Download - "Mastering Supply Chain Strategies"
Mastering Supply Chain Strategies by Driving Flexibility
Chris Armbruster
DirectorSupply Chain StrategyAgere Systems
Today’s business environment can drive waste.
Especially to the Inflexible.
or
Our Choice
“The quest for certainty blocks the search for meaning. Uncertainty is the
very condition to impel man to unfold his
powers.”
--Erich Fromm
It’s also the driving force behind flexibility.
Chip MakerFoundry EMSUltimate Customer
Phenomenon 2(Amplification)
Changes in demand can become exaggerated.
Phenomenon 1(Latency)
Demand can become out of phase or shift in time.
Phenomenon 3(Interference)
Noise can superimpose onto the demand signal.
+ + =
Net Effect
Uncertain Demand
Also Need Visibility & Collaboration
Flexibility Can’t Do It All
Intelligence Speed Strategy
+ +
= Flexibility
Business Intelligence
Notwithstanding its fickle nature, uncertainty can be understood, characterized, bounded and modeled.
The data exists, but must be mined for meaningful information.
Business intelligence is a key input to developing a relevant fulfillment strategy.
SpeedAll About Aligning Windows
Time
Certainty Window
Execution Window
Risk Risk
Speed of operations shrinks execution window
Speed of info stretches certainty window
Strategy
Strategy
CustomerRequirements
Product & Supply ChainArchitecture
Process & SystemBlueprint
Business Intelligence
Speed
Identify Key Flexibility Points
Where to buffer inventory & capacity (& how much)
Where to focus on speed, how often to plan & how to trigger execution
What to insource & what to outsource
Agere’s Approach to Flexibility
About Agere
Employees: 5500 Central Campus: Allentown, Pa.Regional Offices:
Santa Clara, CAShanghai, China
Assembly & Test Sites: Thailand & Singapore
Ascot, UKHong Kong
$1.7B FY05 Revenue• No. 1 in SoC chips for desktop hard drives
• No. 1 in chips for wired communications
• No. 1 in DSP chips for wireless infrastructure
• Over 5,800 U.S. patents and applications
About Our Supply Chain
Wafer Fabrication
Package Assembly
& Test
Circuit Assembly
4-10 Wks Hours2 Days
Propagation Error
As demand propagates up the supply chain, the demand signal
degrades.
+Error
Market Error
Forecasts are often based
on uncertain markets.
-Error
Using Business Intelligence To Manage Uncertainty
FlexibilityVisibility &
Collaboration
Downsides Upsides
Pro
bab
ilit
y
Demand Certainty
Short Horizon Volatility• How certain demand is over a
short horizon• Finished goods inventory policy
Long Horizon Volatility• How certain demand is over a
long horizon• Semi-finished inventory policy
Profiling Uncertain Demand
Our customers are somewhat certain about their demand over a quarter, but beyond the current week they are not sure when in the quarter it will materialize.
