Competitive advantage through SCOR based supply management processes

04/28/2010 Page 1

Supply Chain – A Competitive Advantage via SCOR based Processes and Supply Chain Innovation Stefan Heilmayer November, 8th 2011

Copyright © Infineon Technologies 2011. All rights reserved.

Table of contents

  Infineon – Who we are and what us challenges

 Decision: Transparency via SCOR based processes

 Staying Ahead: Supply Chain Innovation

 Summary

 SC³

 Supply Chain Academy

  Execution: Flexibility and Speed


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


Focus on Our Target Markets

Core Competencies

  Analog/Mixed Signal

  Power

  Embedded Control

  Manufacturing Competence

Focus Areas

  Energy Efficiency

  Mobility

  Security

Our Target Markets

  Automotive

  Industrial Electronics

  Chip Card & Security


Chip Card & Security

Automotive

Industrial & Multimarket

Revenue Split by Division

ATV € 354m

CCS € 98m

3-months FY11 revenue split

IMM € 423m


Infineon’s Key Customers and Partners

Key Customers

  Main channel partners (distributors): Arrow, Avnet, Beijing Jingchuan, Rutronik, Tomen, Toyotsu, WPG Holding

  Electronic

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

Automotive   Autoliv   Bosch   Continental   Delphi

  Denso   Hella   Hyundai   Kostal

  Lear   Mitsubishi   TRW   Valeo

Industrial & Multimarket

  ABB   Alstom   Cisco   Converteam   Dell   Delta   Emerson   Ericsson

  HP   LG Electronics   Microsoft   Nokia   Panasonic   Philips   RIM   Samsung

  Schneider Electric

  Siemens   SMA Technology   Sony

Chip Card & Security

  Beijing Watch Data   Cisco   Gemalto

  Giesecke & Devrient

  Oberthur

  Sagem Orga   US Government

Printing Office

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

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

11/14/11 Copyright © Infineon Technologies 2011. All rights reserved.

Singapore is Infineon's Supply Chain Hub

Semiconductor Supply Chain Science Center (SC³) Singapore

  Develops innovative improvements

  For production partner related supply chain processes

  Based on scientific research

  In collaboration with a local university.

Distribution Center Asia (DCA)

  Distributes finished goods globally (>16 countries)

  ~200 HCs   Export Value

~1.5 bn Euro/y   Regional

competence centre: Custom, Export Control

Supply Chain Hub Singapore

learn from theory...

... and turn it

into value


10.02.2010

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

  Innovation

103

104

105

106

107

108 64 Mbit

1975 1970 1980 1985 1990 1995 2000 2005 2010

♦ ♦

♦ ♦

♦

♦

♦

♦ 4004

80286

80386 80486

Pentium ®

Pentium II

♦ ♦ Pentium III

Pentium IV

8080

8086 68000

16 Mbit

4 Mbit "

"

"

"

"

"256 Mbit

109

512 Mbit "

♦

If the automotive and aircraft industries developed at the same rates as semiconductors in the past 30 years:

  A Rolls Royce would cost $2.75 and make 3 million miles a gallon

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

Copyright © Infineon Technologies 2011. All rights reserved. 11/14/11

The Semiconductor Market

  Steep Product Ramps   Short Lifecycle

100 m

1000 m

1950 1960 1970 1980 1990 2000 2010

2 % 12 % 30 % 35-40 %

% of semiconductors of final product:

VCR TV b&w

TV color PC

iPod

GSM

1 m

10 m

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

  Long Lead Time   Early in Value Chain

Suppliers Customer Semiconductor Industry Customer of

our Customer

~ 3 months

~ 4 months

Copyright © Infineon Technologies 2011. All rights reserved. 11/14/11

The Semiconductor Market – Inventory Risks

Source: WSTS data for historical data; Forecast: ∅ of VSLI, Gartner,iSuppli, WSTS

  Steep product ramps

  Short life cycles   Early in value chain

  Long lead time

Bullwhip Stocking/Destocking

Revenue 2010: 298 billion USD


Table of contents




 Summary

 SC³




Infineon Supply Chain - SCOR Model

SORT

Wafertest Sawing

DIE BANK ASSEMBLY

Sawing

Die Bonding Wire Bonding

Molding Trim & Form

FAB

Furnace Implanting Deposition Stepper Etching Wetting

Chiptest (Burn In)

