make or buy decision - offshoring
TRANSCRIPT
Make or Buy – Consumer
Electronics Case Study: PhoneCo
Franco Monti,
Deloitte Consulting, Zürich
ETHZ, March, 2014
© PricewaterhouseCoopers Ltd. 1
CONTENTS
1. Far East Sourcing - project definition and project plan
2. Product positioning and scope
3. Value chain considerations
4. Business case formulation
5. Outsourcing scenario
6. Supplier selection in China
7. Risk management and special care
© PricewaterhouseCoopers Ltd. 2
FAR EAST SOURCING - PROJECT DEFINITION
* Inclusively sales projections
• Project to provide feasibility scenarios and decision recommendations on December 1, 2002
• Underlying precondition: Far East sourcing must finance initial setup cost inclusively operational
cost in 2003 (i.e. break-even requirement)
Current platform primarily
designed for mid-range and
premium products ...
... however missing low-end
products and second design
options for Retail ...
... lead to tactical project
assessing how to source in Far
East
Situation
• Up to now mid-range
product series on own
platform with Elcoteq
• Low-end product of special
interest for PhoneCo
– complemented product set
– complete product set
– volume generation
– positive contribution to fix
cost
Complication
• PhoneCo likely to be
capable producing mid-
range on own platform
• however PhoneCo not
sufficiently competitive on
prices for producing low-cost
products
Project scope
• Far East sourcing
opportunities to be analyzed
to overcome complications
and prepare new business
model against increasing
competition
• Project to identify Far East
sourcing feasibility and
strategy in terms of:
– economics (business plan)*
– product definition and
development
– supplier selection and
sourcing arrangement
– supply chain management
– maintenance and repair
© PricewaterhouseCoopers Ltd. 3
RIGOROUS APPROACH TO FAR EAST SOURCING REQUIRED
• Find
implications
on:
– Distribu-
tions
– Ware-
housing
– Order
fulfillment
• Identify
danger of loss
of content on
critical parts
of supply
chain
Ac
tivit
ies
• Understand
low-end
products
suppliers and
their products
• Identify entry
barriers and
danger of
substitution
• Define new
products USPs
and target
customer
benefits
• Define target
products
Ap
pro
ac
h
En
d p
rod
uc
ts
Low-end
market
overview and
product
definition
Value chain
target
structure
Product
sourcing
economics
Risk
analysis
Supplier
selection
and sourcing
arrangement
SCM Maintenance
Plan
• Low-end
products
market
overview
• Entry barriers
and substitutes
• USPs
• Product
descriptions
• Provide
value-chain
overview and
elements to
be out-
sourced
• Understand
sourcing
options
• Target value
chain
• Sourcing
options
• Identify value
chain
economics
• Establish
target
costing and
business
case
• Run
sensitivity
analysis
• Value chain
economics
• Product target
costing/pricing
• Far East
business case
• Sensitivity
analysis for
Far East
sourcing
• Assess all
risks of Far
East
sourcing
• Risk
mitigation
plan
• List possible
supplier
profiles
• Evaluate
supplier
responses
• Run
sensitivity
analysis
• assess
negotiation
strategy
• Find
scenarios of
sourcing
arrangement
• Supplier
profiles (incl.
financials)
• Negotiations
strategy
• Scenarios for
sourcing
arrangements
• SCM plan
• SCM
vulnerabilities
• Assess
options for
repair center
and
maintenance
• Repair and
maintenance
plan
Decision to outsourcing taken: Possible
arrange- ments
© PricewaterhouseCoopers Ltd. 4
RESPONSIBILITIES AND NEXT MILESTONE
1.
2.
3.
4.
5.
6.
7.
8.
9.
