The Introduction of Lean Manufacturing Concepts at Qualcomm

2

Introduction: Agenda

The Value Chain

Lean Concepts

Benefits of Lean Manufacturing

2 Oracle Instances

The QCT instance

The Quantum instance

Why 2 instances?

Separation of Production and Non-Prod Procurement

2007 Implementation Sites

3

The Value Chain

Value Chain Processes

MarketProducts /Services

SellProducts /Services

Plan /Manufacture

Distribution / Service

& Support

ProcureMaterials /Services

Generate Demand Fulfill Demand

Develop-IntroduceProducts /Services

The Quantum value chain is driven by Qualcomm’s leadership position as the developer of CDMA technologies. QCT CDMA technologies accounts for 90-95% of QSCO demand, principally FFA’s and SURFS (test equipment used to test chip quality and functionality). The remaining 5-10% of QSCO demand is generated by QWBS (Qualcomm Wireless Business Solutions), which manufactures OmniVision and other wireless products.

4

Lean Concepts: The 5S System

Japanese Meaning Translation

Seiri Organization Sort

Seiton Orderliness Set-in-Order

Seiso Cleanliness Shine

Seiketsu Standardized Cleanup Standardize

Shitsuke Discipline Sustain

5

Lean Concepts

T O :

Inconsistent InventoryInconsistent Inventory Kanbans, Min/Max and Safety Stock Demand TriggersKanbans, Min/Max and Safety Stock Demand Triggers

Disconnected ForecastsDisconnected Forecasts Intelligent ForecastsIntelligent Forecasts

Inconsistent Signal to PartnerInconsistent Signal to Partner Defined Signal to CM PartnerDefined Signal to CM Partner

Complex ProcessesComplex Processes Radical SimplificationRadical Simplification

F R O M :

Predominately “Push”Predominately “Push” “Pull” from the Partner“Pull” from the Partner

6

Benefits of Lean Manufacturing

Reduced inventory across the supply chain

Greater predictability around lead times and on-time shipments

Increased reliability the right product at the right time at the right price

Better customer satisfaction due to greater accuracy in forecast delivery

Better data, robust processes and systems management effectiveness

Increase control over quality, defects and root cause of defects (6Sigma)

Optimize operations between existing QSCO and “shelter” organization

Better manage throughput with new Contract Manufacturing partner

Position Qualcomm for rapid growth in emerging business and markets

7

2 Oracle instances: The QCT Instance

Qualcomm

SAT OrganizationsFAB Suppliers

PO for DIE items

Service PO for FG items

3B

2_C

-I messa

ge

from

FAB

3B

2_C

-O m

essa

ge

to S

AT

4B

2 m

essa

ge

from

SA

T

QCT instance has two application servers: 11.5.8 and 11.5.9 (lot controlled)

Quantum instance is an Oracle 11.5.10 instance, with min. customizations

Each organization “owns” its own inventory; common inventory items

QSCO (manufacturing) has no P&L, and will liquidate costs to other BU’s

QCT Instance

8

2 Oracle instances: The Quantum Instance

9

Why two instances?

The QCT instance is geared to Qualcomm’s chip manufacturing business, is heavily customized, and uses “lot control” and other features that are not attractive to the Qualcomm discrete manufacturing businesses

The QCT instance uses two application servers, one Oracle 11.5.8 and the other, an Oracle 11.5.9 instance, primarily to support Oracle’s Advanced Supply Chain Planning (ASCP) engine

The QCT instance does not include project accounting, nor does it make allowance for international rollout

There is continuing discussion in the press about “spinning off” the chip business

10

Separation of Prod & Non-Prod Procurement

Direct and NPI

Shelter and Bldg M

Indirect and Services

Corp Procure

11

SD1

SD2

Quantum Implementation Sites

Actual sites, 2007 rollout

QMT Taiwan

San Diego

Tijuana, MexicoQMT San Jose

India(3)

China(3)Japan(2)

Korea(2)

UK(5)

EU (DE, ES, FR, IT, NE, SE) (6)

Mexico(6)

Israel(1)

Australia (2)

Argentina (1)

Brazil (1)

Canada (1)

Potential sites, 2008 + global rollout

Indonesia (1)

Russia (2)

Singapore (1)

South Africa (1)

Taiwan (3)

Vietnam(1)

12

Lean Manufacturing: Agenda

Inventory Orgs Structure

ASCP Overview

Forecasts and Sales Order Drive Demand

Business Processes

SCO (Supply Chain Organization) Procurement

Shelter Manufacturing and CM Procurement

NPI Procurement

Quality and RTS Highlights

The concept of a “Virtual MRB”

