Edward Tymick Director, Supply Chain Operations October 21, 2009
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1 Achieving Agility & Responsiveness in an Outsourced Supply Chain Edward Tymick Director, Supply Chain Operations October 21, 2009
2 About Tellabs Tellabs At-a-Glance Enables telecommunications service providers to deliver high-quality voice, video and data services over wireline and wireless networks >50% of the world s mobile calls made on networks owned by Tellabs customers 41 of the top 50 global telecom service providers choose Tellabs solutions Solutions deployed in 150+ mobile networks worldwide Employees: 3, revenues: $1.7 billion 2
3 Our Complex Environment Diverse product portfolio Large number of SKUs per product line Complex products, subject to technology changes, and expensive to maintain as finished goods Build-to-forecast environment where forecast accuracy was a challenge Needed more sophisticated methods to postpone or mitigate liability, i.e. build strategies 3
4 The Move to Outsourced Manufacturing: The Good
5 Resulting Supply Chain Issues
6 The Agility Program Agility provides additional supply flexibility to meet unexpected demand within replenishment lead times. Reduce SKU overdrive SKU Inventory What Makes it Unique? Goes beyond the typical supplier- managed inventory model Deployed at the component or sub-assembly level at the supplier instead of the contract manufacturer (CM) Add flexibility inside lead time Production Component Inventory Supply at lead time Establish 100% component level flexibility in 90 days for target SKUs & chronic-shortage components 0-30 Days 20% Days 30% Days 50% 6
7 Agility Enables Sophisticated Build Strategies Before After Implementation Built to Order 3% Built to Order 31% Demand Replenishment Enhanced 12% Demand Replenishment Standard 7% Built to Forecast 97% Built to Forecast 32% Level Load 18% 7
8 Build Strategy Model High Margin % Level Load Demand Replenishment Enhanced (Increased Service Level) Build to Order Demand Replenishment Standard (Basic Service Level) SKU Rationalization Low Low Risk of inventory (cost, volume, volatility) High Exceptions handled on case-by-case basis 8 PROPERTY OF TELLABS, INC. ALL RIGHTS RESERVED.
9 What is Shadow Planning? Methodology and technology to gain visibility to CMs inventory positions and to replicate their MRP planning outputs for: What-if planning in a real-time environment Simulate forecast changes and material impact Execute mix change analysis to optimize revenue/inventory Inventory visibility & reporting Identify excesses, shortages Cross-balance inventory between CMs Real-time alerting Automated notification when established thresholds are exceeded 9
10 Our New Supply Chain Planning Model Simplified end-to-end MRP, focused on FGI and Raw Materials Outsourced Supply Network Tellabs Distribution Centers Supplier CM 1 MFG 1 Consigned Stock DC US (Illinois) Consigned Stock CM-managed Supplier POs & Lead Times Supplier Supplier Supplier CM 2 CM 3 MFG 2 MFG 3 MFG 4 Consigned Stock Consigned Stock Consigned Stock DC EU DC US (Texas I) DC US (Texas II) Forecasts Orders What-ifs Constrained Demand Plan & What-if Response Virtual Network AGILITY Last Time Buy Inventory Supply Flexibility Agreements Supply Liability T s & C s 10
11 Outsourced Supply Chain Data Flows Supply Planning with CMs Tellabs Demand CM 1 CM 3 MRP and Procurement Suppliers CM 2 Demand and SAP Data ICON- Data Hub CM Data Data validation reports and alerts Supply Liability T s & C s ICON-SCP Planning Clean data Agility Agreements Visibility and Cost Management What-if Planning with Agility 11
12 New Planning Capabilities Demand and Supply Matching Automated demand and commit process Considers both constrained and unconstrained materials What-if Analysis Quickly determines ability to capture upsides and pull-ins Models demand splits Inventory Management E&O reporting and management Vendor liability reporting Risk Management Controls liability risks for aged and overforecasted SKUs and components 12
13 Project Benefits Flexibility from Agility and Build Strategies Delivered an average 15-20% reduction in customer lead times Moved from 97% BTF to 32% BTF Expedited freight reduction (6% annually) Improved Cost Management from Visibility Improved E&O avoidance (8% annually) Supply rebalancing amongst product lines and suppliers Instant ECO effectivity date analysis Responsiveness from Enhanced What-If Capabilities Respond in minutes instead of weeks Potential 1-2% increase in revenues via pull-ins Improved efficiencies and reduction of time required to report 13
14 Lessons Learned Teamwork Reliable Data New Processes The fact that everyone worked together as a team made it a successful project. Sanmina-SCI Having this pipeline data is especially useful for inventory projection, accrual, and planning. Jabil There are now fewer calls and s from Tellabs asking for status. This frees up more time for our people to do their jobs. Flextronics 14
15 Thank you! Any questions?
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