Kick off
Low-end market overview
and product definition
Value chain target structure
Product sourcing economics
Risk analysis
Supplier selection and
sourcing arrangement
SCM
Maintenance plan
Recommendations to
the board
Activities KW 44 KW 45 KW 46 KW 47 KW 48
© PricewaterhouseCoopers Ltd. 5
PROJECT APPROACH - MISSING ITEMS ADDED DURING MEETING
Belongs to Activity
• Establish country and channel priorities for Far East
sourced products
• Identify legal implications
• Define necessary flexibility
– Shipment delay
– Forecast precision
– Stock building
• Decide how many products and platforms needed
• Identify process to feedback Far East sourcing
know-how into PhoneCo
• Clarify scenario differences for cordless and corded
sourcing
• Analyze quality issues to be closely monitored
• Establish financial model:
– implications on NWC
– cash out and liquidity impact
• Define new business behavior and sales approach
• Clarify customization issues per market and channel
Relevance
Low-end market overview and
product definition
Risk analysis
SCM
TBD
Low-end market overview and
product definition
Supplier selection and
sourcing arrangement
SCM
Product sourcing economics
TBD
Low-end market overview and
product definition
Not yet relevant
Not yet relevant
Not yet relevant
Items
© PricewaterhouseCoopers Ltd. 6
CONTENTS
1. Far East Sourcing - project definition and project plan
2. Product positioning and scope
3. Value chain considerations
4. Business case formulation
5. Outsourcing scenario
6. Supplier selection in China
7. Risk management and special care
© PricewaterhouseCoopers Ltd. 7
FORCES AT WORK - LOW / MID RANGE HOME TELEPHONY
Competition among existing firms
Substitutes
New entrants
Bargaining power of customers
Bargaining power of suppliers
- Demand dominates supply
- Very long payment terms
- Requirement for highly customised products
- No more/less volume commitments
- Force supplier to take over logistics (eg. Telecom Italia)
- Obligation to significantly reduce procurement cost (10-20%)
- Eventually some cost and risk of switching suppliers
- low flexibility in contractual issues (eg. L/C, long lead time, large volumes etc.)
- Spot business helps to prevent volume discounts
- Extra services such as shop merchandising or logistic functions may lock a customer
- Other/ new Far East companies eg. design houses and manufacturer, especially if $ low
- Opportunistic penetration as spot business using known brand for short time (e.g. Bernina)
- Other (consumer) electronic brands with brand extension strategy e.g. Grundig
- Strong players from other geographic markets with geographic expansion strategy e.g. Atlinks
- Competition for fixed telephony through new GSM pricing
- GSM “home zone” offers replacement of fixnet (e.g. Genion)
- SMS-box reduces need for purchase of new phone with SMS feature
- VOIP and voice enabled universal PDA devices penetrate home telephony market
(e.g. Orange& Microsoft)
- Three big companies: Siemens (brand, all big NOPs’), Philips (brand), Sagem (all big NOP’s)
- successful Far East companies:
• DBTEL (established, reliable products),
• Binatone (simply does the business)
• Vtech (concentration on huge markets/NOP’s)
• Panasonic (brand, volume)
Characteristics
© PricewaterhouseCoopers Ltd. 8
Products
presented with
feature list only
COMPETITOR PRODUCT POSITIONINGS, LOW / MID RANGE - INTERNET
EXAMPLE (1/3)
Products presented
with little text and
feature list
separately
Products positioned
through consumer
benefits and functions
Schmal und handlich
Doro
Hi-Tel
Panasonic
Siemens
79 € / 98 CHF
„Erweitere Deine Reichweite.“
„Bringen Sie Bewegung in Ihre
Telefonate!“
„Modernste Technik ganz einfach
genutzt. Es lässt sich kinderleicht
anschließen und liegt besonders gut
in der Hand.“
„Das einzigartige Styling besticht. Die
beeindruckende Farbpalette verblüfft. Und
der unglaubliche Funktionsumfang
überrascht immer wieder.“
„Produktfunktionen & Vorteile...“
„Design, völlig anders als bei herkömmlichen
Schurlostelefonen...“
„2 Telefonbücher für Familie und Freunde...“
148 CHF 98 CHF
129 CHF
138 CHF
Philips
Positioning
varies
significantly
across
packaging,
retail shelf
and on
internet
Source: Internet analysis
© PricewaterhouseCoopers Ltd. 9
Brand
Price offer - “Cheap Jack”
Impression of
‘More for less’
Guarantee
Eye catcher:
price, non-
comparable,
cool features
However
real
customer
benefits
difficult to
identify
Technical Statement
COMPETITOR PRODUCT POSITIONINGS, LOW / MID RANGE - DIRECT
MAIL CAMPAIGNS (2/3)
Source: Mailing analysis
© PricewaterhouseCoopers Ltd. 10
90 gramms
Impression
of randomly
selected
criteria
often
impossible
to judge
value or
even verify
by a
customer:
“you have
to believe this”
LCD screen permanent screen
Technical
Statement
COMPETITOR PRODUCT POSITIONINGS, LOW / MID RANGE - DIRECT
MAIL CAMPAIGNS (3/3)
© PricewaterhouseCoopers Ltd. 11
TARGET PRODUCT POSITIONING FOR ANALOG CORDLESS
C 100
“Just” a cordless
telephone
Very simple to use,
no thrills, plug &
phone without
lengthy study of
user manual
Screen for display
of numbers
To be used in the
basement or
kitchen as second
or third phone
EUP 49 EUR
C 200
Entry comfort level
cordless telephone
with larger display
Smart menu for use of
features
Easy call of pre-
defined number for
kids (baby call)
Handfree speaking
with handset
Large enough memory
for friends and familly
numbers and names
EUP 79 EUR
C 150
Simple cordless
telephone - entry
model
Menu guidance for
ease of use
Basic telephone
book for storage of
some names and
numbers
Possibly with SMS
function targeted for
kids communication
EUP 69 EUR
© PricewaterhouseCoopers Ltd. 12
CONTENTS
1. Far East Sourcing - project definition and project plan
2. Product positioning and scope
3. Value chain considerations
4. Business case formulation
5. Outsourcing scenario
6. Supplier selection in China
7. Risk management and special care
© PricewaterhouseCoopers Ltd. 13
IDENTIFICATION OF THE TARGET VALUE CHAIN STRUCTURE
What is the objective of Far East sourcing?
