Competitive advantage through SCOR based supply management processes by Romesh Gupta

Supply Chain â&#x20AC;&#x201C; A Competitive Advantage via SCOR based Processes and Supply Chain Innovation Stefan Heilmayer November, 8th 2011

04/28/2010

Page 1 Page

Table of contents   Infineon – Who we are and what us challenges   Decision: Transparency via SCOR based processes   Execution: Flexibility and Speed   Staying Ahead: Supply Chain Innovation   SC³   Supply Chain Academy   Summary

Page 2

Page 3

Infineon at a Glance The Company   Infineon provides semiconductor and system solutions, focusing on three central needs of our modern society: Energy Efficiency, Mobility and Security   Revenue in FY 2010*: 3.295 billion EUR   25,119 employees worldwide (as of April 2011)   Strong technology portfolio with about 15,400 patents and patent applications (as of Feb. 2011)   More than 20 R&D locations   Germany’s largest semiconductor company *Note: Figures according to IFRS with Wireline and Wireless as discontinued operations; as of September 30, 2010

Page 4

Focus on Our Target Markets Focus Areas

Core Competencies

  Energy Efficiency

  Analog/Mixed Signal

  Mobility

  Power

  Security

  Embedded Control   Manufacturing Competence

Our Target Markets   Automotive   Industrial Electronics   Chip Card & Security

Page 5

Revenue Split by Division 3-months FY11 revenue split

Automotive

ATV € 354m

IMM € 423m

CCS € 98m

Industrial & Multimarket

Page 6

Infineon’s Key Customers and Partners Key Customers Automotive

Industrial & Multimarket

  Autoliv

  Denso

  Lear

  Bosch

  Hella

  Mitsubishi

  Continental

  Hyundai

  TRW

  Delphi

  Kostal

  Valeo

  ABB

  HP

  Alstom

  LG Electronics

  Cisco

  Microsoft

  Converteam

  Nokia

  Dell

  Panasonic

  Delta

  Philips

  Emerson

  RIM

  Ericsson

  Samsung

  Beijing Watch Data

Chip Card & Security

  Cisco   Gemalto

  Giesecke &

Devrient   Oberthur

  Schneider

Electric   Siemens   SMA Technology   Sony

  Main channel

partners (distributors): Arrow, Avnet, Beijing Jingchuan, Rutronik, Tomen, Toyotsu, WPG Holding   Electronic

Manufacturing   Sagem Orga   US Government

Printing Office

Services (EMS): Celestica, Flextronics, Foxlink, Hon Hai, Jabil, Sanmina-SCI

Page 7

Singapore is Infineon's Supply Chain Hub Supply Chain Hub Singapore We manage >400 ship-to addresses and more than 25 production sites in Asia through the Corporate Supply Chain functions (~80HC) :             

Customer Logistics Management (CLM) Operations (Disposition & Ramp Up) Volume Planning for Assembly & Test Business Services, Project Management Master Data Management Manufacturing Automation Logistics, Custom, Export Control

Semiconductor Supply Chain Science Center (SC³) Singapore ... and turn it into value

learn from theory...

11/14/11

Distribution Centre Asia CLM pool location CLM pool service area in-house and production partner sites

Distribution Center Asia (DCA)

  Develops innovative improvements   For production partner related supply chain processes   Based on scientific research   In collaboration with a local university.

  Distributes finished goods globally (>16 countries)   ~200 HCs   Export Value ~1.5 bn Euro/y   Regional competence centre: Custom, Export Control Page 8

Semiconductor Market Moore’s Law: “The number of transistors on a chip doubles every 18 months” 512 Mbit "

109

256 Mbit "

♦

108

64 Mbit " ♦ Pentium IV ♦ Pentium III 16 Mbit "

107

♦ Pentium II " If the automotive and aircraft industries ♦ 4 Mbit developed at the same rates as 6 " 10 ♦ 80286 semiconductors in the past 30 Pentium years: ® " ♦ 5 10 ♦ 80386   A 4004 Rolls Royce would cost $2.75 and make 3 80486 68000 million miles♦ a gallon



Innovation

8086

104

10.02.2010 ♦   A ♦ Boeing 747 would cost $500 and circle the 3 10 globe within 20 minutes on five gallons of gas.

