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Transforming Supply Chain Bhawnesh Mathur Arrow Electronics, Inc. Agenda. Introduction to Arrow Electronics, Inc. Industry Dynamics and Their Impact on Customer Needs Transforming Arrow’s Supply Chain Through an End-to-End Approach Summary and Q&A. Supplier. OEM . Contract Manufacturer.

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agenda
Agenda
  • Introduction to Arrow Electronics, Inc.
  • Industry Dynamics and Their Impact on Customer Needs
  • Transforming Arrow’s Supply Chain Through an End-to-End Approach
  • Summary and Q&A
introduction to arrow electronics inc

Supplier

OEM

Contract

Manufacturer

ODM

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
agenda1
Agenda
  • Introduction to Arrow Electronics, Inc.
  • Industry Dynamics and Their Impact on Customer Needs
  • Transforming Arrow’s Supply Chain Through an End-to-End Approach
  • Summary and Q&A
industry dynamics have greatly complicated the electronics supply chain

Increasing Regional & Global Competition

Growth in Differentiated Components

Multi-SitePurchasing & Manufacturing

Shrinking Product Lifecycles

EnvironmentalComplianceRequirements

Numerouse-BusinessOptions

Increasing ProductVariety

Continuing ConsolidationTrends

Industry Dynamics Have Greatly Complicated the Electronics Supply Chain

Supply Chain Complexity

this complexity has caused customer needs to evolve from few and simple
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

to many and complex
… 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

Collaborative forecasting

Inventory bonding

Supply chain visibility

SC Mgmt Outsourcing

e-Business

VMI / SMI

3PL Services

Programming

Assembly

Kitting & turnkey

Engineering

Parametric search

Environmental data

Risk assessment

Part change notification

A R R O W

to meet customer needs arrow has transformed itself into a supply chain solutions provider

71%

69%

64%

54%

38%

17%

3%

'00

'90

'95

'80

'03

'05

'04

To Meet Customer Needs, Arrow Has Transformed Itself Into a Supply Chain Solutions Provider

Arrow Electronics, Inc.Global Supply Chain Service Related Revenue

agenda2
Agenda
  • Introduction to Arrow Electronics, Inc.
  • Industry Dynamics and Their Impact on Customer Needs
  • Transforming Arrow’s Supply Chain Through an End-to-End Approach
  • Summary and Q&A
arrow s chain management approach starts with delighting customers

Source

Source

Source

Make

Make

Make

Deliver

Deliver

Deliver

Arrow’s Chain Management Approach Starts with Delighting Customers . . .

Suppliers

Customers

Plan

Plan

Plan

Connected With

Connected With

Goals:

Suppliers’Distributor of Choice

Supply Chain

Excellence

Delighted Customer

. . . Which is Empowered By Supply Chain Excellence and Preferred Supplier Relationships

delighting the customer

Customer Segmentation

Critical Tools & Services

Differentiated Tools & Services

Delighting the Customer
arrow uses a customer segmentation framework to understand customer characteristics

High:

  • Core supplier base
  • Value partnerships
  • Low:
  • Many suppliers
  • Do not value partnerships
  • Low:
  • Little appreciation for SC
  • Do not invest in SC
  • High:
  • SC critical to success
  • Invest in SC
Arrow Uses a Customer Segmentation Framework to Understand Customer Characteristics . . .

Standard Solutions

TailoredSolutions

High

SUPPLIERCONCENTRATION

Parts forDollars

Price ofAdmission

Low

Low

High

SUPPLY CHAIN SOPHISTICATION

and to define specific service strategies

Service Approach

LeverageServices

MinimizeServices

Services/Tools

Sales/Support Model

Simple

Low-Cost

Complex

Sophisticated

. . . And to Define Specific Service Strategies

High

TailoredSolutions

Standard Solutions

PartsforDollars

SUPPLIER CONCENTRATION

PriceofAdmission

Low

Low

High

SC SOPHISTICATION

arrow has developed a segment aligned differentiated tool service portfolio
Arrow Has Developed a Segment-Aligned, Differentiated Tool & Service Portfolio

Examples

Tailored Solutions

Standard Solutions

  • Collaborative forecasting
  • Bonded inventory
  • Consignment
  • Auto-replenishment
  • Kitting & turnkey
  • On-line decision support
  • Business Needs Analysis
  • VMI / SMI
  • In-plant store
  • Staffed terminal
  • New product introduction
  • Supply chain outsourcing
  • Integrated systems
  • Total cost analysis

Parts for Dollars

Price of Admission

  • On-line part search
  • On-line buying
  • VMI / SMI
  • Electronic communications
case study tailored solutions
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
case study tailored solutions1
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

