operations overview - molex · – air to sea freight for automotive product ... pricing innovation...
TRANSCRIPT
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Operations OverviewOperations OverviewLiam McCarthy
President and Chief Operating Officer
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Restructuring Program CompleteRestructuring Program Complete3 year process to reorganize and restructure from geographic to global product focusTotal cost $315 millionTotal annual savings $205 million
– 39 manufacturing facilities (from 53) – 28 customer service facilities (from 50)– 9 logistics hubs (from 16)
Reduced CapexSequential savings = $2M in Q1, FY11 and $3M in Q2,FY11
Results in 14% operating margin
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AsiaAmericasEurope
3.7M2.2M1.3M
5.0M2.2M0.7M
Total Square Footage 7.2M 7.9M
Number of Locations 53 39
Manufacturing Footprint by GeographyManufacturing Footprint by Geography
Mfg. Sq. FootageFY07 FY10
Fewer, but larger, fully-integrated facilities
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Strong Asia PresenceStrong Asia Presence
Sales Revenue %
Asia 60%R.O.W.
40%
Asia 62%R.O.W.
38%Mfg. Revenue %
China 28%
China 20%
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Chengdu, China1,100,000 sq. ft. Rapidly expanding operation for CPD Division, with tremendous technology. Excellent global tool-room.
Vietnam114,000 sq. ft.
Expanding operation and focus of MPD Division
transfers.
Newest Manufacturing FacilitiesNewest Manufacturing Facilities
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China Cost / Productivity ChallengeChina Cost / Productivity ChallengeChina GDP growth will drive consumer spending and consequently our revenueRisk is spread - positioned in several locations in China, including western ChinaMolex’s plants in China are technology driven, and capable of becoming less dependant on low cost labor over timeCapabilities in Molex China operations are excellent with a strong work ethic and disciplined processes
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Clear Path to a 14% Operating MarginClear Path to a 14% Operating Margin
Target
Eliminate Transition
CostsReduce Unusual Logistics Costs
Restructuring Benefit
June 2010
11.1%
14.0%
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Transition Costs Breakdown by ImpactTransition Costs Breakdown by Impact60%
Logistics
Logi
stic
s40%Plant
Utilization
Plan
t Util
izat
ion
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Eliminate Transition & Logistics CostsEliminate Transition & Logistics CostsLogistics and Demand Planning
– Added a second warehouse in Europe– Added capacity to alleviate bottlenecks– Air to Sea freight for Automotive product– Maximize sea freight across the business
Plant Utilization– Learning curve for receiving plants– Minimize external manufacturing– Reduce the cost of excessive changeovers /
add capacity where necessary
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Capital Expenditure TrendCapital Expenditure Trend9.0%
9.7%9.1%
6.8% 6.9%7.6%
2005 2006 2007 2008 2009 2010
CapEx target: 6-7% of sales
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FY10 CapitalFY10 Capital
Q4 higher capex drivers– Plant enhancements to support product
transfers (Chengdu, Lincoln, Kagoshima and Shizuoka)
– Increase in generic capacity to support transfers and rapid bookings growth
– High period of New Product Investment driving growth
6 to 7% of revenue is still an appropriate target
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EconomicDownturn
Economic Upturn
VMI
Transfers & Restructuring
Started Sea Frt.
Additional Sea Freight
2011 InventoryInventory
72.8
76.2
83.5
77.5
75 to 80
FY07 FY08 FY09 FY10 FY11 65
67
69
71
73
75
77
Inve
ntor
y D
ays 79
81
83
85
Ran
ge
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Global Lean Six Sigma ResultsGlobal Lean Six Sigma Results
$62.6 million FY10 savings
833 projects
19 GLSS locations; expanding deployments in FY11
1136 employeestrained to date
84 Black Belts
1043 Green & Lean Belts
9 MBBs
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Pricing InnovationPricing InnovationSignificantly invested in upgrading our Pricing and Management resources last yearProvides visibility through the channels to protect margin and eliminate leakage Focus is cost to serve versus traditional standard marginAbility to factor “win/loss” in determining market price – over priced, underpricedGreater emphasis on pricing for value realization
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Pricing InnovationPricing InnovationIdentifies strategic products and protects marginGlobal Pricing Group can leverage best practices and consistencySignificant part of Operational Improvement strategySelective price increases begin October 1 and continue during Q2
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On the Path to 14% Operating Margin:What We Have AccomplishedOn the Path to 14% Operating Margin:What We Have Accomplished
Biggest reorganization/restructuring in Molex’s history is completeMajor reduction in our cost structureOffset price erosion through improved productivity and a successful Global Lean Six Sigma initiativeImproving SG&A performance
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On the Path to 14% Operating Margin:What We are Working OnOn the Path to 14% Operating Margin:What We are Working On
Eliminating transition costs related to production transfers, logistics and utilizationLeveraging pricing with consistent, strategic systems-based approachContinuing to drive new products and technologyMore effective and efficient use of capexAchieving operational excellence
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