8080

1970

1975

1980

1985

1990

1995

2000

2005

2010

Page 9

The Semiconductor Market % of semiconductors of final product: 12 %

30 %

TV color

2% 1000 m

100 m

GSM

VCR

TV b&w

10 m

35-40 %



Steep Product Ramps



Short Lifecycle



Long Lead Time



Early in Value Chain

iPod 1950

1960

1970

1980

1990

2000

2010

Sources : Dataquest, ST shown at IEF 2005, Malta (some wording changed)

~ 3 months Suppliers

Semiconductor Industry

Customer

Customer of our Customer

~ 4 months 11/14/11

The Semiconductor Market – Inventory Risks 

Steep product ramps



Long lead time



Short life cycles



Early in value chain

Bullwhip

Stocking/Destocking

Revenue 2010: 298 billion USD

11/14/11

Page 12

Infineon Supply Chain - SCOR Model Plan Make

Source

Deliver

Return

Customers Wafer stock

FAB

Furnace Implanting Deposition Stepper Etching Wetting

Buffer / Stock Infineon Supplier

SORT

DIE BANK

ASSEMBLY

TEST

Consi

Buffer / Stock

Sawing

Wafertest Sawing

Up to 500 process steps

Die Bonding Wire Bonding Molding Trim & Form

Chiptest (Burn In)

Buffer / Stock

Market:

Operations:   Efficient use of resources   Capital cost reduction idle costs/excess inventory   no scrap, damage & relocation

  diversification   small batches   fast time-to-customer/market

12.0

0.0

8.9

12.0

The SC master planning follows the SCOR plan process 7.18

7.18

6.80

6.20

5.00

Identify, Assess and Aggregate Supply Chain resources

Identify, Assess and Aggregate Supply Chain requirements

Capacity Planning

6.20

5.00

Demand Planning

Balance Supply Chain resources and requirements Supply Planning

Capa & Supply Provision

Production Management 6.40

Demand & Supply Consumption

Order Management

Establish and communicate supply chain plans

6.40

8.60 9.20

8.60

Page 14

9.20

12.0

0.0

8.9

12.0

Plan processes are enabled by IT Tool independent Master Data â&#x20AC;&#x201C; Key product structures 7.18

7.18

6.80

6.20

5.00

Plan Position PPOS capacity and demand planning element

Production View

~ 1000

Fabrication Position product & manufacturing route, Where we produce - coarse

1:N

FPOS

1:N

Sales Product can be ordered by a customer

1:N

Finished Product independent of storage location 6.40

Sales and Marketing view

5.00

Die-Representative Supply element; where the package is not yet 1:N decided DREP

1:N

RfP Required for Plan planning product being not capacity relevant

FP 1:N 1:N

~ 10 000 ~ 30 new/d

SKU

SKU: finished product by storage location

8.60 9.20

6.20

6.40

8.60

Page 15

9.20

12.0

0.0

8.9

12.0

An integrated IT Tool landscape supports further the implementation of the Plan processes 7.18 6.80 6.20

7.18

Capa & Supply Provision Tools

Demand & Supply Consumption Tools Marketing Demand

5.00

Unconstrained Production Request

PPOS

Unconstrained Forecast

Product Capacities

P. Capa. Promise (coarse)

Forecast

APS coarse

Prod. Commit

SKU

Target Inventory Profile

Stocks coarse

Commit

Allocation

Lot Tracking

Production Starts

Supply Plan

9.20

System from I2

System from SAP

Other vendors

IFX own system

Min Stock

Stocks fine

(ATP)

FP Target Allocation (AATP)

Demand Fulfillment

Request Promise

8.60

RfP

Orders / EDI Forecast

WIP

6.40

5.00

Min Stock

APS fine

Prod. Requests

6.20

Demand

FPOS

Technical release

P. Capa Promise (fine)

Sales Demand

Orders / EDI Forecast

Operational

Manufacturing Capacities

M. Capa. Promise

Sales Forecast

6.80

Order Management

Orders / EDI Forecast 6.40

Confirmation

APS = Advanced Planning sytem for (semi) automated Supply Demand Balancing

Page 16

8.60 9.20

Infineon’s Plan Process

SCOR based processes

Best of breed IT Tools

Infineon’s  comprehensive  state-of-the-art  IT supported process landscape 11/14/11

Supportive Basic Data

Transparent KPIs are key for a successful controlling of the SC network. One Web interface to access all Supply Chain related reports   Inventories (different views)   Delivery Reliability   Delivery Performance   Order Backlog

Supply Chain Cockpit   For SC experts   Drill down functionality to individual product portfolio   Transparency of key performance parameters Copyright © Infineon Technologies 2011. All rights reserved.