Freight

Forwarder

Proto CM

USA

EMS Site 1Thailand

EMS Site 2

Malaysia

EMS Site 3

Juarez

POs (Assy)

Invoice/Payment

case study tailored solutions2
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
achieving supply chain excellence

Flawless Execution

Global Processes

Common IT Platform

Achieving Supply Chain Excellence
arrow has established a clear set of core global strategic priorities
Arrow Has Established a Clear Set of Core Global Strategic Priorities

Arrow’s Strategic Priorities

Objectives

  • Voice of the Customer
  • Understand customer needs and experiences
  • Transform findings into action
  • Back to Basics
  • Execute the fundamentals flawlessly (e.g., perfect order, responsiveness, ease of doing business)
  • Be the industry’s service leader
  • Have the industry’s most effective & cost efficient supply chain
  • Operational Excellence
  • Talent Development
  • Attract, retain and develop the right talent
  • Reward performance
innovation is managed through a proven continuous process improvement model

Ideas

Specification

Deployment Plan

Feedback

Analysis

Design

Deployment

Execution

Monitoring

Development

Concept

Metrics

Test Plan

Deployment

Lead

IT

Supply Chain

Supply Chain

Supply Chain

Business

IT

Supply Chain

Supply Chain

Global Business Units

Global Business Units

Global Business Units

Global Business Units

Global Business Units

Significant Participation

Deployment

Continuous Process Improvement

Innovation Is Managed Through a Proven Continuous Process Improvement Model
becoming the distributor of choice

Integrated Processes & Systems

Collaborative Forecasting & Inventory Optimization

Unique Global Supply Chain Models

Becoming the Distributor of Choice
real time process integration with suppliers
Real-Time Process Integration With Suppliers

Arrow’s “Concept to Cash” RosettaNet Program

Product

Information

Demand

Creation

Forecast/

Inventory

Quote/

Price &

Availability

Order/

Order

Mgmt

Backlog

Advanced

Ship

Notice

Invoice /

Invoice

Status

Payment

w/ Bank Notice

2A1

2A10*

2A13**

5C1

5C2

5C3

5C4

4A2

4A4

4A5

4D1

3A1

3A2

5D1

3A4

3A7

3A8

5D3

5D5

3A6

3B2

3Bx**

3C3

3C4

3C6

3C6**

Done Done In Dev Done Done Done Done Done TBD

* Piloted, ** Under investigation

real time process example order management

Traditional EDI Model

Up to 2 weeks

Sub line

Rework

Post ship Rework

Batch Processing

Error Rework

Order

Latency Reduction Mechanisms

2-4 days

2-4 days

40% 2-4 hrs 60% in 24 hrs

  • Real-Time standard
  • Schedule dates in 24 hrs at best
  • Manual process on split line items
  • Many acknowledgement failures
  • Iterations of reschedules
  • Lost window of selling visibility
  • Back-End integration
  • Collaboration rules

Advanced RN Model

Over 90% Reduction

Real-time Rework

  • Controlled processes

Order

80% 2-4 min 20% in 24 hrs

  • Acknowledgements within minutes; rapid exception resolution
  • Immediate visibility to all ship dates
  • No acknowledgement failures
  • Stabilized schedules, improved productivity
Real-Time Process Example: Order Management
agenda3
Agenda
  • Introduction to Arrow Electronics, Inc.
  • Industry Dynamics and Their Impact on Customer Needs
  • Transforming Arrow’s Supply Chain Through an End-to-End Approach
  • Summary and Q&A
summary
Summary
  • Industry dynamics have and will continue to change customer needs and Arrow’s supply chain role
  • Arrow’s supply chain management approach starts with delighting customers . . .
  • . . . Which is empowered by supply chain excellence and preferred supplier relationships
  • Success is a journey
the ultimate goal of arrow s journey is to increase shareholder value

Supply Chain Impacts . . .

All Financial Metrics . . .

& Shareholder Value

  • Enhanced customer service
  • Improved inventory utilization & productivity

Appropriate Working Capital

Increased Capital Efficiency

Reduced Fixed Capital

Increased Shareholder Value

  • Best-in-class customer relationships
  • Differentiated service capabilities

Increased Revenue and Margin

Increased Profit

  • Best-in-class strategic supplier partnerships
  • Unique supply chain models

Appropriate

Cost Model

The Ultimate Goal of Arrow’s Journey is to Increase Shareholder Value
our journey is underway
Our Journey is Underway!

Arrow Stock PerformancePast 3 Years

2003

2004

2005