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
0.400
0.450
(20
0%)
(15
0%)
(10
0%)
(50
%)
0%
50%
100
%
150
%
200
%
Demand Volatility
Rel
ativ
e F
req
uen
cy
HS1224A3-DB Statistics: Volume Weighted Fit
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
0.400
0.450
(20
0%)
(15
0%)
(10
0%)
(50
%)
0%
50%
100
%
150
%
200
%
Demand Volatility
Rel
ativ
e F
req
uen
cy
HS1224A3-DB Statistics: Volume Weighted Fit
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
0.400
0.450
(20
0%)
(15
0%)
(10
0%)
(50
%)
0%
50%
100
%
150
%
200
%
Demand Volatility
Rel
ativ
e F
req
uen
cyMS455B4-61T10-DB Statistics: Volume Weighted Fit
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
0.400
0.450
(20
0%)
(15
0%)
(10
0%)
(50
%)
0%
50%
100
%
150
%
200
%
Demand Volatility
Rel
ativ
e F
req
uen
cy
MS455B4-61T10-DB Statistics: Volume Weighted Fit
Telcom Code Telcom Code
PC Industry Code PC Industry Code
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
0.400
0.450
(20
0%)
(15
0%)
(10
0%)
(50
%)
0%
50%
100
%
150
%
200
%
Demand Volatility
Rel
ativ
e F
req
uen
cy
HS1224A3-DB Statistics: Volume Weighted Fit
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
0.400
0.450
(20
0%)
(15
0%)
(10
0%)
(50
%)
0%
50%
100
%
150
%
200
%
Demand Volatility
Rel
ativ
e F
req
uen
cy
HS1224A3-DB Statistics: Volume Weighted Fit
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
0.400
0.450
(20
0%)
(15
0%)
(10
0%)
(50
%)
0%
50%
100
%
150
%
200
%
Demand Volatility
Rel
ativ
e F
req
uen
cyMS455B4-61T10-DB Statistics: Volume Weighted Fit
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
0.400
0.450
(20
0%)
(15
0%)
(10
0%)
(50
%)
0%
50%
100
%
150
%
200
%
Demand Volatility
Rel
ativ
e F
req
uen
cy
MS455B4-61T10-DB Statistics: Volume Weighted Fit
Telcom Code Telcom Code
PC Industry Code PC Industry Code
Long Horizon Short Horizon
Typical Telcom Industry
Typical PC
Industry
Lag=2 months , Correlation =0.81
0.0
50000.0
100000.0
150000.0
200000.0
250000.0
300000.0
0 5 10 15
1062975420
CLUSTER
Lag= 6 months, Correlation=0.91
-200.0
0.0
200.0
400.0
600.0
800.0
1000.0
1200.0
1400.0
1600.0
1800.0
0 2 4 6 8 10
1087588630
CLUSTER
Cluster- 6Cluster- 3
Lag= 7 months, Correlation=0.64
-200000.0
0.0
200000.0
400000.0
600000.0
800000.0
1000000.0
1200000.0
0 2 4 6 8
1088786200
CLUSTER
Cluster- 8
Lag=3 months, Correlation=0.85
-10000.0
0.0
10000.0
20000.0
30000.0
40000.0
50000.0
60000.0
70000.0
0 2 4 6 8 10 12
1079570110
CLUSTER
Cluster- 7
Leading Indicators for Clusters
Time(Weeks)
Certainty Window
Lean Manufacturing
Shrink Execution Window for Package
Assembly & Test Operations to Fit Inside
Certainty Window
0
50
100
150
200
250
300
350
1998 1999 2000 2001 2002 2003 2004
Hou
rs
Package Assembly & Test Cycle Time
Speed
More Than Just Fast Manufacturing
24 Hour Planning Cycle
Order Fulfillment & Delivery
Strategic Finished Goods Buffer
Statistically Sized.
CustomerDistributor
Forecast
Strategic Semi-finished Buffer
Statistically Sized.
Agere
OrderOrder
Shipment
Part 1 2 wks
Part 2 1 wks
Part 3 1.5 wks
Part 4 2 wks
Part 1 3 wks
Part 2 3 wks
Part 3 1.5 wks
Part 4 1 wks
Diebank and Finished Goods Buffers Sized and Located
Based on Statistical Demand Profiling and Monthly Forecast
Collaboration Meeting
EXAMPL
EEXAMPL
E
Collaboration Model: Customer, Distributor & Agere
Shipment
Customer
Subcon Loc #1Pull
Pull
PullStrategic BufferStatistically Sized
& Located.
Agere Subcon Loc #2
Subcon Loc #3
Collaboration Model: Customer, Subcon & Agere
Shipment
Shipment
Shipment
Forecast
Shipment
Shipment
Shipment
Order
Order
Order
Agere’s Flexibility Strategy
Strategy
Customer RequirementsFlexibility
ResponsivenessSecurity
Supply ChainArchitecture
Insource Assembly & TestOutsource Wafer Fabrication
Process & System BlueprintDaily Planning
Custom Built APS
Business IntelligenceDemand ProfilingLeading Indicators
SpeedLean Manufacturing
Logistics
Key Flexibility Point is just before Package Assembly & Test
Statistically size and locate buffers
Align Package Assembly & Test execution time w/ Certainty Window
Thank You!
Questions?