• Reduce cost
• Accelerate new product introduction
• Improve access to markets through complete product set
• Learn from partnership (access to up-to-date technology)
• Reduce future capital requirement / increase cash flow
• Be 'asset light'
R&D
Product
develop-
ment
PCB*-
design
and
proto-
typing
PCB-
making
PCB-
assembly
and
testing
Assembly
and
testing of
sub-
systems
Assembly
and
testing of
final
system
Logistics • Distri-
bution • Ware-
housing • Order ful-
fillment
Marketing
and sales
Support
services
Marketing/
sales Product development PCB-making
Support
services
Final system assembly
and delivery Assembly
Which element in the value chain do I want to outsource?
ELECTRONIC MANUFACTURER EXAMPLE
*Printed Circuit Boards
© PricewaterhouseCoopers Ltd. 14
ELCOTEC-SOURCING – TODAYS VALUE CHAIN
• All the major
processes are
PhoneCo own
processes (R&D,
Marketing, Sales,
Quality, Logistics)
• Tooling, Sourcing,
Manufacturing &
part of logistics
are outsourced
• This processes
must be changed
if we want to do a
far-east-sourcing
Customer 1
DTAG
Customer 2
Swisscom
Customer 3
Retail CH
CMS
CMS
display
subassembled
PCB’s
CMS
microtel
Prototyping
Mechanic
Design
Industrial
Design
Shipment
papers
Logistics
Transport
CMS parts
Sourcing Test-
equip-
ment Ware-
house
NPI
Industriali-
sation
Manuf-
acturing
Elcoteq
Hungary
Tooling Plastic
manu-
facturing
WEZ
Ware-
house
CBA CH
PhoneCo
Qualifing
R&D
HW
R&D
SW
Quality
Marke-
ting
Sales
Logistics
Project-
mgmt.
© PricewaterhouseCoopers Ltd. 15
Options / Scenarios
1. Direct
Sourcings
1a) Product
direct sales
1b) Chinese
Suppliers
1c) Euro
Suppliers
2. “PhoneCo-
Asia“-Sources
2a) PhoneCo-
Asia over DH
2b) PhoneCo-
Asia direct to
Manufacturer
3. Designhouse
(DH) Sources
4. ODM Sources
FAR-EAST
SOURCING
VALUE CHAIN –
SIMPLIFIED VIEW
-PhoneCo office
-IPO Hongkong
PhoneCo-
Asia
Customer 1
DTAG
Customer 2
Swisscom
Customer 3
Retail CH
Ware-
house
CBA CH
China Manufacturer with
internal Designhouse
DH
China-Suppliers
with a product
basket
Buy in
NPI
Industriali-
sation
ASS
1a)
2)
China Manufacturer with
internal Designhouse
3)
4)
2a)
2b)
2a)
ODM
China Manufactuer
Euro-Suppliers
with a product
basket
Buy in
1b)
1c)
PhoneCo
PhoneCo
© PricewaterhouseCoopers Ltd. 16
FAR-EAST
SOURCING
VALUE CHAIN –
DETAILED VIEW Options / Scenarios
1. Direct
Sourcings
1a) Product
direct sales
1b) Chinese
Suppliers
1c) Euro
Suppliers
2. “PhoneCo-
Asia“-Sources
2a) PhoneCo-
Asia over DH
2b) PhoneCo-
Asia direct to
Manufacturer
3. Designhouse
(DH) Sources
4. ODM Sources
BACKUP
-PhoneCo office
-IPO Hongkong
Sourcing
Buy in
Qualification