Lean Manufacturing “to be” Model

Conclusion

13

Qualcomm Inventory Orgs Structure

QFT OU QMT OU975-980

QC US BUSINESS GROUP

QC US SET OF BOOKS

QWBS OU QWS OU QGOV OUQSCO OU

QWBS SAN DIEGO QWS QGOV

QSCO SD1

QSCO MEX

QWBS REPAIR SAN DIEGO

QWBS REPAIR N.CAROLINA

Inventory Org Structure for US Entities

INVENTORY

QCT OU

QCT

RPR FG

RPR IP

RPR STAGE

MRB

RTS

OFFSITE

STAGE

INVENTORY

MRB

RTS

OFFSITE

STAGE

INVENTORY

MRB

OFFSITE

STAGE

WFR

INVENTORY

SCCA2__Velociti, Inc. (Barstow) SCCA4__Sacramento Valley Ford Trucks SCCA5__Connect Wireless Solutions SCCO1__Thermo King of Denver SCCT1__Freightliner of Southern Connecticut

SCGA1__Cetacea Sound of Atlanta SCIL1__Illinois Auto Central Thermo King SCIL2__Truck Centers, Inc.

SCFL1__Select Communications SCIN2__Stoops Freightliner SCIN1__Great Lakes Thermo King

SCKS1__Velociti, Inc. (Kansas City)

050-099 225-249100-124001-049 125-149

050

054

052

001

002

100 125

QWS REPAIR

RPR FG

RPR STAGE

RPR IP

101

RESERVEDQGOV REPAIR126

QWBS REPAIR MEXICO

RPR IP

053

ITEM MASTER000

RPR COMP

RPR IP

RPR FG

RPR STAGE

Last Updated: 12/12/2006 7:32 PM

RPR FG

RPR STAGE

RPR IP

RPR INV

STAGE

BU: 00300-QSCO

PO: 100000000 PO: 200000000 PO: 300000000 PO: 400000000

BU: 00002-OMNI

BU: 00007-QWS

BU: 00005-QGOV

PO: 500000000

BU: 00003 - QCT 00009 - QCTST

NL

N R

N R

NL

R

RPR INV

R

N

NL R

N

R

NL N R

N R

R

NL R

NL N R

N R

NL R

R

N R

BLDG M

BLDG MX M

BLDG MX M

BLDG CAR A

BLDG AK

BLDG AK BLDG M

BLDG M

BLDG W

BLDG M

BLDG M

QUALCOMM Legal Entity

- Division 01 -

RCPT: 4000001

RCPT: 1000001

RCPT: 2000001

RCPT: 3000001

RCPT: 1000001

RCPT: 4000001

RCPT: 5000001

RCPT: 2000001

RCPT: 1000001

RCPT: 2000001

RCPT: 1000001 RCPT: 1000001

RTS

DROPSHIP NL

CUSTEVAL

HOLDS

DROPSHIP NL

QSCO QCT006 BLDG WRCPT: 6000001

QFT950

PO: 3100000000

950-974

BU: 00257-QFT

RCPT: 1000001

QMT 975

PO: 5100000000

BU: 00247-QMT

RCPT: 1000001

NL R

INVENTORY N

INVENTORY

MRB

OFFSITE

WFR

N

WIP NL

SOI NL

INVENTORY

MRB

OFFSITE

WFR

N

WIP NL

SOI NL

MRB

OFFSITE

WFR

WIP NL

SERVICE CENTERS055

= Item Validation Org (Allows different buyer per item per inv org)

001-049 = Inventory Org Codes

= Item Master Org (Houses all items found within Oracle)

= Reservable= Nettable

BU: 00001-CORP

RCPT: 1000001

NL

N

R

= Not Locator Controlled= Business Unit Number-Name= Receipt Sequence (7 digits)

PO: 1XXXXXXXX

LEGEND

= Default Backflush Subinventory

= PO Sequence (9-10 digits: 100000001, 1100000001, 2100000001)

MRB

RTS

QCT REPAIR226

RPR FG

RPR STAGE

RPR IP

NL R

R

BLDG MRCPT: 2000001

STAGE NL N R

CORP OU

PO: 900000000

275-299

BU: 00001 - CORP 00017 - INVC 00018 - QPROJ 00092 - MFT 00008 - QPAG 00016 - QCCU 00167 - QCDT 00195 - QCSEC 00204 - QGBD 00106 - QCWK