TEST Wafer stock DC

Up to 500 process steps

Buffer / Stock

Buffer / Stock

Buffer / Stock

Buffer / Stock

Consi

Source Deliver Return Return

Make Plan

Infineon Supplier

Customers

Holistic SC-Management; Systematic via SCOR

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

Market:   diversification   small batches   fast time-to-customer/market

12.0 0.0 12.0 8.9

7.18 7.18

6.40

6.20

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6.20

5.00 5.00

9.20 9.20

8.60 8.60


Supply Planning

Capa & Supply Provision

Capacity Planning

Demand Planning

Production Management

Order Management

Demand & Supply

Consumption

Identify, Assess and Aggregate Supply Chain requirements

Identify, Assess and Aggregate Supply Chain resources

Balance Supply Chain resources and requirements

Establish and communicate supply chain plans Establish and communicate

supply chain plans

The SC master planning follows the SCOR plan process

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6.40

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6.20

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8.60 8.60


PPOS

FP

FPOS

RfP

SP Sales Product can be ordered by a customer

Plan Position capacity and demand planning element

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

Die-Representative Supply element; where the package is not yet

decided

Finished Product independent of storage location

Required for Plan planning product being not capacity relevant DREP

SKU: finished product by storage location Sales and Marketing view

Production View ~ 1000

~ 10 000 ~ 30 new/d

Plan processes are enabled by IT Tool independent Master Data – Key product structures

1:N

1:N

1:N

1:N

1:N

1:N

1:N

SKU

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6.20

5.00 5.00

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8.60 8.60


Sales Demand

Marketing Demand

Sales Forecast

Demand & Supply Consumption Tools

Unconstrained Production Request

Manufacturing Capacities

M. Capa. Promise

Capa & Supply Provision Tools

Stocks coarse

Stocks fine APS coarse

Operational Demand

Product Capacities

P. Capa Promise

(fine)

Min Stock

Demand Fulfillment

Order Management

Orders / EDI Forecast

Confirmation

Target Allocation

(AATP)

Allocation


Request

Promise

System from I2 System from SAP Other vendors IFX own system

Forecast


Supply Plan

APS fine

Production Starts

Commit

Lot Tracking

Prod. Requests

Min Stock

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

WIP

Technical release

Unconstrained Forecast

P. Capa. Promise (coarse)

(ATP)

Prod

. C

omm

it

PPOS RfP

FPOS

SKU

FP

SP


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

Target Inventory Profile


SCOR based processes Best of breed IT Tools Supportive Basic Data

Infineon’s Plan Process

11/14/11

Infineon’s

 comprehensive

 state-of-the-art

 IT supported

process landscape


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

Transparent KPIs are key for a successful controlling of the SC network.


Table of contents




 Summary

 SC³



12.0 0.0 12.0 8.9

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-5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 '10

-70% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% Global real GDP

Global Semi Market

We have to manage two extreme BIZ cycles.

Up Turn Down Turn

Time

BIZ

cycl

e


-5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 '10

-70% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% Global real GDP

Global Semi Market

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

Up Turn Down Turn

Time

BIZ

cycl

e

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

12.0 0.0 12.0 8.9

7.18 7.18

9.20 9.20

8.60 8.60

6.40

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5.00 5.00


Supply chain flexibility is key in down and up turns

  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

forecasts

CALP

Development of CMOS capacity during downturn


Tough and time limited resource adjustments

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

0% 5% 10% 15% 20% 25% 30%

Overall PD MNT POH FM So. OH Plan KU share per employee ACT KU share per employee Plan KU share overall ACT KU share overall

Partial switch off „Cold steel“  Maximum of ~ 45% tools

Reduce invest  Reduce Invest to absolute

minimum – down to 30%

Optimize inventory  Finished goods and diebank

inventory reduced to minimum reaches


-5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 '10

-70% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% Global real GDP

Global Semi Market

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

 The Up Turn is challenging: you have to foresee it by weeks or even months, a delayed detection has an exponential effect.

