The Introduction of Lean Manufacturing Concepts at Qualcomm

1. The Introduction of Lean Manufacturing Concepts at Qualcomm

2. Introduction: Agenda • The Value Chain • Lean Concepts • Benefits of Lean Manufacturing • 2 Oracle Instances • The QCT instance • The Quantum instance • Why 2 instances? • Separation of Production and Non-Prod Procurement • 2007 Implementation Sites

3. Value Chain Processes Fulfill Demand Generate Demand Develop-Introduce Products / Services Market Products / Services Sell Products / Services Procure Materials / Services Distribution / Service & Support Plan / Manufacture The Value Chain The Quantum value chain is driven by Qualcomm’s leadership position as the developer of CDMA technologies. QCT CDMA technologies accounts for 90-95% of QSCO demand, principally FFA’s and SURFS (test equipment used to test chip quality and functionality). The remaining 5-10% of QSCO demand is generated by QWBS (Qualcomm Wireless Business Solutions), which manufactures OmniVision and other wireless products.

4. Lean Concepts: The 5S System

5. Predominately “Push” “Pull” from the Partner Kanbans, Min/Max and Safety Stock Demand Triggers Inconsistent Inventory Disconnected Forecasts Intelligent Forecasts Inconsistent Signal to Partner Defined Signal to CM Partner Complex Processes Radical Simplification Lean Concepts T O : F R O M :

6. Benefits of Lean Manufacturing • Reduced inventory across the supply chain • Greater predictability around lead times and on-time shipments • Increased reliability  the right product at the right time at the right price • Better customer satisfaction due to greater accuracy in forecast delivery • Better data, robust processes and systems  management effectiveness • Increase control over quality, defects and root cause of defects (6Sigma) • Optimize operations between existing QSCO and “shelter” organization • Better manage throughput with new Contract Manufacturing partner • Position Qualcomm for rapid growth in emerging business and markets

7. FAB Suppliers SAT Organizations PO for DIE items 3B2_C-O message to SAT Service PO for FG items 3B2_C-I message from FAB 4B2 message from SAT Qualcomm 2 Oracle instances: The QCT Instance • QCT instance has two application servers: 11.5.8 and 11.5.9 (lot controlled) • Quantum instance is an Oracle 11.5.10 instance, with min. customizations • Each organization “owns” its own inventory; common inventory items • QSCO (manufacturing) has no P&L, and will liquidate costs to other BU’s QCT Instance

8. 2 Oracle instances: The Quantum Instance

9. Why two instances? • The QCT instance is geared to Qualcomm’s chip manufacturing business, is heavily customized, and uses “lot control” and other features that are not attractive to the Qualcomm discrete manufacturing businesses • The QCT instance uses two application servers, one Oracle 11.5.8 and the other, an Oracle 11.5.9 instance, primarily to support Oracle’s Advanced Supply Chain Planning (ASCP) engine • The QCT instance does not include project accounting, nor does it make allowance for international rollout • There is continuing discussion in the press about “spinning off” the chip business

10. Separation of Prod & Non-Prod Procurement Indirect and Services Direct and NPI Shelter and Bldg M Corp Procure

11. Quantum Implementation Sites Russia (2) Canada (1) UK(5) EU (DE, ES, FR, IT, NE, SE) (6) San Diego Korea(2) SD1 Japan(2) QMT San Jose China(3) Israel(1) Tijuana, Mexico Taiwan (3) SD2 QMT Taiwan India(3) Mexico(6) Vietnam(1) Singapore (1) Indonesia (1) Brazil (1) Australia (2) South Africa (1) Argentina (1) Actual sites, 2007 rollout Potential sites, 2008 + global rollout

12. Lean Manufacturing: Agenda • Inventory Orgs Structure • ASCP Overview • Forecasts and Sales Order Drive Demand • Business Processes • SCO (Supply Chain Organization) Procurement • Shelter Manufacturing and CM Procurement • NPI Procurement • Quality and RTS Highlights • The concept of a “Virtual MRB” • Lean Manufacturing “to be” Model • Conclusion