RCPT: 1000001

CORP275

INVENTORY N R

MRB

RTS

STAGE NL N R

SOI MRB

RTS

N

N

N

RTS

NL

SOI MRB NL

REPAIR COS

REPAIR COS

REPAIR NPI

MUI

PO: 2100000000

BU: 00099-MUI

RCPT: 1000001

925225

INVENTORY N R

OFFSITE

RTS

MRB

WFR

INVENTORY N R

OFFSITE

RTS

MRB

WFR

INVENTORY N R

OFFSITE

RTS

MRB

WFR

SCMN1__Thermo King Sales & Service SCNC1__Carolina Engine

SCOH1__P.J.'s - Fabricating, Inc. SCOK1__Central States Thermo King

SCOR1__Thermo King Northwest

SCNE1__Thermo King Christensen

SCPA1__Thermo King of Philadelphia

SCTX1__Thermo King of Dallas SCUT1__Thermo King Intermountain SCVA1__Radio Communications of VA / MOBEX

SCTN1__Cetecea Sound of Memphis

SCMI2__Wolverine Freightliner

RPR FG

RPR STAGE

RPR IP

NL R

R

CORP REPAIR276RCPT: 2000001

RPR FG

RPR STAGE

RPR IP

NL R

R

QMT REPAIR976RCPT: 2000001

ERROR

GSTAR DEV

GSTAR RSVD

N

N

SOI

R

NNL

R

RR

R

RRR

STAGE N RSTAGE N R

NL

OFFSITE

WFR

NLNL

R

QAPP OU

QAPP

175-182

PO: 600000000

BU: 00004 - QAPP

BLDG __RCPT: 1000001175

QGST OU

QGST

183-190

PO: 700000000

BU: 00166 - QGST

BLDG __RCPT: 1000001183

MUI OU925-949

QWI OU

QWI

191-199

PO: 800000000

BU: 00011 - QWI

BLDG __RCPT: 1000001191

QTL OU

QTL

200-224

BU: 00013 - TECH

BLDG __200

Snaptrack Legal Entity

- Division 33 -

QSERV OU

QSERV

900-909

PO: 1100000000

BU: 00010 - QSERV

BLDG __RCPT: 1000001900

MediaFLO USA Legal Entity

- Division 82 -

QC Flarion Legal Entity

- Division 77 -

QC MEMS Legal Entity

- Division 74 -

QC International Legal Entity

- Division 04 -

QCINT OU

QCINT

910-924

BU: 00283 - QCINT

BLDG __910

QC Global Trading Legal Entity

- Division 25 -

QGTC OU

QGTC

981-985

PO: 4100000000

BU: 00060 - QGTC

BLDG __RCPT: 1000001981

QCT Asia Pacific Legal Entity

- Division 31 -

QCTAP OU

QCTAP

986-990

PO: 6100000000

BU: 00014 - QCTAP

BLDG __RCPT: 1000001986

QWBSS Legal Entity

- Division 11 -

QWBSS OU

QWBSS

875-899

BU: 00152 - QWBSS

BLDG __875

QMT Cayman Islands Legal Entity

- Division 76 -

QMTCI OU

QMTCI

850-875

BU: 00250 - QMTCI

BLDG __850

QMT TWN 977

RCPT: 1000001INVENTORY N R

OFFSITE

RTS

MRB NL

WFR

STAGE

QMT SJC 979

RCPT: 1000001INVENTORY N R

OFFSITE

RTS

MRB NL

WFR

STAGE

RPR FG

RPR STAGE

RPR IP

NL R

R

NL

NL

QMT TWN REPAIR978RCPT: 2000001

R

R

NL N R

N RNL

R

FGSTOCK

STAGE

N

N R

RR

STAGE N RNL

NL

RTS R

R

R

STAGE N RNL

DEPOT INV N RNLDEPOT WIP NNL

PROTO NNLDEBUG NL

QWS MEX102

HOLD N

OFFSITE

FGI-PSTK N R

RPR-INCMNG

RPR PSTK R

INVENTORY

MRB

STAGE NL N R

N R

RTS R

FGSTOCK N

INACTIVE N R

INACTIVE N R

14

ASCP Overview

Generate Baseline Forecast

Oracle Modules:

ODP ASCP CollaborativePlanning

iSupplierPortal

OrderManagement

In addition, DBI may be used for KPI / Metric reporting

Collaborative DemandPlanning

Generate ConsensusForecast

Capture Inventory Visibility

Collaborate withContract Manufacturer

Generate ConstrainedLong Term Supply Plan

Generate Short TermManufacturing Plan

Release Work Ordersto Contract Manufacturer

Release Purchase Ordersto Component Vendor(s)

