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SkipBoothby Canieti

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Published on April 13, 2008

Author: Jacob

Source: authorstream.com

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Slide1:  A Competitive Supply Chain Strategy for Mexico Contents:  Contents Who is SalesLink? How Industry Trends Drive A Competitive Strategy for Mexico Comparative Business Models: China Build to Stock Mexico Configure to Order Supply Chain Concepts for Reducing Total Cost and Improving Cash Flow High Tech Industry Comparisons Conclusion Who Are We?:  Who Are We? • SalesLink is a $434 million company (2003 sales) with a work force of 1800 employees worldwide. • SalesLink has been a division of CMGI for 15 years. The company has been in business for 28 years. • Headquartered in Boston. • Network of 14 facilities in North America, Europe, and Asia. History and Growth Track:  1976 1996 1997 1998 1999 2000 2001 2002 Acquired PacificLink, enter SCM business Acquired InSolutions Acquired On-Demand Solutions, e-fulfillment Opened Guadalajara Memphis Distribution Center Acquired iLogistix 1989 Acquired by CMGI Founded: Literature Distribution History and Growth Track 2003 2004E 2005B Acquired Modus Media Opened Hungary, NYC and Hillsboro A Commitment to SCM:  A Commitment to SCM $237 million cash and stock acquisition of Modus Media (August 2004) $42 million cash acquisition of iLogistix (July, 2002) immediately accretive $40 million in supply chain acquisitions 1997 - 1999 $25M capex on IT World-Class Global Footprint:  World-Class Global Footprint Charlestown, MA Memphis, TN Guadalajara, Mexico Santa Clara, CA Chicago, IL Newark, CA San Diego, CA Fountain, CO Indianapolis, IN Miami, FL Penang, Malaysia Taipei, Taiwan Singapore Tilburg, The Netherlands Dublin, Ireland Lindon, UT Raleigh, NC Austin, TX Nashville, TN Guadalajara, Mexico Monterrey, Mexico Salt Lake City, UT Chicago, IL Waltham, MA HQ Millington, TN Tokyo, Japan Seoul, Korea Penang, Malaysia Taipei, Taiwan Shenzhen, China Singapore Shanghai, China Futian, China KunShan, China SongJiang, China Budapest, Hungary Apeldoorn, The Netherlands Orléans, France Kildare, Ireland Dublin, Ireland Limerick, Ireland Angers, France Cumbernauld, Scotland Miscolc, Hungary Suzhou, China (As of August 2004) Why SalesLink is Different from the Rest:  Why SalesLink is Different from the Rest Sustained growth right through the recession Very solid financials Legitimate world class IT tools on a common platform as a strategic differentiator Mobile flexibility allows us keep pace with our customers Not tied to long term brick and mortar Problem solving approach creates business models designed to meet tomorrow’s challenges Best performance in our industry backed by our customer ratings Service Offering:  Service Offering An Optimized Bridge Between Manufacturing & Customer > Sourcing & Procurement > Manufacturing Support Services > Closest-to-Customer Configuration > Optimized IT Visibility > Optimized Cash Velocity > Optimized Final Assembly > Full-Cycle Logistics > Optimization Consulting > Order Management What Value does SalesLink provide to its Customers?:  What Value does SalesLink provide to its Customers? Increased revenue due to improved product availability Reduced total cost of ownership Increased asset utilization Accelerated time to market Increased cash velocity; shortened cash conversion cycle (CCC) Industry Trends and Drivers:  Industry Trends and Drivers A Competitive Strategy for Mexico:  A Competitive Strategy for Mexico Supply Chain Strategy: Postponement Postponement Capabilities and Benefits:  Postponement Capabilities and Benefits Supply Chain Drivers Time-to-Market Flexibility/Agility Total Cost and Cash Management Mexico Advantages Geographic Position Skilled, lower cost of labor than U.S. market Competitive logistics cost Reliable infrastructure Supply Chain Strategy: Postponement Capability/Benefit Configure-Closest to-Customer Configure-to-Order Customization Lower Total Cost Improved Cash Conversion Supply Chain Models: Comparing China to Mexico:  Supply Chain Models: Comparing China to Mexico Total Cost Management:  Total Cost Management Sourcing/procurement Transportation (Inbound/Outbound) Manufacturing