Transforming Supply Chain Bhawnesh Mathur Arrow Electronics, Inc.

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Transforming Supply Chain Bhawnesh
MathurArrow Electronics, Inc.
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Agenda

• Introduction to Arrow Electronics, Inc.
• Industry Dynamics and Their Impact on Customer
  Needs
• Transforming Arrows Supply Chain Through an
  End-to-End Approach
• Summary and QA

3
Introduction to Arrow Electronics, Inc.

• Distributor of Electronic Components and Computer
  Products
• Founded in 1935
• Headquartered in Melville, New York
• Global Player in Electronics Supply Chain
• 53 Countries
• 600 Suppliers
• 150,000 Customers
• Annual Sales of 11 Billion

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Arrows Vision Statement
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Agenda

• Introduction to Arrow Electronics, Inc.
• Industry Dynamics and Their Impact on Customer
  Needs
• Transforming Arrows Supply Chain Through an
  End-to-End Approach
• Summary and QA

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Industry Dynamics Have Greatly Complicated the
Electronics Supply Chain
Supply Chain Complexity
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This Complexity Has Caused Customer Needs to
Evolve from Few and Simple
Customer Functions Needs
Engineering
Purchasing
Manufacturing
Complex Supply Chain Negot.
Supply Chain Order Mgmt
Traditional Parts for Dollars Ordering
Excess Buying Selling
Tech. Discovery
Design Activity
Prototype Develop.
Spot Buying
InboundLogistics
Mfg
End of Life
Quote
Parts
A R R O W
Powering the supply chain
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To Many and Complex!
Customer Functions Needs
Engineering
Purchasing
Manufacturing
Complex Supply Chain Negot.
Supply Chain Order Mgmt
Traditional Parts for Dollars Ordering
Excess Buying Selling
Tech. Discovery
Design Activity
Prototype Develop.
Spot Buying
InboundLogistics
Mfg
End of Life
Engineering Parametric search Environmental
data Risk assessment Part change notification
VMI / SMI 3PL Services Programming Assembly Kittin
g turnkey
Collaborative forecasting Inventory
bonding Supply chain visibility SC Mgmt
Outsourcing e-Business
A R R O W
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To Meet Customer Needs, Arrow Has Transformed
Itself Into a Supply Chain Solutions Provider
Arrow Electronics, Inc.Global Supply Chain
Service Related Revenue
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Agenda

• Introduction to Arrow Electronics, Inc.
• Industry Dynamics and Their Impact on Customer
  Needs
• Transforming Arrows Supply Chain Through an
  End-to-End Approach
• Summary and QA

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Arrows Chain Management Approach Starts with
Delighting Customers . . .
Suppliers
Customers
Plan
Plan
Plan
Connected With
Connected With
Goals
Delighted Customer
SuppliersDistributor of Choice
Supply Chain Excellence
. . . Which is Empowered By Supply Chain
Excellence and Preferred Supplier Relationships
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Delighting the Customer
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Arrow Uses a Customer Segmentation Framework to
Understand Customer Characteristics . . .
Standard Solutions
TailoredSolutions
High
SUPPLIERCONCENTRATION
Parts forDollars
Price ofAdmission
Low
High
Low
SUPPLY CHAIN SOPHISTICATION
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. . . And to Define Specific Service Strategies
High
Standard Solutions
TailoredSolutions
PartsforDollars
SUPPLIER CONCENTRATION
PriceofAdmission
Low
Low
High
SC SOPHISTICATION
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Arrow Has Developed a Segment-Aligned,
Differentiated Tool Service Portfolio
Examples
Standard Solutions
Tailored Solutions

• VMI / SMI
• In-plant store
• Staffed terminal
• New product introduction
• Supply chain outsourcing
• Integrated systems
• Total cost analysis

• Collaborative forecasting
• Bonded inventory
• Consignment
• Auto-replenishment
• Kitting turnkey
• On-line decision support
• Business Needs Analysis

Price of Admission
Parts for Dollars

• VMI / SMI
• Electronic communications

• On-line part search
• On-line buying

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Case Study Tailored Solutions
Customer Background
Customer Strategy

