MIM 544Global Cases in Supply Logistics

Class two – NPI & Metrics

Agenda

Case learning objectives Current Events – China LaborOverview New Product TeamsCisco discussionTeam AnalysisOverview Quality Metrics Manfield discussionTeam Analysis

Global Cases

Case Learning ObjectivesApply past knowledge Provide a conceptual FrameworkAnalyze in depth – metrics & numbersDon’t necessarily accept the strategy

Underlying objective – EBITA & Cash!

Case format for the eveningOne team will lead the discussionWhat do we know about the company?What is the problem statement?Questions assignedOther questions?

China Labor Market – Relate to the NPI case?Facts:FDI-$500B; Directly Employ 16M people112M factory workers200 largest exporters, 153 were from FDIIs unrest growing? 280K labor disputes 2009Wages increased 9%/yr since 2002Surplus 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-sourcedDesign for “X”AVLPackagingPostponementService strategies

NPI Summary – All Affect Cost

Purchasing (RFQ / SOW)Engineering (ERP / AVL)Logistics (Packaging)Quality (Yield / Touches)Marketing (PRD)Warranty / ServiceMost Important – “The Crossover”

Drivers of the crossoverDemand side

Environmental – MacroeconomicCompetitionPricingTimingMarket responseProduct capability

Supply sideExternal execution – SCMInternal execution – supply in volume

Cisco CaseWhat 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

1. What are the risks in NPI overall?2. Why Foxconn or any new supplier?3. What are the challenges and risks with

China directly.4. What are the benefits of going to China

directly.5. Why Foxconn?6. How do you mitigate the risks of going

direct to China?

Metrics – Right ones?

Quality SystemsTQM / Lean / ISO

Above the Shop Floor – Value stream mapping can be applied everywhere

“What is measured improves”Overemphasis on a few can be riskyToo many? (Attention span?)

Lean

Sorting (Seiri)Straightening or Setting in Order (Seiton) –

SimplifyingSweeping or Shining or Cleanliness /

Systematic Cleaning (Seiso)Standardizing (Seiketsu)Sustaining the discipline (Shitsuke)Safety

Some Performance Measurements

Quality – PPM, FPY, IC, FMEACost to Target – OPEX & ProcurementOn Time DeliveryFlexibility – cycle time improvementProductivity Improvement – output / hourSupplier’s Management ProgramProgress Toward Certification ISO 14,000Technology roadmap (products & IT infrastructure)

Measuring Performance – Cont.

Forecast AccuracyFormal Sharing of Information – Markets & customersMinimize expediting and Schedule ChangesFocus on Total Cost - Not PriceOn Time A/P & A/RProgram to Manage Supplier Relationships

– NPI -> ObsolescenceContractual Protection and LiabilitiesPeriod Expenses - Variances

The hp way: TQRDCEB:

Technology

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

1. Vanity – cognitive dissonance (IBM PC)2. Provincialism – only measure within an org group3. Narcissism – measure from your point of view, not the

customer4. Laziness – We know best5. Pettiness – only a small component of what matters6. Inanity – Measure what you want to change7. 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

1. How does quality help Manfield?2. What made the Q-S successful?3. What metrics would have made Manfield

more successful?4. Are they moving in the right direction?5. Seven deadly sins & aligning incentives;

how does this relate?