Quality
Supervision
Customer 1
DTAG
Customer 2
Swisscom
Customer 3
Retail CH
Shipment
papers
Logistics
Transport
Ware-
house
CBA CH
CMS
CMS
display
subassembled
PCB’s
CMS
microtel
CMS parts
Sourcing
Ware-
house
Manu-
facturing
China
Manu-
facturing
CMS plastic
manufacturing
Test-
equip-
ment
NPI
Industriali-
sation
Proto-
typing
Tooling Industrial
Design Mechanic
Design
R&D
HW
R&D
SW
DH
Qualifing
Shipment
papers
Logistics
Transport
R&D
HW
R&D
SW
DH Qualifing
China-Suppliers
with a product
basket
Buy in
NPI
Industriali-
sation
Repair
Hotline
Spare-
handling
ASS
1a)
2)
CMS
CMS
display
subassembled
PCB’s
CMS
microtel
CMS parts
Sourcing
Ware-
house
Manu-
facturing
China
Manu-
facturing
CMS plastic
manufacturing
Test-
equip-
ment
NPI
Industriali-
sation
R&D
HW
R&D
SW
Proto-
typing
Tooling Industrial
Design Mechanic
Design
DH
Qualifing
3)
4)
2a)
2b)
2a)
PhoneCo
Asia
CMS
CMS
display
subassembled
PCB’s
CMS
microtel
CMS parts
Sourcing
Test-
equip-
ment
Ware-
house
Manuf-
acturing
ODM
China
Manu-
factuer
Euro-Suppliers
with a product
basket
Buy in
CMS
CMS
display
subassembled
PCB’s
CMS
microtel
CMS parts
Sourcing Test-
equip-
ment Ware-
house
NPI
Industriali-
sation
Manuf-
acturing
Elcoteq
Hungary
End-
assem-
bling SW Branding
Box, Manual,
Labeling
1b)
1c)
PhoneCo
Qualifing
R&D
HW
R&D
SW
Quality
Marke-
ting
Sales
Logistics
Project-
mgmt.
© PricewaterhouseCoopers Ltd. 17
QUALITATIVE VALUATION OF SOURCING OPTIONS 1a)
Product
direct sales
High High Medium Low High Low High
interest interest interest interest interest interest
1b)
China
Suppliers
1c)
Euro
Suppliers
2a)
„PhoneCo
Asia" Sources
via DH
2b)
„PhoneCo
Asia" direct
Sources
3)
DH
Sources
4)
ODM
Sources
Characteristics
PhoneCo source
products over an
ODM partner
PhoneCo source
products over a DH
PhoneCo has a
partner or an own
organisation which
can source direct
products in China
PhoneCo has a
partner or an own
organisation which
can source
products in China
over DH or ODM
PhoneCo source
products over a
China Supplier
which has a
product-basked
PhoneCo source
products over a
China-Supplier
which has a
product-basket
PhoneCo sources
products directly
through a chinese
manufacturer
PhoneCo
-> ODM
(-> Designhouse)
PhoneCo
-> Designhouse
-> China
Manufacturer
PhoneCo
-> PhoneCo-ASIA
-> China
Manufacturer
PhoneCo
-> PhoneCo-ASIA
-> China
Designhouse
-> China
Manufacturer
PhoneCo
-> Euro Suppl.
-> China
Manufacturer
PhoneCo
-> China Suppl.
-> China
Manufacturer
PhoneCo
-> China
Manufacturer Value Chain
Scenarios
Pros +
and
Cons -
+ ODM makes
better price
pressure on the
Designhouse
- flexibility ?
