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Supply Chain Management at Foxconn MIS 6352-05020 Sivapriya Aswathanarayanan Brigett Bentley James Fancher Jason Hammons Paul Lanham Nina Thowsen July 20, 2004. Introduction. Foxconn is the recognized trade name for Hon Hai Precision

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slide1

Supply Chain Management at Foxconn

MIS 6352-05020

Sivapriya Aswathanarayanan

Brigett Bentley

James Fancher

Jason Hammons

Paul Lanham

Nina Thowsen

July 20, 2004

introduction
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
introduction1
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.
developmental history
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
developmental history1
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
developmental history2
Developmental History
  • Hon Hai’s combination of manufacturing skills, engineering capabilities, merger and acquisitions, and low cost control has caused the other EMS companies to lose market share.
slide7

How Analytics and SCM Applications Fit

Together

Analytics

Plan

Operational

Planning

StrategicPlanning

Tactical phase

Analyze

Execute

Transaction

Management

information

Primary data entry

Admin

Capture

SCM

industry analysis
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.
industry analysis1
Industry analysis
  • SAP is said to be the market leader in the ERP business
    • top competitors are Oracle, PeopleSoft, Siebel, and Lawson Software
industry analysis2
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.
industry analysis3
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.
industry analysis4
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
industry analysis5
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
industry analysis6
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
industry analysis7
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
industry analysis8
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
industry analysis9
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
slide18

L

E

G

A

C

Y

2

L

E

G

A

C

Y

1

M

P

R

II

Integration Broker

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

Legacy Purchasing

Contracts

Engineering

Outsourcer

analytics from technology to business critical
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

slide20

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

slide21

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

strengths
Strengths
  • Original Electronic Manufacturer.
  • Largest manufacturers of connectors.
  • Leading producers of Sockets.
  • Well spread distribution & logistical network worldwide.
strengths continued
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.
weaknesses
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.
opportunities
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.
threats
Threats
  • Many competitors like Solectron, Flextronics, Sanmina SCI, Celstica, Jabil Circuit etc.
  • The company shows no sign of changing in terms of culture.
roi measurement in the supply chain

Sales and

Marketing

Logistics

Planners

Manufacturing

Customers

Suppliers

ROI Measurement in the supply Chain

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

scor a model for scm

Plan

Source

Make

Deliver

Deliver

Source

Make

Deliver

Source

Make

Deliver

SCOR: a model for SCM

Source

Return

Return

Return

Return

Return

Return

Return

Return

Suppliers’

Supplier

Supplier

Your Company

Customer

Customer’s

Customer

Internal or External

Internal or External

SCOR MODEL

Building Block Approach

Processes

Metrics

Best Practice

Technology

recommendations
Recommendations
  • Hon Hai’s 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 (R&D) is one area in which Foxconn has been weak. In the rapidly changing world of electronics manufacturing investing into the R&D
recommendations1
Recommendations
  • Creating a regionalized Help Desk to support customers/Foxconn user’s 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
slide31

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

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