driving improvements through supply chain optimization

9/8/2015 September 2015, p.1Supply Chain Insights Global Summit #ImagineSC

Supply Chain Optimization

Kehat ShaharVice President, Supply Chain Planning

SanDisk Corporation


Forward Looking StatementsDuring our meeting today, we may make forward-looking statements.

Any statement that refers to expectations, projections or other characterizations of future events or circumstances is a forward-looking statement, including those relating to market position, market growth, product sales, industry trends, supply chain, future memory technology, production capacity, production costs, technology transitions, construction schedules, production starts, and future products. This presentation contains information from third parties, which reflect their projections as of the date of issuance. Actual results may differ materially from those expressed in these forward-looking statements due to factors detailed under the caption “Risk Factors” and elsewhere in the documents we file from time to time with the SEC, including our annual and quarterly reports. We undertake no obligation to update these forward-looking statements, which speak only as of the date hereof or the date of issuance by a third party, as the case may be.


Agenda

SanDisk Overview Supply Chain Optimization

- Supply Chain Segmentation & Policy

Q & A


We Enable Innovation in Four Mega Markets

Mobile and Connected

DevicesConsumerData Center Client

Computing


Financial Strength

Trailing 4 Quarter Financials*• $6.1B Revenue• 61% commercial; 39% retail• $1.5B Net Cash• $.9B R&D Investment

Fortune 500

5

* Financials as of Q2’15. Net Cash = (Cash + cash equivalents + short-term and long-term marketable securities) less (debt at maturity value) as of end of Q2’15


Supply Chain Footprint

SanDisk with Mfg partner Toshiba

Silicon Suppliers

SanDisk Storage Shanghai Factory

SanDisk Storage Malaysia Factory (Target production in 1H-2015)

Contract Manufacturers (CM)

CM CM

SanDisk Retail

Fulfillment

Regional Fulfillment

Local Warehouse

VMI Hub

300,000+Store Fronts

Distributors

System Integrators

Wafer Memory Packaging & Test Card and Solid State DriveAssembly & Test

Vertically Integrated, scale and flexible supply chain

Shipping almost 2 million units daily

Packaging and Fulfillment

Channel

CM CM


DP

DM

SCP

FP

MEIOSAP

Agile BI

Tableau

Advanced Planning Systems

GATP

Advanced Planning Solutions

L1 Independ

ent Forecasti

ng L2 - Consensu

s Forecasti

ng

L3 Supply

Planning

L4 Adjust Demand &Supply

Plan

L5 Distribute Sup Plan Week/Monthly

Process

Daily/Weekly Process

S&OP Process

Analytics

Simulation

Optimization

Analytics COE

Supply ChainR&D

SC PolicyInv. ModelsFcst Algorithm…

Plan Recommendatio

n

Decisions


Postpone Inventory while meeting customer service level requirements

Delay Product Differentiation without adding significant cycle time or cost

Number of Products

Understand/Measure · Buffer · Reduce Variability σ

SKUWaferMemoryPackage

Card and Drive

Mem Pkg Test

Advance Planning System

ArchitectureSystem

recommendsUser review and

update planSystem respect

user updates and re-plan

Supply Chain Policy to Maximize $/GB & effectively balance Service level & Inventory

Reduce Cycle Time without compromising on flexibility



Supply Chain Segmentation(Postpone inventory while meeting

customer service level requirements)


Supply Chain SegmentationSuppl

y chain segmentati

on

Started with one size fits all approach (FY 2008 and prior)

- Build to forecast with 6-8 weeks manufacturing frozen fence

- Changed from Build to forecast to Build to targets (still one size fits all)

- Key drivers for this change is to reverse trend of high inventory and low service level

Die Bank Tested Memory Pkg

Tested Card or Drive Generic Card

or DriveSKU

Factory/Contract Manufacturer Fulfillment

Build To Forecast Order

Build To Targets Order

High Margin Builds

Excess Build PlanKey changes

• Multi stage inventory• Reduce frozen fence (from weeks to days) to

increase response to demand changes • Demand priority visibility and actions across

supply chainImplementation approach• Top management buy in• Think tank team of functional expert is set up to

architect solution• Think tank team led change management

Build To Targets


BTT

Supply chain segmentationSuppl

y chain segmentati

on

Supply chain segmentation by customer and product


Tested Card or Drive

Generic Card or Drive

SKU

Factory/Contract Manufacturer Fulfillment

Build To Targets OrderBuild To Targets

CP

FR C

usto

mer

Targets (SS) OrderTargets (SS)

Commits

Driver: CPFR team request to meet CPFR customer requirementsKey changes: Provide commits to CPFR customers accurately and consistently meet commits

SKU

Whse

Em

ergi

ng

Mar

kets Build To Targets Build To Targets Targets

Driver: Retail BU focus on strategic growth in emerging marketsKey changes: same day pick up, regional whse, value stream map & improvements


Supply chain segmentationSuppl

y chain segmentati

on

Supply chain segmentation by customer and product


Tested Card or Drive

SKU SKU

Factory/Contract Manufacturer VMI Hub

Build To Forecast Order

Build To Targets Order

BTO

Build To OrderDriver: Excess inventory of custom productsKey changes: improving end to end cycle time, material and capacity planning

VH

ub Build To Commits & Days of Inv Virtual Hub PullsDriver: stg customer request to set up hub for all mfg locations around the worldKey changes: Factory as hub, Expanded CPFR commits process for OEM customer

VM I Build To Commits & Days of Inv Pulls

Driver: Customer request


Supply Chain Segmentation and Next StepsSu

pply

cha

in s

egm

enta

tion

Started with One size fits all supply chain

Proactively understanding key customer and product needs and segment supply chain

Achieve effective trade off between• Customer service lvl• Inventory/cost• Replenish’t lead

time

Del

ay p

rodu

ct

diffe

rent

iatio

n

Generic products delay differentiation

Custom products delay differentiation (common platform)

Design for delay product differentiation

Configure to order

Cos

t to

serv

e

Trade-offs – Cost, Repln LT, Service level

Cost to serve for on boarding new customers

Provide ongoing visibility to BU and sales (in progress)

Tracking supply chain operating cost by segment (in progress) Va

lue

adde

d se

rvic

e

Identify value added service opportunities through competitive analysis

Capturing value to price ratio by segment (in progress)

Integrate in cost to serve model (in progress)


Key lessons

Think tank team of functional leads helps in architecting solution and managing change

Internal sales and customer collaboration teams are good source of customer requirements and competitive landscape information

Advanced planning systems is key enabler of segmentation

Take incremental re-engineering as opposed to big bang approach to segmentation

Increased effort in re-design existing products for delay differentiation

Getting management buy-in for cost-to-serve is easy, implementation is complex


Q & A


Postpone Inventory while meeting customer service level requirements

Delay Product Differentiation without adding significant cycle time or cost

Number of Products

Understand/Measure · Buffer · Reduce Variability σ

SKUWaferMemoryPackage

Card and Drive

Mem Pkg Test

Advance Planning System Architecture System recommends User review and

update planSystem respect user updates and re-plan

Supply Chain Policy to Maximize $/GB and effectively balance Service level & Inventory

Reduce Cycle Time without compromising on flexibility

Supply Chain Optimization Recap and Q &A

driving improvements through supply chain optimization

Business