Stratex's Automated Approach to Supply-side Order Management

1. Case Study: Stratex's New Automated Approach to Supply-side Order Management Stratex Networks Scott G. Snyder Assistant Controller

2. What You Will Hear From Me Today • Stratex Networks – who we are and what we do • System topology and metrics • Our economic situation and initiatives • Our solution • Implementation • Where we are today • Where we are going

3. Who Is Stratex Networks? • Founded in 1984 • Headquartered in San Jose, CA with major manufacturing operations in Wellington (New Zealand), Cape Town (South Africa) and Taiwan • We are one of the world’s leaders in providing high-speed wireless transmission solutions • We design, manufacture, and market advanced wireless solutions for mobile applications and broadband access to enable the development of complex communications networks worldwide • $157 million in sales for fiscal 2004

4. Our System Topology • ERP - Oracle 10.7 • Started on Oracle in January, 2000 • Use Oracle for finance functions, Purchasing, Order Entry, Inventory & Mfg. • Upgrading to Oracle 11i (11.5.9) in October, 2004 • Concur for web-based, automated expense reports • Use ADP for payroll • T&E card – American Express

5. Product data mgmt • Items, BOMs, ECOs Agile Current environment. Pre-Sales Order Submission Order Fulfillment Support Customer Sales Cycle Customers Employees – Sales Customer Online Ordering Licensing Web Interface Customer Support Portal (Service) Suppliers/Contract Manufacturers Employees – Management and Staff Oracle 11i, Siebel 7.5, and/or Custom Data Management Systems • Order Management • Items, BOMs • Shipping/Logistics • Service • Contracts and Billing • Installed Base • Depot Repair Supplier Portal • Opportunity Management • Items • Configurator (node/site) • Quotes • MDS • Product Ordering Guides • Orders (pre-book) • Pricing Network Configurator Online Ordering Tool (sales focused) • Inventory Management • Purchasing • Manufacturing • Planning • Finance (GL, AP, AR, FA) Vitria (EAI Framework) • Forecasts • TAS • Approval Oracle 11i Siebel 7.5 • iProcurement • Time and Expense Data Warehouse/ Repository PeopleSoft Enterprise Portal (Employee/Exec/Business Intelligence)

6. Metrics (U.S. operations) • 1,210 – Average Invoices Per Month (2003) • $18.3 M in disbursements (2003) • 797,446 – POs • 1 – 60 Pages • 1 – 80 Revisions • 5 buyers • 3 key receiving areas • 2 AP clerks, 1 supervisor

7. Economic Situation (Our Challenges) • $418 million in sales in FY-01, down to $229 million in FY-02, now $157 million in FY-04 • Cost reductions were required, decision to outsource manufacturing from San Jose to Taiwan & other locations • Outsourced model meant large portion of shipments to drop-ship direct from key suppliers • Documents all paper and in various locations geographically around the world

8. Economic Situation (Our Challenges) • Reductions in force meant very lean accounting staff to get the work done (AP staff reduced to two clerks and one supervisor-including T&E) • AP staff were in constant “fire-fighting” mode with no time to address issues on a timely basis • Turnover in receiving due to reductions in force and outsourced manufacturing • Receiving worked in a reactionary mode, not a proactive mode

9. Initiatives (Where we needed to go) • Corporate Goals • Reduce costs from anywhere possible • Manage contract manufacturers • Improve existing supplier interactions • Finance Goals • Automate wherever possible while keeping costs down (started as Evaluated Receipts Settlement (ERS)) • Make an impact on the company through change

10. Solution: Automate and Improve Supply-Side OM • Automate the routine matching of invoices to receiving documents & purchase orders • Migration to a paperless AP environment through integration of our paper (images) with the transactions (data) into one source • Solve discrepancies within hours not days – avoid “fire drills” to resolve invoice discrepancies • Automatic sending of invoice images for approval of expense purchases (2-way match) • Overcome our geographical problems • De-Compartmentalize supply chain – one team (receiving, purchasing & accounting) • Focus our employees on our core competencies and outsource the rest (AP clerks to issues analysts)

11. Parts To Our Solution (In-House / Outsourced) • In-House • Supplier communication • Receiving transactions • Discrepancy resolution • Payment • Outsourced or Outtasked • Data entry (routine matching) • Data conversion • Image archival and storage

12. The Implementation • We chose AcceLIM to meet our company goals and initiatives while keeping costs down • We had to outline the handoffs in the process between Oracle and AcceLIM • We identified what items would be our responsibility and what AcceLIM would do • Required some work from IT, but not months of development

13. The Implementation

14. Implementation – Flow of data • Purchase orders (and changes to PO’s) and receiving data downloaded daily from Oracle to AcceLIM • Receiving paperwork (packing slips, bills of lading & receipt travelers) sent by fax or scanner to AcceLIM daily • Invoices faxed directly from suppliers or from us to AcceLIM daily • AcceLIM matches daily and provides daily exceptions reports • Matched items are downloaded daily from AcceLIM back into Oracle as payables objects for payment • Issues are highlighted daily for resolution

17. rcarbajal@stratex.com Just curious, who did we windup sourcing the other wire from?

20. - ssnyder

21. - ssnyder - ssnyder There was problem with this supplier’s data, please reprocess tomorrow.

23. Where are we Today • Signed agreement in October 2003 • Pilot in November and December • Started production in February • Successes and struggles

24. Our Successes - Accounts Payable • Currently about 30% of invoices come through the automated AcceLIM system for payment • Images of invoices are e-mailed for approval on expense PO’s • Document images along with the data from invoice to packing slip to PO can be accessed while discussing with a supplier • Proof of receipt documents can be easily accessed and printed during audit • Better collaboration with purchasing and receiving

25. Our Successes - Receiving • Receiving used to have a complete row in the warehouse for receipts with various issues, this has been reduced to one shelf and now just a small pile • Majority of receipt issues are resolved the following day, based on the exception report, rather than only when suppliers call • Better collaboration with purchasing and accounting

26. Our Successes - Purchasing • Real-time resolution of purchase order issues and invoice issues • Addressing issues on a daily basis rather than waiting for a crisis • Access to all data related to a purchase order: PO, order confirmation, receiving documents and supplier invoices • Better collaboration with receiving and accounting • Faster identification and resolution of problems

27. Where we struggle(d) • Initial buy in and acceptance from all departments involved • Overcoming the challenge of defining and implementing the data flow in and out of Oracle • Achieving supplier support for sending invoices directly to AcceLIM and the right method of sending that data • Clearly documented training and help material for new users • Lessons learned

28. Lessons Learned • Implementation timeline needs to be realistic, not too aggressive • Involve all departments early in the process, do not wait to include any departments • Clearly define what our I.T. department will do and what AcceLIM will do • Have a clear method for discussing and resolving issues as they arise

29. Where are we going • Within the next 12 months have over 90% of all suppliers sending their invoices directly to AcceLIM, no paper coming to Stratex • Have all key warehouse locations sending receiving documents directly to AcceLIM for all U.S. purchase orders • Further develop purchasing and accounting departments as analysts and not data entry clerks • Automate purchase order changes through AcceLIM • Achieve over 50% of invoices on automated matching

30. Questions • Questions…