Check Availability& Capacity (ATP)

• Demand driven by forecasts and Sales Orders (depending on OU)

• As Demand drops into the Planners Workbench, Planners route “make” orders to MES (“Shop Floor Control”), material requirements are identified, and PO’s are created and transmitted to Suppliers via EDI (Harbinger)

• Entire production procurement process is automated, end-to-end

15

Forecasts Drive Demand into QSCOQC US BUSINESS GROUP

QC US SET OF BOOKS

QSCO OU

MFG SAN DIEGO – SDI001

Business Group

Set of Books

Legal Entity

001-049

ITEM MASTER000

QC LEGAL ENTITY

MFG END TO END PROCESSQCT

MFG MEXICO002

QCT006

Supplier

Customer

Production material received from supplier

Production POs

Sales OrderShipments

Manual MOs

Demand

Manual MOs

Demand

Manual MOs

Demand

Supp

ly

Prod

uctio

n PO

s

QCT OU

QCT225

225-249

Suba

ssem

bly

Supp

ly

SubassyDem

Forecast/SO Demand

Projects

Issue to Projects

• Forecasts or SO’s created in QCT, MUI, QMT OU

• Demand is placed against QSCO OU, 3 inventory orgs

• PO’s are generated and sent via EDI to suppliers

16

Adjustments to Plan made with

Arrow

Forecasts entered via spreadsheetReleases

against Blanket PO (EDI 850)

Sales Orders Drive

Demand

Forecast (EDI 830)

Includes VMI, SOI, “toll

manufacture”

17

Sales Orders Drive Demand

Run ASCP Engine

SIM versus REGEN Run

PO’s using EDI 850

Forecast using EDI 830

18

ICG Process: Item is

“Planning Enabled”

PO’s marked with an “-NPI”

19

Oracle Configuration: Item Master (1 of 2)

Defines period for which

releases created

Create Supply to Match Demand

Indicates an “Active Item”

20

Oracle Configuration: ASCP Engine (2 of 2)

ASCP Plan is not Constrained

EnforcedDemand Drives

the Planning Engine

21

Quality and RTS Design Highlights

Uses standard Oracle hooks from Procurement to Quality

8 Quality Collection Plans developed for each “state” an NC’ed item may take

Handles RTS for both Production and Ancillary Items

Covers all RTS scenarios: Credit Outside Rework SOI (Supplier Owned Inventory) Legacy Receipts

Utilizes standard Quantum shipping process (custom, integration with RTS)

Leverages standard Oracle WO/PO process to capture all relevant inventory consumption, item conversions, labor charges and other variances

Improves A/P debit memo process using the AP Open Invoices API for automatic debit memo creation

22

Automated

QUALCOMM “Virtual” MRB Process

RepairVendor

DispositionSub (SQE)

Scrap

Factory

Part is not salvageableand is scrapped.

NC part is sent tooutsourced repair

facility

Supplier

MRBSub

RTS/RTV( Credit/ SOI)

Factory receives part, and after inspection (“reject”),transfers NC part to MRB Inventory.

Scrap

OSP

Material Receipt into MRB Inventory

RTS Process: Create OM Shipping Lines from Receipt Lines.

“Accept, Use as Is”

“Accept Use as Is”

NC part is retuned toMRB Sub-inventory

Rework: Manually Create Work Order for internal rework items

NC Process Start

RTS(Buyer)

Hold

Manual

Work OrderNC Rework

Inv Move

Key

Collection Plans

• Master Main

• Detail• Audit

• Disp Master

• RoHS-WEES

• WFR Master • RTS Master • OSP Master

• RCV INSP

23

Quality Automated Processes (incl. RTS)

Automatic Creation of Sales Orders

Trigger on RTS disposition

Utilize Item set up

“Feed” Shipping documents

Create Vendor address (site)

Automatic E-mail Notification to next Person in Chain

Reports

24

ERPOrderMgmt

LEAN Process Flow “To Be” Model

Resp

MPS Planning

Contract Manufacturer

ERP

Customer

Health Monitoring

Eng Change Mgmt

Qualc

om

mS

up

ply

Ch

ain

Part

ner

MRP Planning

Bad Board/ Virtual MRB

Process

Pack-out

ROP Sizing

Costing

Transit

SLC

CM Pack-out

Kanban/ROP

Component Mgmt

Kanban/ROP

Kanban/ROP

CM Dist Site #`1

Transfer FGI to Company

CM Dist Site #2

Kanban/ROP

CdeC Site

On line Orders

Conclusion