Supply Chain Management at Foxconn

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Supply Chain Management at Foxconn MIS
6352-05020
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Introduction

• Foxconn is the recognized trade name for Hon Hai
  Precision
• Third largest electronic manufacturing services
  (EMS) company in the industry
• Produce cables, connectors, sockets, and
  motherboards
• Has shown a 30 growth rate a year from 2000 to
  2003, 2.9 to over 10 billion respectively

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Introduction

• Supply Chain Management (SCM)
• The close linkage and coordination of activities
  involved in buying, making, and moving a product.
• Integrates supplier, manufacturer, distributor,
  and customer logistics processes to reduce time,
  redundant effort, and inventory costs.
• Network of organizations and business processes
  for procuring material into finished products,
  and distributing the finished product.

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Developmental History

• Established in 1974
• Based in Taipei Taiwan
• The first overseas facilities, located in
  Shenzhen, in the Guangdong Province and Kunshan,
  in the Jiangsu Province, were established in 1993

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Developmental History

• 1996 started the production of PCs enclosures
• The company continued their rapid growth which
  included desktop PCs, video games and other
  mobile hand-held devices
• 1998 Foxconn established additional electronic
  manufacturing facilities in Scotland and the
  United Kingdom
• 1999 with additional EMS (electronic
  manufacturing services) facilities in Ireland and
  the United States

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Developmental History

• Hon Hais combination of manufacturing skills,
  engineering capabilities, merger and
  acquisitions, and low cost control has caused the
  other EMS companies to lose market share.

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How Analytics and SCM Applications Fit Together
Analytics
Plan
Operational Planning
StrategicPlanning
Tactical phase
Execute
Analyze
Transaction
Management information
Primary data entry
Capture
Admin
SCM
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Industry analysis

• ERP - enterprise resource planning - is defined
  as a business management system that integrates
  all facets of the business, including planning,
  manufacturing, sales, and marketing.

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Industry analysis

• SAP is said to be the market leader in the ERP
  business
• top competitors are Oracle, PeopleSoft, Siebel,
  and Lawson Software

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Industry analysis

• Suppliers
• power is found to be low
• the ERP firms have a lot of vendors to work with
• can not be any switching cost because the final
  product is customized to what the customer wants
• dependent however of the capacity of the systems,
  as systems with higher capacity can give the ERP
  solution a higher speed when processing data.

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Industry analysis

• Customers
• power is found to be medium
• they have high power
• when it comes to choosing the product
• because there are several firms providing
  complete ERP solutions
• there are also several best-of-breed producers
  that can provide different specialized
  applications
• Some customers can also develop systems
  themselves.

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Industry analysis

• Customers (cont.)
• power is found to be medium
• They have low power
• Because of high switching cost
• Dependent on a system that can give them the
  competitive edge, by making the processes
  streamlined and connected

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Industry analysis

• Threat of new entrants
• Threat is found to be fairly low
• Due to the high switching cost for the customers
• Recent trend is to try to extend the life of the
  existing system

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Industry analysis

• threat of substitutes
• are found to be low if an ERP system already are
  implemented in the customer firm
• switching costs are high
• trend to search for a vendor that can offer
  stability
• But
• disconnection between ERP buyers requirements
  and vendors performance
• vendors promote speeds, feeds, and technology
  prowess,
• decision-makers want service, flexibility and
  practicality

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Industry analysis

• Traditional industry competitors
• competition is fierce between the major
  competitors in the ERP business
• SAP is claiming the No. 1 market share spot in
  all major application categories, including ERP,
  SCM, SRM, CRM, and PLM, to a 36 share
• strong market lead in Europe
• ability to focus on business processes unique to
  specific industries
• full commitment to openness

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Industry analysis

• Strategy for the future
• build alliances with other software application
  providers
• focus on building partnerships within their
  supply chains from suppliers to customers
• extend the reach of the enterprise resource
  planning system to go across the organizations to
  also include collaboration with the ERP vendors
  customers suppliers, partners, and customers
  using portal technology

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Industry analysis

• switching costs are high
• trend to search for a vendor that can offer
  stability
• disconnection between buyers requirements and
  vendors performance

• product selection is great
• can develop systems themselves
• high switching cost
• dependent on a competitive functional system