Configuration Rework/Reconfigure Storage Returns Product support Inventory investment Discount/loss of value with excess & obsolescence Cost of capital/opportunity cost Slide15:  Cash Conversion Cycle Days Sales Outstanding (Receivables Turnover) = (Receivables $)/ (Annualized Revenue $) * 365 Days Payables Outstanding (Payables Turnover) = (Payables $)/ (Annualized Mat’l Cost $) * 365 Days of Supply Inventory (Inventory Turnover) = (Inventory $)/ (Annualized COGS $) * 365 (DSO) (DSI) (DPO) + - Slide16:  Customer Build to Stock in China Manufacture Platform & Component Configuration Core Hardware Supplier Component Supplier DC Reconfigure Customer Manufacture Platform & Component Configuration Core Hardware Supplier Component Supplier DC Collect and Ship to Asia China China U.S. U.S. Customer Choice Drives SKU Proliferation:  Customer Choice Drives SKU Proliferation Product A Component 2 – 8 SKUs A-1 A-2 A-3 Product B B-1 B-2 B-3 Product C C-1 C-2 C-3 D-1 D-2 D-3 Core – 9 SKUs E-6 E-7 E-8 E-5 Sub-Group 2 E-2 E-3 E-4 E-1 Sub-Group 1 Component 1 – 6 SKUs Example D-6 D-4 D-5 Higher Inbound Freight Cost:  Higher Inbound Freight Cost Monthly Inbound Shipments Total Units Shipments 8 14 10 15 7 13 14 12 4 12 10 8 Max 3,712 1,934 2,718 2,060 9,354 6,782 3,846 14,733 3,550 12,273 5,352 2,353 Min 118 216 470 135 422 62 185 275 760 275 68 157 Average 1,290 682 1,052 1,027 2,422 1,629 1,103 2,220 1,852 2,453 1,509 910 Missed Sourcing Savings :  Price Variance % Volume by Supplier Missed Sourcing Savings (20%) (55%) (90%) Supply-Demand Mismatch :  Supply-Demand Mismatch Excessive Finished Goods Inventory Levels :  Avg. Inv. Avg. Demand Excessive Finished Goods Inventory Levels Slide22:  Repair/Returns Center Component Supplier Manufacture Platform Adding Value in Mexico (CTO) Core Hardware Supplier Customer Diagnose and Repair, Ship to Asia as needed Component Configuration –to-Order Component Supplier Manufacture Platform Core Hardware Supplier Customer China China Mexico U.S. Managing Freight to an Advantage:  Managing Freight to an Advantage In-Transit Time Cost Comparison Bulk Shipment Leveraging Commodity Spend:  Cost Savings Single Source for Multiple Suppliers Leveraging Commodity Spend (20%) (55%) (90%) Commodity Management Component C1 Component C2 Component C3 Component B1 Delayed Ownership Improves Cash Position:  Delayed Ownership Improves Cash Position OEM control Customer control Supply Chain Integrator control Reducing Inventory Without Compromising Service Levels :  Reducing Inventory Without Compromising Service Levels Commonality Lowers Safety Stock:  Commonality Lowers Safety Stock ~10% - 50% Reduction + + > The Benefits of Postponement: Measurable Savings and Increased Service Levels:  The Benefits of Postponement: Measurable Savings and Increased Service Levels $15.6 M $12.5 M Scenario 1: Build-to-Stock Scenario 2: Configure-to-Order Cash Conversion Cycle:  Cash Conversion Cycle Days Sales Outstanding (Receivables Turnover) = (Receivables $)/ (Annualized Revenue $) * 365 Days Payables Outstanding (Payables Turnover) = (Payables $)/ (Annualized Mat’l Cost $) * 365 Days of Supply Inventory (Inventory Turnover) = (Inventory $)/ (Annualized COGS $) * 365 (DSO) (DSI) (DPO) + - Slide30:  Cash Requirements for China BTS Payables (DPO) = 30 Days Inventory (DSI) = 55 Days Receivables (DSO) = 30 Days CCC= 55 Days Customer Manufacture Platform & Component Configuration Core Hardware Supplier Component Supplier DC Reconfigure Slide31:  Supplier Owned Company Owned Inventory Payables (DPO) = 30 Days Inventory (DSI) = 15 Days Receivables (DSO) = 30 Days CCC= 15 Days Customer Manufacture Platform & Component Configuration Core Hardware Supplier Component Supplier DC Reconfigure Cash Requirements for Mexico CTO Time savings translates into a cash injection:  Time savings translates into a cash injection High Tech Industry Examples:  High Tech Industry Examples Source: Benchmark Brief prepared by SCE Ltd. The SCOR Users Resource Center, 2003/2004 Conclusion/Summary:  Conclusion/Summary As China supply chains begin to mature we believe there is opportunity for Mexico to recapture some of the business lost during the past few years using a postponement business model strategy

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