Up Turn Down Turn

Time

BIZ

cycl

e

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7.18 7.18

9.20 9.20

8.60 8.60

6.40

6.20

6.40

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6.20

5.00 5.00


Supply chain flexibility is key in down and up turns

Flexibility is key!

Development of CMOS capacity during upturn

forecasts

CALP

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(allocation) in an upturn or excess inventory in a downturn“

  Postponement

  Reduce confirmable lead time.

  Faster Response to demand changes

  Diversification in BE

  More cost flex in BE

  significant value add in BE

  BE Investment lead times ½ shorter than FE CT Frontend: 2-3 Months CT Backend: 3-5 Weeks

Diebank (Semi finished Goods

Finished Goods

Raw Material

Increase Speed from DB

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

Wafer stock DC

Buffer/ Stock

Buffer/ Stock

DIE BANK

Buffer/ Stock

Build to Forecast Make to Order


Table of contents




 Summary

 SC³



10.02.2010 Copyright © Infineon Technologies 2011. All rights reserved.

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!

Sources: Webinar GTNexus; Dr. Hau L. Lee


Table of contents




 Summary

 SC³




Infineon‘s SemiConductor Supply Chain Centers

WP 1: Information:

Collaboration with

Customers

WP 2: People:

Logistic staff knowledge

development

SC logistic business performance

WP 3: Technology

July 09 to Aug 11

Focus on Customer Interface

SC³ Ireland Achievements

WP1:•  CustomerFCbehaviourandsalesFCbehaviourunderstood(UniversityofAppliedScienceMunich)

•  Ongoingcollabora:onwithcustomeronCustomerFCbehaviour

WP2:•  Diplomainsupplychain–BachelorandMasterlevel(UniversityofLimerick)

•  CLMselec:onprocess•  CLMtrainingsincl.Emo:onalInteligence(LMUMunich)

•  SeriousGaming(MDHMunich)

WP3:•  Webbasedtoolforprocesssupporte.g.:blockedstock(UniTech)

•  Implementwebbasedprocessforcollabora:on

WP 1: Information:

Forecast Accuracy towards suppliers

WP 2: People:

Supplier collaboration process and know-how creation

SC logistic business performance

WP 3: Enabler: B2B IT Solution

Start October 10

Focus on Production Partner Interface

SC³ Singapore

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SC³ bridges the gap

•  Operations Research

•  Scientific Papers

•  University cooperation

•  Conferences

•  ...

•  Inhouse/ production partner balancing

•  Production partner capacity reservation

•  Demand uncertainty

•  ...

learn from theory...

... and turn it into value

SC³ Singapore

“SC³ Singapore” focuses on Collaboration & Information Sharing

Excellence with our production partner.

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START SORT

FURNACE IMPLANT Defect Density ETCHING PVD

CVD LITHOGRAPHY METROLOGY W E T C M P

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

Fab Dresden - GE

Supply Chain at Infineon evolved from managing fabs to managing complex networks of manufacturing partners and customers

Prof. Zangl

Set date Copyright © Infineon Technologies 2011. All rights reserved.

Semiconductor Supply Chain Science Center Network

Michael Hennessy

Prof. Martin Grunow Prof. Rainer Kolish Dr. Anulark Naber

Prof. John Fowler Prof. Lars Mönch

Prof. Hoppe

Prof.Detlef Urhahne & Jens van Scherpenberg

Joe Francis & Douglas Kent

Prof. Hau Lee

Prof. Brüggemann-Klein

Dr. Holly Ott

Singapore Institute of Management

Dr. Robert de Souza


Table of contents




 Summary

 SC³



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Supply Chain Academy

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

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The concept – IFX Supply Chain Academy (SCA)

SCM – an Infineon Competitive Advantage

Customer Logistics

Global Planning Demand-Capa

Planning Basics

Academic Bachelor

Experts

SC-Expert

Master

E-learning & OJT

University Partnership

Class Training Serious Gaming

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

Status as of September 2011

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

SCA


Classroom training supported by Serious Games for SC

Example: The Coffeegame used for training purposes makes the bullwhip effect tangible

SCA

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

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

SCA


Table of contents




 Summary

 SC³




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

  To stay ahead of our competitors, know how distribution and innovation in Supply Chain are crucial

Competitive advantage through SCOR based supply management processes

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