• high switching costs
• Recent trend to extend life of the existing system

• lot of vendors
• No switching cost
• dependent of the capacity of the systems

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Procurement Infrastructure Of the
Future Assemble The Building Blocks
Supplier Portal
Asset Proc
H-R Proc
IT Proc.
Suppliers
Transaction Delivery Network
Future Tech- nology
T M S
Category Solutions
Data Synchronization
Sourcing
Buyer Portal
Logistics
Contracts
Legacy Purchasing
Engineering
Outsourcer
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Analytics From Technology to Business Critical
Old speak
New speak
SCM analytics
Business intelligence
Supplier Performance
Management reporting
ABC
Customer profitability
Forecast accuracy
Workload analysis
Inventory effectiveness
Consolidation
BI/ERP
Promotion analysis
Analytics empower enterprises with perspective
and insight derived from access to and analysis
of quantitative information sources
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SWOT Analysis for Foxconn

• Original Electronic Manufacturer
• Largest manufacturer of connectors
• Leading producers of sockets
• Improved R D

STRENGTH

• To gain Design skills
• To change the culture
• To strengthen the management team

THREATS
OPPURTUNITIES
FOXCONN

• Many competitors Flextronics
• Solectron
• Sanmina SCI
• Celstica etc.

• Lack of design skills
• Culture is secretive
• Lack of acquisition skills
• Lack of a deep management team
• Lack of proper channels of entry

WEAKNESS
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CRM, SCM, and ERP II Need a Strong PLM Foundation
to Realize Product Value
Product Data Repository
Manage resources and production, financials
ERPII
SCM Align and manage supply chains
CRM Care for customers
Manage Product definition and innovation
PLM
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Strengths

• Original Electronic Manufacturer.
• Largest manufacturers of connectors.
• Leading producers of Sockets.
• Well spread distribution logistical network
  worldwide.

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Strengths continued

• Acquisitions in 2003 has helped to make cell
  phones, servers networking gears.
• Improved Research Development.
• Started manufacturing its own brand motherboards
  in 2004.

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Weaknesses

• Lack of design skills.
• Culture at Foxconn is secretive.
• Lack of acquisition skills.
• Lack of a deep management team.
• Lack of proper channels of entry.

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Opportunities

• To improve in their design skills.
• Necessary to change the culture in the company.
• To strengthen their management team.
• Improve the methods of entry in to new products.

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Threats

• Many competitors like Solectron, Flextronics,
  Sanmina SCI, Celstica, Jabil Circuit etc.
• The company shows no sign of changing in terms of
  culture.

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ROI Measurement in the supply Chain
Sales and Marketing
Logistics
Planners
Manufacturing
Customers
Suppliers
Supply Chain Applications
Performance Measurement
Visibility and Event Management
Business Process Analysis
E Business Marketplace
Effectiveness and Continuous Improvement
Trading Partner data
Third Party
History
Data Repository
Analysis for all Trading partners
Supplier Performance
Forecast Accuracy
Inventory Analysis
Cycle Time
Delivery Performance
SC Response Time
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SCOR a model for SCM
Plan
Source
Make
Deliver
Make
Make
Source
Deliver
Source
Deliver
Deliver
Source
Return
Return
Return
Return
Return
Return
Return
Return
Suppliers Supplier
Supplier
Your Company
Customer
Customers Customer
Internal or External
Internal or External
SCOR MODEL
Building Block Approach
Processes
Metrics
Best Practice
Technology
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Recommendations

• Hon Hais combination of manufacturing skills,
  engineering capabilities, merger and
  acquisitions, and low cost control has caused the
  other EMS companies to lose market share.
• Research and development (RD) is one area in
  which Foxconn has been weak. In the rapidly
  changing world of electronics manufacturing
  investing into the RD

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Recommendations

• Creating a regionalized Help Desk to support
  customers/Foxconn users requests, service level
  agreements (SLA) these are agreements between two
  parties that determine how quickly tickets are
  processed. A priority 1 ticket might indicate
  that a work order has to be completed in one hour
  or one day, depending upon the agreement.
• creating a hot site for core applications using
  disaster recovery techniques is critical

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Supply Chain Management at Foxconn MIS
6352-05020 Sivapriya Aswathanarayanan (aka no
show) Brigett Bentley James Fancher Jason
Hammons Paul Lanham Nina Thowsen July 20, 2004