Page 19

12.0

0.0

8.9

12.0

We have to manage two extreme BIZ cycles. 7.18

6.80

6.20

5.00

BIZ cycle

7.18

5.00

Global real GDP

4% 3% 2%

Global Semi Market

Up Turn

Down Turn 0% 1%

-1%

1999

2000

2001

2002

70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% -70%

2003

2004

2005

2006

2007

-2% -3% -4% -5%

2008

2009

'10

Time 6.40

6.40

8.60 9.20

8.60

Page 20

9.20

BIZ cycle

We have to manage two extreme BIZ cycles. Both are an issue of detection, but…

Global real GDP

4% 3% 2%

Global Semi Market

Up Turn

Down Turn 0% 1%

-1%

1999

2000

2001

2002

70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% -70%

2003

2004

2005

2006

2007

-2% -3% -4% -5%

2008

2009

'10

Time

  The Down Turn is simple to manage: you react when it comes, a delay of detection has a linear impact on the savings.

Page 21

12.0

0.0

8.9

12.0

Supply chain flexibility is key in down and up turns 7.18 6.80 6.20

7.18 6.80

CALP

6.20

5.00

forecasts

Development of CMOS capacity during downturn

6.40

  Forecast are too often reflecting hope and prevent the organization to adjust to the new situation   Top down management adjustments are required and must be strong to change the mindset of the organization

8.60 9.20

6.40

8.60

Page 22

9.20

Tough and time limited resource adjustments Partial switch off „Cold steel“   Maximum of ~ 45% tools 30% 25%

Short time work & unpaid leave   20% across all functions and sites

20% 15% 10% 5% 0% Overall Plan KU share per employee

MNT

ACT KU share per employee

POH Plan KU share overall

So. OH ACT KU share overall

Reduce invest   Reduce Invest to absolute minimum – down to 30%

Page 23

BIZ cycle

We have to manage two extreme BIZ cycles. Both are an issue of detection, but…

Global real GDP

4% 3% 2%

Global Semi Market

Up Turn

Down Turn 0% 1%

-1%

1999

2000

2001

2002

70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% -70%

2003

2004

2005

2006

2007

-2% -3% -4% -5%

2008

2009

'10

Time

Page 24

12.0

0.0

8.9

12.0

Supply chain flexibility is key in down and up turns 7.18

7.18

6.80

6.20

Flexibility is key!

5.00

CALP

forecasts

Development of CMOS capacity during upturn 6.40

6.40

8.60 9.20

8.60

Page 25

9.20

(allocation) in an upturn or excess inventory in a downtu 12.0

0.0

8.9

12.0

Value of SPEED: 1d saving >0.1% cost of sales 7.18 6.80

7.18

Raw Material

Diebank (Semi finished Goods

6.20

Finished Goods

6.80

  Diversification in BE

6.20

  More cost flex in BE

5.00

  significant value add in BE CT Frontend: 2-3 Months

  BE Investment lead times ½ shorter than FE

CT Backend: 3-5 Weeks

Increase Speed from DB

  Postponement

Wafer stock

DIE BANK

Buffer/ Stock

  Reduce confirmable lead time.   Faster Response to demand changes 6.40

6.40

Build to Forecast

Make to Order

8.60 9.20

8.60

Page 26

9.20

Page 27

The Importance of Collaboration in the Supply Chain Collaboration = Information Sharing Sharing information across company boundaries enables win-win outcomes: Collaboration increases responsiveness and smoothes fluctuations (“bullwhip”) along the supply chain.

Supply chains compete, not companies!