• Provider of audio / visual control and automation
  systems
• Annual sales of 90 million
• Overhauling its supply chain

• Utilize Arrow to manage all component sourcing
  globally
• Integrate Arrow with internal engineering,
  procurement, planning and EMS management
  processes
• Consolidate to a single EMS provider with
  multiple locations allow a profit on labor only
• Direct the EMS provider to procure components
  exclusively from Arrow
• Institute a centralized VMI hub
• Manage product life cycle throughout the supply
  chain

Customer Objectives

• Reduce and standardize global raw material costs
• Enhance external design support
• Reduce design-to-manufacturing cycle time
• Improve continuity and flexibility of supply
• Limit supply chain liability and risk

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Case Study Tailored Solutions
Local NF Sources
Components
Other
Distributor 2
Distributor 1
NF Eng Support
Arrow FAEs
Forecasts/POs
Gatekeeper
Invoice/Payment
Design Eng
Arrow Inc.
Customer
Arrow Project Manager/On Site Team
POs (Assy)
Freight Forwarder
Forecasts/POs
Freight Forwarder
EMS Site 4USA
Proto CM USA
Freight Forwarder
EMS Site 1Thailand
EMS Site 2 Malaysia
EMS Site 3 Juarez
POs (Assy)
Invoice/Payment
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Case Study Tailored Solutions

• Customer Benefits
• NPI process
• Design cycle reduced from 12 to 6 weeks
• Supply chain costs
• Customer raw turns virtual moving to 10 at EMS
  network
• Planning and purchasing resources reduced
• Supply chain performance
• Liability reduced 60
• Finished goods availability dramatically
  increased
• Total First Year Savings 3 Million

• Supply Chain Services
• Single global logistics provider
• Franchised non-franchised
• NPI production
• Design and materials management support
• FAE support
• Inside sales material planners onsite
• VMI at EMS sites
• Information services
• Arrow Collaborator
• Arrow Risk and Alert
• Shared Pro-Series

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Differentiated Tool Example Arrow Collaborator
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Differentiated Tool Example Arrow Collaborator
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Differentiated Tool Example Arrow Risk Manager
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Achieving Supply Chain Excellence
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Arrow Has Established a Clear Set of Core Global
Strategic Priorities
Arrows Strategic Priorities
Objectives

1. Voice of the Customer

• Understand customer needs and experiences
• Transform findings into action

1. Back to Basics

• Execute the fundamentals flawlessly (e.g.,
  perfect order, responsiveness, ease of doing
  business)

• Be the industrys service leader
• Have the industrys most effective cost
  efficient supply chain

1. Operational Excellence

1. Talent Development

• Attract, retain and develop the right talent
• Reward performance

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Innovation Is Managed Through a Proven Continuous
Process Improvement Model
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Becoming the Distributor of Choice
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Real-Time Process Integration With Suppliers
Arrows Concept to Cash RosettaNet Program
Product Information
Forecast/ Inventory
Quote/ Price Availability
Order/ Order Mgmt
Advanced Ship Notice
Backlog
Invoice / Invoice Status
Demand Creation
Payment w/ Bank Notice
2A1 2A10 2A13
4A2 4A4 4A5 4D1
3A4 3A7 3A8 5D3 5D5
3A6
3B2 3Bx
3C3 3C4 3C6
3C6
5C1 5C2 5C3 5C4
3A1 3A2 5D1
Done Done In Dev
Done Done Done Done
Done TBD

Piloted, Under investigation
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Real-Time Process Example Order Management
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Agenda

• Introduction to Arrow Electronics, Inc.
• Industry Dynamics and Their Impact on Customer
  Needs
• Transforming Arrows Supply Chain Through an
  End-to-End Approach
• Summary and QA

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Summary

• Industry dynamics have and will continue to
  change customer needs and Arrows supply chain
  role
• Arrows supply chain management approach starts
  with delighting customers . . .
• . . . Which is empowered by supply chain
  excellence and preferred supplier relationships
• Success is a journey

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The Ultimate Goal of Arrows Journey is to
Increase Shareholder Value
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Our Journey is Underway!
Arrow Stock PerformancePast 3 Years
2003
2004
2005
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Thank You!