpsSync

1st inWorld

ConfoeCapability/Product Matrix

confoe field service 2006 outsourcing 2006-03

Documents

confidential proprietarys4

confidential proprietaryconfoe

largestchallenges outsourcing

right job

workforce planning

workforce flexibility

semiconductor industrymarch

workforce andmore