transforming supply chain bhawnesh mathur
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Transforming Supply Chain
Bhawnesh Mathur
Arrow Electronics, Inc.
Agenda
• Introduction to Arrow Electronics, Inc.
• Industry Dynamics and Their Impact on Customer Needs
• Transforming Arrow’s Supply Chain Through an End-to-End Approach
• Summary and Q&A
Introduction to Arrow Electronics, Inc.
• Distributor of Electronic Components and Computer Products
– Founded in 1935
– Headquartered in Melville, New York
• Global Player in Electronics Supply Chain
– 53 Countries
– 600 Suppliers
– 150,000 Customers
– Annual Sales of $11 Billion
Supplier OEM
ODMContract
Manufacturer
Arrow’s Vision Statement
Agenda
• Introduction to Arrow Electronics, Inc.
• Industry Dynamics and Their Impact on Customer Needs
• Transforming Arrow’s Supply Chain Through an End-to-End Approach
• Summary and Q&A
Industry Dynamics Have Greatly Complicated the Electronics Supply Chain
Multi-SitePurchasing & Manufacturing
Increasing Regional &
Global Competition Growth in
Differentiated Components
Numerouse-Business
Options Continuing Consolidation
Trends
Increasing ProductVariety
EnvironmentalCompliance
Requirements
Shrinking Product
Lifecycles
Supply Chain Complexity
Quote Parts
This Complexity Has Caused Customer Needs to Evolve from Few and Simple …
Powering the supply chainPowering the supply chain
Engineering Purchasing Manufacturing
Tech.Discovery
DesignActivity
PrototypeDevelop.
ComplexSupplyChain
Negot.
Supply Chain Order Mgmt
Traditional Parts for Dollars
Ordering
SpotBuying
ExcessBuying &Selling
InboundLogistics
Mfg End of Life
Customer Functions & Needs
A R R O WA R R O W
… To Many and Complex!
Engineering Purchasing Manufacturing
Tech.Discovery
DesignActivity
PrototypeDevelop.
ComplexSupplyChain
Negot.
Supply Chain Order Mgmt
Traditional Parts for Dollars
Ordering
SpotBuying
ExcessBuying &Selling
InboundLogistics
Mfg End of Life
Customer Functions & Needs
A R R O WA R R O W
EngineeringParametric search
Environmental dataRisk assessment
Part change notification
VMI / SMI3PL ServicesProgramming
AssemblyKitting & turnkey
Collaborative forecastingInventory bonding
Supply chain visibilitySC Mgmt Outsourcing
e-Business
To Meet Customer Needs, Arrow Has Transformed Itself Into a Supply Chain Solutions Provider
Arrow Electronics, Inc.Global Supply Chain Service Related Revenue
'80
3%
17%
'90
38%
'95
54%
'00
64%
'03
69%
'04
71%
'05
Agenda
• Introduction to Arrow Electronics, Inc.
• Industry Dynamics and Their Impact on Customer Needs
• Transforming Arrow’s Supply Chain Through an End-to-End Approach
• Summary and Q&A
Arrow’s Chain Management Approach Starts with Delighting Customers . . .
PlanPlan
Source Make Deliver Source Make Deliver Source Make Deliver
PlanPlan PlanPlan
Suppliers Customers
Delighted Customer
Suppliers’Distributor of Choice
Connected With
Supply Chain
Excellence
Connected With
Goals:
. . . Which is Empowered By Supply Chain Excellence and Preferred Supplier Relationships
Delighting the Customer
Customer Segmentation
Critical Tools & Services
Differentiated Tools & Services
Low:• Little appreciation for SC• Do not invest in SC
High:• SC critical to success• Invest in SC
SUPPLIERCONCENTRATION
High:• Core supplier base• Value partnerships
Low:• Many suppliers• Do not value
partnerships
HighLow
Low
High
Parts forDollars
Standard Solutions
TailoredSolutions
SUPPLY CHAIN SOPHISTICATION
Price ofAdmission
Arrow Uses a Customer Segmentation Framework to Understand Customer Characteristics . . .