- no experiences
+ most flexibility for
product definition
+ technologie
advantage
+ Designhouse
has ODM
experience
+ more then one
ODM
- long value chain
+ local people
+ short communi-
cation path
- expensive to bulid
up a new organi-
sation
+ shorter distance
for cooperation
+ better
understanding
same culture
+ suppliers has a
product basket
- Euro-Supplier is
more expensive
then china
supplier
+ local supplier
with direct
connections
+ suppliers has a
product basket
- long distance for
cooperation
+ cheapest option
+ suppliers has a
product basket
- chinese mentality
unknown
- no experience
+ local people
+ short
communication
path
+ over Design-
house we have
more flexibility to
define product
- expensive to bulid
up a new organi-
sation
- longer value chain
© PricewaterhouseCoopers Ltd. 18
CONTENTS
1. Far East Sourcing - project definition and project plan
2. Product positioning and scope
3. Value chain considerations
4. Business case formulation
5. Outsourcing scenario
6. Supplier selection in China
7. Risk management and special care
© PricewaterhouseCoopers Ltd. 19
VALUE CAPTURED = NPV OF ADDITIONAL CASH FLOWS
NPV of
ongoing
business
Fixed
costs
Variable
production
costs
Recurring
investments
Interaction
cost
Exceptional
items
Tax impact NPV with
deal
Product
purchase
NPV of additional
interaction cost
(monitoring of
supplier, management
of the supply chain…)
Net NPV of one-off costs
and investments, i.e. asset
sale, restructuring costs,
required investments such
as IT-system upgrading
NPV of product
purchasing cost to the
manufacturer, driven by
negotiated unit billing
price and volumes
All cash costs directly related to
production are avoided in case of
outsourcing, including the
recurring investments required to
maintain the plants and lines
Value of the
deal captured
by the
outsourcing
company
Purchasing price is not the
unique driver of additional
value captured by the
outsourcing company
SCHEMATIC
© PricewaterhouseCoopers Ltd. 20
BUSINESS CASE FORMULATION
The essence of DCF is to represent the cash inflows and outflows of this project at a common point of time so that they can be compared in an appropriate was
Because DCF weigths The essence of DCF is to represent the cash inflows and outflows of this project at a common point of time so that they can be compared in an appropriate was
Becaus DCF weigths
C200 Best CASE Project NPV 43
Variables
Fiscal Year 2003 2004 2005 2006
Revenue side Liquidation
Volume in '000 Units 80 200 200 0 in units
Consumer price (EUP) 80 72 65 0 in EUR Only 10% price decrease
Transfer Price per unit 42 38 34 0 in EUR
Standard cost per unit 38 32 27 0 in EUR
Standard Margin 9.8 14.8 19.5 0.0
SG&A Total 11 11 11 0 in %
Marketing 2.5 2.5 2.5 0.0 in % Sales Smaller marketing cost
Sales 2.5 2.5 2.5 0.0 in % Sales Smaller sales cost
Outsourcing Management (Swisscom) 5.0 5.0 5.0 0.0
Overhead 1.0 1.0 1.0 0.0 in % Sales
COGS Total 3,147 6,622 5,629 0
Product Procurement 3,040 6,460 5,491 0
Warranty 61 129 110 0
Logistics 16 33 28 0
Testing 30 65 55 0
Testing in % 1 1 1 0
Warranty % 2.0 2.0 2.0 0.0
Logistics % 0.5 0.5 0.5 0.0
Initial and recurring CAPEX 110 55 55 0
Initial setup cost in EUR '000 100 0 in EUR
Legal cost 10 5 5 0 in EUR
Annual costs for improvement 50 50 0 in EUR
Net Working Capital
Average days of inventory 120 120 120 120 in days
Average days of oustanding A/R 180 180 180 180
Average neccessary inventory 1,035 2,177 1,851 0 in EUR
Average necessary A/R 1,499 500 400 0 in units
Average outstanding days of inventory: 42 days sea freight + 14 days production + 42 days component lead + 7 days LC opening
Average outstanding days A/R: 120 days of product provisioning + 60 days deferred payment
Average A/R equals COGS/oustanding A/R days
Cost of Capital 5 in %
Investment Justification
Intermediate Calculations
less setup investments
Higher volumes (only year 04 and 05!!)
