Global Cases in Supply Logistics Class two – NPI & Metrics MIM 544 Global Cases in Supply Logistics Class two – NPI & Metrics

Agenda Case learning objectives Current Events – China Labor Overview New Product Teams Cisco discussion Team Analysis Overview Quality Metrics Manfield discussion

Global Cases Case Learning Objectives Apply past knowledge Provide a conceptual Framework Analyze in depth – metrics & numbers Don’t necessarily accept the strategy Underlying objective – EBITA & Cash!

Case format for the evening One team will lead the discussion What do we know about the company? What is the problem statement? Questions assigned Other questions?

China Labor Market – Relate to the NPI case? Facts: FDI-$500B; Directly Employ 16M people 112M factory workers 200 largest exporters, 153 were from FDI Is unrest growing? 280K labor disputes 2009 Wages increased 9%/yr since 2002 Surplus labor or shortage? Half the number of <16-29yrs by 2020

Global Cases - NPI New Product Introduction (NPI) – Why care? Risks & Concerns without it? SCM Strategy – Single / multi-sourced Design for “X” AVL Packaging Postponement Service strategies

NPI Summary – All Affect Cost Purchasing (RFQ / SOW) Engineering (ERP / AVL) Logistics (Packaging) Quality (Yield / Touches) Marketing (PRD) Warranty / Service Most Important – “The Crossover”

Drivers of the crossover Demand side Environmental – Macroeconomic Competition Pricing Timing Market response Product capability Supply side External execution – SCM Internal execution – supply in volume

Cisco Case What do we know? Viking Product has transitioned to a faster model, surpassing the competition (Juniper & Alcatel). Now want to go from US-based NPI & China transition to Foxconn out of the gate in Shenzen. Foxconn had never made this complex a box, especially from the start, but now level – 3. 45% of employees and sales from outside US. Proud of their “adaptive supply chain,” cut its number of outsourced partners from 13 to 4 (is this good & why?) 2001 Cisco went from 1,500 suppliers to 600, of which 200 had 80% of the spend. Cisco Lean was the mantra, pull system & predictable lead-times and on-time shipments.

Cisco NPI – 6 Questions What are the risks in NPI overall? Why Foxconn or any new supplier? What are the challenges and risks with China directly. What are the benefits of going to China directly. Why Foxconn? How do you mitigate the risks of going direct to China?

Metrics – Right ones? Quality Systems TQM / Lean / ISO Above the Shop Floor – Value stream mapping can be applied everywhere “What is measured improves” Overemphasis on a few can be risky Too many? (Attention span?)

Lean Sorting (Seiri) Straightening or Setting in Order (Seiton) – Simplifying Sweeping or Shining or Cleanliness / Systematic Cleaning (Seiso) Standardizing (Seiketsu) Sustaining the discipline (Shitsuke) Safety

Some Performance Measurements Quality – PPM, FPY, IC, FMEA Cost to Target – OPEX & Procurement On Time Delivery Flexibility – cycle time improvement Productivity Improvement – output / hour Supplier’s Management Program Progress Toward Certification ISO 14,000 Technology roadmap (products & IT infrastructure)

Measuring Performance – Cont. Forecast Accuracy Formal Sharing of Information – Markets & customers Minimize expediting and Schedule Changes Focus on Total Cost - Not Price On Time A/P & A/R Program to Manage Supplier Relationships – NPI -> Obsolescence Contractual Protection and Liabilities Period Expenses - Variances

Technology The hp way: TQRDCEB: Quality Responsiveness Delivery Cost Environment Business Kropf, W. C. & Russell, P. L. (N.D.). Hewlett-Packard's Packaging Supplier Evaluation Process and Criteria. Retrieved May 24, 2009 from: http://www.hp.com/packaging/Procurement/paper.doc

7 Deadly Sins of Performance Measurements Vanity – cognitive dissonance (IBM PC) Provincialism – only measure within an org group Narcissism – measure from your point of view, not the customer Laziness – We know best Pettiness – only a small component of what matters Inanity – Measure what you want to change Frivolity – Not taking metrics seriously

Manfield Coatings What do we know? Short lead-times Strong niche player Uses quality as comparative advantage - Cost containment and speed for customers - Satisfy customers, not surpass expectations

Manfield Coatings – 5 Questions How does quality help Manfield? What made the Q-S successful? What metrics would have made Manfield more successful? Are they moving in the right direction? Seven deadly sins & aligning incentives; how does this relate?