13. Qualcomm Inventory Orgs Structure

14. Order Management iSupplier Portal ODP ASCP Collaborative Planning ASCP Overview • Demand driven by forecasts and Sales Orders (depending on OU) • As Demand drops into the Planners Workbench, Planners route “make” orders to MES (“Shop Floor Control”), material requirements are identified, and PO’s are created and transmitted to Suppliers via EDI (Harbinger) • Entire production procurement process is automated, end-to-end Generate Baseline Forecast Generate Constrained Long Term Supply Plan Oracle Modules: Collaborative Demand Planning Generate Short Term Manufacturing Plan Generate Consensus Forecast Release Work Orders to Contract Manufacturer Capture Inventory Visibility Release Purchase Orders to Component Vendor(s) In addition, DBI may be used for KPI / Metric reporting Collaborate with Contract Manufacturer Check Availability & Capacity (ATP)

15. Forecasts Drive Demand into QSCO • Forecasts or SO’s created in QCT, MUI, QMT OU • Demand is placed against QSCO OU, 3 inventory orgs • PO’s are generated and sent via EDI to suppliers

16. Sales Orders Drive Demand Forecasts entered via spreadsheet Releases against Blanket PO (EDI 850) Forecast (EDI 830) Adjustments to Plan made with Arrow Includes VMI, SOI, “toll manufacture”

17. Sales Orders Drive Demand Run ASCP Engine SIM versus REGEN Run PO’s using EDI 850 Forecast using EDI 830

18. ICG Process: Item is “Planning Enabled” PO’s marked with an “-NPI”

19. Oracle Configuration: Item Master (1 of 2) Indicates an “Active Item” Create Supply to Match Demand Defines period for which releases created

20. Oracle Configuration: ASCP Engine (2 of 2) ASCP Plan is not Constrained Enforced Demand Drives the Planning Engine

21. Quality and RTS Design Highlights • Uses standard Oracle hooks from Procurement to Quality • 8 Quality Collection Plans developed for each “state” an NC’ed item may take • Handles RTS for both Production and Ancillary Items • Covers all RTS scenarios: • Credit • Outside Rework • SOI (Supplier Owned Inventory) • Legacy Receipts • Utilizes standardQuantum shipping process (custom, integration with RTS) • Leverages standardOracle WO/PO process to capture all relevant inventory consumption, item conversions, labor charges and other variances • Improves A/P debit memo process using the AP Open Invoices API for automatic debit memo creation

22. QUALCOMM “Virtual” MRB Process Collection Plans Material Receipt into MRB Inventory Factory Factory receives part, and after inspection (“reject”), transfers NC part to MRB Inventory. Rework: Manually Create Work Order for internal rework items • RCV INSP Work Order NC Rework • Master Main NC Process Start • Audit MRB Sub NC part is retuned to MRB Sub-inventory • Detail Repair Vendor • Disp Master Inv Move OSP • RoHS-WEES RTS (Buyer) • WFR Master “Accept, Use as Is” Disposition Sub (SQE) “Accept Use as Is” NC part is sent to outsourced repair facility • RTS Master Scrap • OSP Master Part is not salvageable and is scrapped. RTS/RTV ( Credit/ SOI) Hold Supplier Key Automated Scrap RTS Process: Create OM Shipping Lines from Receipt Lines. Manual

23. Quality Automated Processes (incl. RTS) • Automatic Creation of Sales Orders • Trigger on RTS disposition • Utilize Item set up • “Feed” Shipping documents • Create Vendor address (site) • Automatic E-mail Notification to next Person in Chain • Reports

24. SLC Customer Kanban/ROP Kanban/ROP Kanban/ROP Kanban/ROP Pack-out Transit Eng Change Mgmt Health Monitoring Bad Board/ Virtual MRB Process Component Mgmt LEAN Process Flow “To Be” Model On line Orders ERPOrderMgmt Costing Resp Qualcomm CdeC Site MPS Planning Transfer FGI to Company ROP Sizing CM Dist Site #`1 ERP Supply Chain Partner CM Pack-out Contract Manufacturer MRP Planning CM Dist Site #2

25. Conclusion