10.02.2010 Sources:

Page 28

Page 29

Infineon‘s SemiConductor Supply Chain Centers Achievements

SC³ Ireland

SC³ Singapore

July 09 to Aug 11 Focus on Customer Interface

SC logistic business performance

WP 1: Information:

WP 2: People:

Collaboration with Customers

Logistic staff knowledge development

WP 1:  •  Customer FC behaviour and sales FC behaviour  (University of Applied Science Munich) understood    Start October 10 •  Ongoing collabora:on with customer on  Focus on Production Partner Interface Customer FC behaviour  WP 2:  •  Diploma in supply chain –  Bachelor and Master  level  (University of Limerick)  SC logistic business performance •  CLM selec:on process  •  CLM trainings incl. Emo:onal Inteligence (LMU  Munich)   1: WP WP 2: Information: •  Serious Gaming (MDH Munich)  People: Forecast Supplier Accuracy WP 3:  collaboration towards process and •  Web based tool for process support e.g.:  suppliers know-how blocked stock (UniTech)  creation

•  Implement web based process for collabora:on  WP 3: Technology

WP 3: Enabler: B2B IT Solution

Page 30

12.0

0.0

8.9

12.0

SC³ Singapore 7.18

7.18

6.80

SC³ bridges the gap

6.20

5.00

6.20

5.00

•  Inhouse/ production partner balancing ... and turn it into value

•  Production partner capacity reservation

•  Operations Research

•  Demand uncertainty

•  Scientific Papers

•  ...

•  University cooperation •  Conferences

learn from theory...

•  ... 6.40

8.60 9.20

6.40

8.60

Page 31

9.20

12.0

0.0

8.9

12.0

In the past it was required to mainly manage internal Frontend SC fast and cost efficient 7.18

7.18

6.80

6.20

FURNACE

IMPLANT

Defect Density

ETCHING

PVD

5.00

START

Fab Dresden - GE SORT

6.40

SupplyC MChain at Infineon managing fabs to managing complex P W E T evolved from METROLOGY LITHOGRAPHY CVD networks of manufacturing partners and customers 8.60 9.20

8.60

Page 32

9.20

Semiconductor Supply Chain Science Center Network Prof. Martin Grunow Prof. Rainer Kolish Dr. Anulark Naber

Prof. Lars Mönch

Prof. John Fowler

Joe Francis & Douglas Kent

Prof. Hau Lee Dr. Robert de Souza

Dr. Holly Ott

Michael Hennessy Singapore Institute of Management

Prof. Brüggemann-Klein

Prof. Hoppe

Prof. Zangl

Prof.Detlef Urhahne & Jens van Scherpenberg Set date

Page 33

Page 34

12.0

0.0

8.9

12.0

7.18

6.80

6.20

5.00

Supply Chain Academy

6.20

5.00

The next generation of learning, teaching and knowledge gaining:   Training modules for the needed Know How for all personnel   Globally same Processes, Tools and Know How   Common understanding of the entire Supply Chain based on SCOR 6.40

6.40

8.60

9.20

12.0

7.18

0.0

8.9

12.0

The concept – IFX Supply Chain Academy (SCA)

7.18

6.80

6.20



5.00

Master

Academic

University Partnership

Bachelor

Experts

Class Training Serious Gaming

SC-Expert Customer Logistics

Global Planning

Demand-Capa Planning

Basics 6.40

SCM – an Infineon Competitive Advantage

E-learning & OJT 6.40

8.60 9.20

8.60

Page 36

9.20

12.0

7.18

0.0

eLearning modules provide training on demand supported by a state of the art IT platform

8.9

12.0

SCA 7.18

6.80 6.20

Status as of September 2011

5.00

6.40

Within 18 months: •  more than 500 employees took advantage of the supply chain academy e-learning platform

6.40

8.60 9.20

8.60

Page 37

9.20

Classroom training supported by Serious Games for SC

SCA

Page 38

12.0

7.18

0.0

8.9

12.0

SCA

Bachelor/Master program lifts supply chain education onto an academic level

7.18

6.80

6.20

5.00

6.40

Diploma in Supply Chain Management – joint bachelor program of Infineon and the University of Limerick: •  End of 2010 the first group of students finished the one year distance learning program •  The second group will graduate in a few weeks

8.60 9.20

6.40

8.60

Page 39

9.20

Page 40

Executive Summary   Long production lead times and the bullwhip effect are two main challenges of semiconductor supply chains

  Transparency and Speed help to master these challenges   Transparency is reached via IT

supported SCOR based processes on an appropriate basic data structure

  Speed is gained via reduction of

planning overhead and transit lane optimization

Page 41