YusanSupplyChain

RedesignandImprovementHKUST&StanfordYusanIndustriesLimitedFinalPresentationMarch27,2006ObjectiveEnhanceYusan’sProfitabilitybyRe-designingandImprovingSupplyChain2FacingProblemExtraSupplyChainCostAirshipmentcostin2005:2MHKD(0.5%oftotalrevenue)HighreworkcostLowOn-Time-DeliveryRateThomson:28%3MethodologyIdentifyInvestigateRecommendObjective4ScopeThomson’sProductsin2005(7)

2005Products(3)Pre-2005Products(4)CS190CS86RCD147BTM9235TM9237TM9245RCD1475InvestigateRecommendIdentifyScopeoftheanalysis:ThomsonproductsIdentifiedProblemFocusonProduction6InvestigateRecommendIdentifyOrderProcessSalesProductionPlanningPurchasingProduction123456Customer78CustomerOrdersJobOrdersJobOrdersProductionScheduleRecommendIdentifyInvestigateweek7InvestigationofProductionProductionPartSupplyCapacityPlanningRework8RecommendIdentifyInvestigatePartSupply44%ofthepartsupplylate:ConsequencesandCauses?Source:ProductionPlanning

Report(Jan–May2005)9InvestigatePartSupplyCapacityPlanningReworkCriticalPartDelayCriticalParts:LongLeadtime-Expensive-NosubstituteNon-CriticalParts:ShortLeadtime-CommodityCriticalPartsNon-CriticalPartsPercentageofcriticalpartlateOctober95414%November81296%December2921012%Total4639310%Source:MeetingMinutesOct-Dec2005InvestigatePartSupplyCapacityPlanningRework10330Suppliersin2005131(40%)averagequality<99.8%48RegularSuppliersNoonecanachieve99.8%QAstandardUnreliableRegularSuppliersQualityPerformanceSuppliersAnalysisSummary11InvestigatePartSupplyCapacityPlanningReworkPotentialtoimprovesupplierperformanceRegularSuppliersQualityPerformancein200512QualityPassRate(%)MakesuresupplierskeepahighlevelofqualitySource:IQC2005InvestigatePartSupplyCapacityPlanningReworkPartSupplyQualityCriticalpartsalsoarelessreliableQualityPassRate%13Source:IQC2005InvestigatePartSupplyCapacityPlanningReworkCriticalpartsCapacityEvaluationInvestigatePartSupplyCapacityPlanningReworkSource:ProductionPlanSept-Dec2005ProbleminallocatingthecapacitytoeachcustomerOvertimeEmployed15Source:WorkshopDailyReport,Feb2006InvestigatePartSupplyCapacityPlanningRework16%22%19%29%26%12%27%21%0%21%Inanon-peakseason,overtimeisstillhighProductivity16Source:WorkshopDailyReport,Feb2005InvestigatePartSupplyCapacityPlanningReworkRealProductivityisloworexpectedoneisnotappropriate?WorkforceDistribution17LineCLineDWorkers*allocatedperline(average)8361Whereasdirectlylineworkers5737Source:WorkshopDailyReport,Feb2005InvestigatePartSupplyCapacityPlanningReworkMoreattentionhastobepaidtoValue-addedproceduresFinishedProductReworkRate18Source:QualityAssurance2005InvestigatePartSupplyCapacityPlanningRework89%11%ReworkRatebyCustomers19Source:QA,2005InvestigatePartSupplyCapacityPlanningReworkReworkRateonProductionLines20VerydifferentreworkratesamongthelinesSource:QCDailyReport,Feb2006InvestigatePartSupplyCapacityPlanningReworkAveragereworkrate:17.4%CausesandEffect21ReworkCapacityPlanningPartSupplyLowProfitabilityRecommendations22IdentifyInvestigateRecommend123MakeSupplyChainPerformanceVisibleMetricIndustrialBenchmark(Median)*Yusan’sPerformanceDeliveryRatebyCommitDate91.5%40%OrderFulfillTime(days)29.5>39.0InventoryDaysofSupply(days)68.172.5Cash-to-CashCycleTime(days)73.330.5Source:SCOR(Feb2005)23IdentifyInvestigateRecommendUseKeyIndicatorstocontrolSCimprovementsMakeSupplyChainPerformanceVisibleMakeSupplyChainPerformanceVisibleCostMHKDAs%ofRevenueInventoryCarrying10.62.3%Backlog28.16.0%Rework&Scrap19.54.2%Total58.212.5%24IdentifyInvestigateRecommendKeeptrackofSupplyChainExtraCostsRecommendations25IdentifyInvestigateRecommend123MakeSupplyChainPerformanceVisibleEnhanceSupplierPerformanceEnhanceSupplierPerformanceCreateaCrossFunctionTeamPurchasing,QualityAssurance,Engineering,ProductionDetermineCriticalPerformanceMetricsDeliveryLeadTime,QualityDetermineMinimumPerformanceStandardMinimumQualityStandard,MinimumLeadTimeReduceSupplierBaseEliminateNon-qualifiedSuppliersAssessSupplierPerformanceRefineSupplierBaseQuarterly26IdentifyInvestigateRecommendRecommendations27IdentifyInvestigateRecommend123MakeSupplyChainPerformanceVisibleBettermanageordersEnhanceSupplierPerformanceBettermanageordersProductionPlanning:PlanforalltheexistingordersPlanforboththeassemblyandPCBAlinesPurchasingUnreliablesuppliers/Criticalparts:PurchaseAsSoonAsPossibleReliablesuppliers:PurchasebasedonProductionPlanningscheduleCommonparts:KeepSafetyStockUnaddressedProblemCommittedOrderOrderDeliveryProductionStart042LTLT-6-101PartorderPlacementLTForecastedOrderweeksTheEndBackUpSlidesSuppliersAnalysisSup.RegularSuppliers–Yusanpurchasedpartsfromthissuppliersmorethan10monthsAssumeoneproductuses50differentsuppliersX^50=FinalproductpassrateToachieve95%finalproductpassrate,eachsuppliersshouldprovidepartsat99.98%QualityToachieve90%finalproductpassrate,eachsuppliersshouldprovidepartsat99.79%QualityCalculationandAssumptions:InventoryCalculationInventory*YearlyInterestRat