15% decrease of SHK
2003 2004 2005 2006
Investment Justification C200 Estimated Launch 8/2003 Liquidation
Swissvoice Revenue 3,368 7,579 6,821
- COGS (Standard Cost) 3,147 6,622 5,629
Contribution I (C1) in CHF '000 222 957 1,192
Contribution I (C1) in % 7 13 17
- SG&A 371 834 750
= Operating Profit -149 123 442
- Initial and recurring CAPEX 110 55 55
- Increase Inventory 1,035 1,143 -327 -1,851
- Increase Accounts Receivables 1,499 -999 -100 -400
= Cash Flow from Operations -1,758 1,067 487 400
Discounted Cash Flows -1,674 968 421 329
Net Present Value (NPV) 43
PhoneCo Revenue
Average outstanding days of inventory: 42 days sea freight + 14 days production + 42 days component lead + 7 days LC opening
Average outstanding days A/R: 120 days of product provisioning + 60 days deferred payment
Average A/R equals COGS/oustanding A/R days
© PricewaterhouseCoopers Ltd. 21
CONTENTS
1. Far East Sourcing - project definition and project plan
2. Product positioning and scope
3. Value chain considerations
4. Business case formulation
5. Outsourcing scenario
6. Supplier selection in China
7. Risk management and special care
© PricewaterhouseCoopers Ltd. 22
TYPES OF OFFSHORE ARRANGEMENTS
Relationship type Pros
Off-shore development
center
• Maximum value from off-shore
outsourcing
• Significant managerial
and financial
commitment
Cons
Joint venture • Risk mitigation without losing
control over partner
Exclusive outsourcing • Lower commitment to off-shore
outsourcing
• Lower upfront investment
• Easier exit strategy
• Value from offshore
outsourcing is divided
between vendor and
client
Multiple vendors • All the benefits from exclusive
outsourcing
• Competitive pricing
• No long-term commitments
• Multiple knowledge
transfer efforts
• Threat of experienced
assets leaving
Co
mm
itm
en
t
+
–
EXAMPLE
Example
• PhoneCo
Asia
• Swisscom
Testlab Asia
• VTech
arrangement
• DRS,
VTech,
Binatone
© PricewaterhouseCoopers Ltd. 23
CONTENTS
1. Far East Sourcing - project definition and project plan
2. Product positioning and scope
3. Value chain considerations
4. Business case formulation
5. Outsourcing scenario
6. Supplier selection in China
7. Risk management and special care
© PricewaterhouseCoopers Ltd. 24
SELECT THE RIGHT PARTNER: SCREENING PROCESS
Define long list of
candidates
Select shortlist
based on basic
criteria
Shortlist
Activity
Main criteria
for selection • Experience in the
manufacturing of
products similar to
the one to be
outsourced
• Suitable geographic
location
• Trust worthiness
• Fit on broad criteria:
– Response to RFQ
respecting the desired
Service Level
– Cost efficiency
– Suitable size
– Financial performance
• Fit on detailed criteria, such as:
– Lack of strategic / competitive conflict
– Capacity to absorb the different
outsourcing contracts
– Reputation of reliability
– Flexibility of forecast and engagement
mechanism
– Breadth of capabilities
– Adaptability to future needs
– Technological potential
• Long list (5-10
companies)
• Reduced list (3-4
companies) • Short list
(2 companies)
End products
EXAMPLE
Send a Request for
Quotation (RFQ)
Direct contact to evaluate fit
on detailed criteria
Final decision based on
negotiation result (sharing of
the deal value)
The 'right
partner'
© PricewaterhouseCoopers Ltd. 25
CONTENTS
1. Far East Sourcing - project definition and project plan
2. Product positioning and scope
3. Value chain considerations
4. Business case formulation
5. Outsourcing scenario
6. Supplier selection in China
7. Risk management and special care
© PricewaterhouseCoopers Ltd. 26
FAILURE CAN HAVE SERIOUS RAMIFICATIONS
Potential ramifications
• Miss one-time and year-on-year financial goals
• Delays in outsourcing timeline
• Lowered workforce morale and productivity
• Customers become dissatisfied
• Consume greater share of management's mind
• Large switching costs should operations need to be brought back in-
house
© PricewaterhouseCoopers Ltd. 27
AFTER SALES SERVICES (ASS) CONCEPT FAR EAST
supplier Stock
PhoneCo Distr. POS
Service
Desk
End
User
ASS
Center
Hot-
line
Substitution
Local
ASS-Center
Distribution Channel
Key Points
• Our warranty obligations will be satisfied through over-delivery. Warranty conditions will be identical to those of the supplier
• The service desk is restricted to exchange of Handset or Basestation in warranty cases.
• PhoneCo offers neither repair nor spare parts.
• The supplier makes an over-delivery of about 4% at the rate of 1:4 Basestation / Handset
• If the return rate can be proved to be higher than appr. 6%, substitution will be made 1:1 by the supplier. The distribution
channel is responsible for the corresponding statistic.
• An extended ASS-concept could be taken in account with a distribution channel with more than 100’000 pieces.
Order incl. over-delivery