SC SOPHISTICATION
SUPPLIER CONCENTRATION
Partsfor
Dollars
Standard Solutions
HighLow
Low
High
Priceof
Admission
TailoredSolutions
Simple
Low-Cost
Complex
Sophisticated
Services/Tools
Sales/Support Model
LeverageServices
MinimizeServices
Service Approach
. . . And to Define Specific Service Strategies
Arrow Has Developed a Segment-Aligned, Differentiated Tool & Service Portfolio
Standard Solutions
Price of Admission
Tailored Solutions
• VMI / SMI• In-plant store• Staffed terminal• New product introduction• Supply chain outsourcing• Integrated systems• Total cost analysis
• Collaborative forecasting• Bonded inventory• Consignment• Auto-replenishment• Kitting & turnkey• On-line decision support • Business Needs Analysis
• VMI / SMI• Electronic communications
• On-line part search• On-line buying
Examples
Parts for Dollars
Customer Background
• Provider of audio / visual control and automation systems
• Annual sales of $90 million
• Overhauling its supply chain
Customer Objectives
• Reduce and standardize global raw material costs
• Enhance external design support
• Reduce design-to-manufacturing cycle time
• Improve continuity and flexibility of supply
• Limit supply chain liability and risk
Customer Strategy• Utilize Arrow to manage all
component sourcing globally
• Integrate Arrow with internal engineering, procurement, planning and EMS management processes
• Consolidate to a single EMS provider with multiple locations; allow a profit on labor only
• Direct the EMS provider to procure components exclusively from Arrow
• Institute a centralized VMI hub
• Manage product life cycle throughout the supply chain
Case Study: Tailored Solutions
Freight Forwarder
Freight Forwarder
Arrow Inc.Arrow Project Manager/On Site Team
EMS Site 1Thailand
EMS Site 4USA
Proto CMUSA
OtherDistributor 2Distributor 1
Local NF Sources
Arrow FAEs
NF Eng Support
Design Eng
EMS Site 2Malaysia
EMS Site 3Juarez
Freight Forwarder
Customer
Components
Forecasts/POs
Gatekeeper
Forecasts/POs
POs (Assy)
Invoice/Payment
Invoice/Payment
POs (Assy)
Case Study: Tailored Solutions
Case Study: Tailored Solutions
Supply Chain Services
• Single global logistics provider
– Franchised & non-franchised
– NPI & production
• Design and materials management support
– FAE support
– Inside sales & material planners onsite
– VMI at EMS sites
• Information services
– Arrow Collaborator
– Arrow Risk and Alert
– Shared Pro-Series
Customer Benefits
• NPI process
– Design cycle reduced from 12 to 6 weeks
• Supply chain costs
– Customer raw turns virtual; moving to 10 at EMS network
– Planning and purchasing resources reduced
• Supply chain performance
– Liability reduced 60%
– Finished goods availability dramatically increased
Total First Year Savings $3+ Million
Differentiated Tool Example: Arrow Collaborator
Differentiated Tool Example: Arrow Collaborator
Find Similar Part Parameters Customer Notes Data Sheets
Cross References PCN Notices
Differentiated Tool Example: Arrow Risk Manager
Achieving Supply Chain Excellence
Flawless Execution
Global Processes
Common IT Platform
Arrow Has Established a Clear Set of Core Global Strategic Priorities
1. Voice of the Customer
Arrow’s Strategic Priorities
2. Back to Basics
3. Operational Excellence
4. Talent Development
• Understand customer needs and experiences
• Transform findings into action
• Execute the fundamentals flawlessly (e.g., perfect order, responsiveness, ease of doing business)
• Be the industry’s service leader
• Have the industry’s most effective & cost efficient supply chain
• Attract, retain and develop the right talent
• Reward performance
Objectives
Analysis Design Development Deployment
Ideas
Concept
Specification
Test Plan
Deployment Plan
Metrics
Execution Monitoring
Feedback
Lead
Significant Participation
Global Business Units
Global Business Units
IT Supply Chain
Global Business Units
Global Business Units Deployment
Supply Chain
Global Business Units
Continuous Process Improvement
Supply Chain Supply Chain IT Deployment Business Supply Chain
Innovation Is Managed Through a Proven Continuous Process Improvement Model
Becoming the Distributor of Choice
Integrated Processes & Systems
Collaborative Forecasting & Inventory Optimization
Unique Global Supply Chain Models
2A1 2A10*
2A13**
ProductInformation
Forecast/Inventory
Quote/Price &
Availability
Order/Order Mgmt
AdvancedShip
Notice
Backlog Invoice /InvoiceStatus
Paymentw/ Bank Notice
Demand Creation
4A24A44A54D1
3A43A73A8
5D35D5
3A6 3B2
3Bx**
3C33C43C6
3C6**
5C15C25C35C4
3A13A25D1
Done Done In Dev Done Done Done Done Done TBD
Arrow’s “Concept to Cash” RosettaNet Program
* Piloted, ** Under investigation
Real-Time Process Integration With Suppliers
•Real-Time standard
•Back-End integration
•Collaboration rules
•Controlled processes
Latency Reduction Mechanisms
Traditional EDI Model Order
Batch Processing
Error Rework
Sub lineRework
Post ship Rework
40% 2-4 hrs 60% in 24 hrs
2-4 days 2-4 days
• Schedule dates in 24 hrs at best• Manual process on split line items• Many acknowledgement failures• Iterations of reschedules• Lost window of selling visibility
Up to 2 weeks
Advanced RN Model
• Acknowledgements within minutes; rapid exception resolution
• Immediate visibility to all ship dates• No acknowledgement failures• Stabilized schedules, improved productivity
Order Real-time Rework
80% 2-4 min 20% in 24 hrs
Over 90% Reduction
Real-Time Process Example: Order Management
Agenda
• Introduction to Arrow Electronics, Inc.
• Industry Dynamics and Their Impact on Customer Needs
• Transforming Arrow’s Supply Chain Through an End-to-End Approach
• Summary and Q&A
Summary
• Industry dynamics have and will continue to change customer needs and Arrow’s supply chain role
• Arrow’s supply chain management approach starts with delighting customers . . .
• . . . Which is empowered by supply chain excellence and preferred supplier relationships
• Success is a journey
The Ultimate Goal of Arrow’s Journey is to Increase Shareholder Value
• Enhanced customer service
• Improved inventory utilization & productivity
• Best-in-class customer relationships
• Differentiated service capabilities
• Best-in-class strategic supplier partnerships
• Unique supply chain models
Supply Chain Impacts . Supply Chain Impacts . . . . .
& Shareholder & Shareholder Value Value
Increased Capital
Efficiency
Increased Profit
Increased Shareholder
Value
All Financial All Financial Metrics . . . Metrics . . .
Appropriate Working Capital
Reduced Fixed
Capital
Increased Revenue
and Margin
AppropriateCost Model
Our Journey is Underway!
Arrow Stock PerformancePast 3 Years
2003 2004 2005
Thank You!