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SCOR® model.The Supply Chain Operations Reference (SCOR®) model ignores the fact that there is a lot of interaction between supply chains. The Engineered Supply chain works in parallel with the traditional model.
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A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
Interview with
Dustin Mattison
3rd July, 2012
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
Engineering Supply Chain(ESC)
1. How do you distinguish between
traditional SCM and the engineering
supply chain?
2. What are the two important cycles before
a finished product appears to the
customer?
3. Can you talk about the importance of the
hybrid engineering supply chain?
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
1.How do you distinguish between
traditional SCM and the engineering
supply chain?
3
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
Traditional SCM • A Demand-Supply process of
managing – Plan levels of aggregation and
information sources
– Source locations and products
– Make production sites and methods
– Deliver channels, inventory deployment and products
– Return locations and methods
• Biz transaction (activities) – Procurement, Logistics to
response to Sale
Source: Supply Chain Council
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
Traditional SCM Considers Engineering as
Corrective Action of Quality Return
• Quality Return is only engineering level transaction in SCOR as reversed
PO in Biz transaction
• Product/process integration between buyers and suppliers are off-the-book
operation till surface up to return process in SCOR
• Engineering is buried behind quality, delinquency, cost, capacity etc.
Source: Supply Chain Operations Reference (SCOR®) model Overview - Version 10.0
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
Supply Chain Deep Behind SCOR
6
FA
E
Sale Product Component Material
Design 100% 60% 80% 20%
Assembly 0 80% 20% 10%
Process 0 20% 80% 90%
| Current Supply Chain Management |
| A
sset-h
eavy
|
| A
sset-lite
|
Customer
blue-collar
manufacturing
offshore or
outsourcing
|
Piecewise
organization
Sale /channel
outsourcing
Figure 1: An illustration of three- phases outsourcing toward distributed organization
Demand-
Supply
Multiple
industries
supply
chain
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
SCOR Over Simplified Complexity Involved
Production Chain
• A finished goods (Product such as Mobile phone, PC, etc) to customer is
root of the chain network covering multiple industries
– Component and material industries
– Design, Assembly, Process industries
• When the supply chain is going more fragmented, process inter-
dependence between the nodes is increasing
– Problem behind Quality, delinquency, cost, and capacity
– Out of Procurement, Supplier Relationship, IT capability to handle under SCOR
assumption
• Consequence – Turn strategic outsourcing a high risk activity due to over estimated the under layer risk of
distributed organization when crossing industries
– Low degree of freedom of strategic outsourcing. It has very few natural partition in supply
chain. CEO either keep the entire biz, sell them all off, or move them out to somewhere can
justify the cost
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
2.What are the two important cycles
before a finished product appears
to the customer?
8
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
Cycles Before a Product • 2 cycles: with technology & product only
– Acquisition Lifecycle invokes full
technology cycle from early research to
sustainment
• Ref to Defense Acquisition System -
DoD 5000 Process Life Cycle - DAP
• Best practice framework: DoD 4245.7-M
– Product life Cycle Management (PLM)
over Matured Technology Platform • Wiki: entire lifecycle of a product from its
conception, through design and manufacture, to
service and disposal
• Industrial Supply Chain is less
complicated to DoD – Acquisition lifecycle is rarely done over supply
chain, mostly in-house activities
– Apple is 1st Enterprise executes Acquisition
cycle over supply chain rewriting history
– All cases are different in activities level
9
A generic lifecycle of products
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
Changing Paradigm to Supply Network
10
Traditionally,
Acquisition
cycle are all in-
house activities
Last decade,
some companies
successfully
transformed into
supply chain:
Boeing: 787
TI: CMOS
Ford: automotive
platform
Apple: i-series
They all suffers a lot of pain but sure one of the
pioneers in their industries can hold position in next
decade
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
Example: DoD 5000 Process Life Cycle Framework
11
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
The 2 cycles: Core Competency of Innovation
• Digitization is to transform the activities into a new more productive
workflow but not drop it
– From fully in-house to be connection-oriented virtual enterprises
– Innovation is effective execution to idea. Without that execution, that is
creativity makes no value to revenue in product company
• Dilemma of being failed to transform: can’t response to change,
finance instability due to asset-heavy
– TI vs. Motorola in semiconductor
– Apple vs. HP in connection platform
– Ford vs. GM in automotive
• Suggested Engineering SC to keep the capability
– SCOR vs. ESC coverage
– Keep strategic core component, the technology enabler(s)
12
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
SCOR vs. ESC coverage
SCOR ESC
Short way Finished goods Semi-finished goods
Detail definition Biz level, source/Deliver as Input / Output of Make, apply to all industries
Operation level, basic unit is integrated operation of Planning/Engineering/Quality
• Biz Transaction Only Biz Transaction Parallel to Biz Transaction, execute transaction
•SC inter-dependence Assume NO Yes
•Quality Lagging as finance performance
Leading to prevent quality event, put inter-dependence under control, as part of spec
•Engineering Assume NO Integration, Failure Analysis, Yield enhancement etc
•Planning Demand-Supply continuity Demand-Supply continuity plus inventory quality sampling, virtual Mfg management
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
3.Can you talk about the importance
of the hybrid engineering supply
chain?
14
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
IT Evolution Maturity & Globalization
Turning Point 1. The world is confirmed to heading next level of outsourcing when Economic Policy
Institute (EPI) said statistics confirmed 1.4M jobs were created overseas by U.S.
companies, compared to 1M domestically in year Dec, 2010 (Scott, 2010). Majority
of employees growing is overseas or virtual.
2. China became world’s top manufacturing nation, ending 110 year US leadership at
May, 2011
3. U.S. reaches $14.3 trillion debt limit and his perfect credit rating was being
downgraded from AAA to AA+ with a negative outlook by Standard & Poor at Aug
5th, 2011, the first time ever.
4. Apple has surpassed oil group Exxon to become the world's most valuable
company by market capitalization at Aug, 2011;
5. e-commerce is confirmed a persistent activities conducting post-Internet economy
where Amazon (20.4%) sites visited by 1 in 5 global internet users, about 282
millions in June, 2011 following with eBay (16.2%) and Alibaba(11.3%) in China
(comScore, 2011).
6. Facebook value may soar over $100 Billion and Facebook set to reach 1 BILLION
users by 2012
15
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
“Bretton Woods” system
broken at 70s’ and
deficit raised to $800B
at 2007, capital bubble
broken in 2008
Make (Engineering)
Challenges in new Game Plan
Raw Material
Make (China)
ODM (TWN)
Consumer (US)
Lock currency rate to Dollar,
30% GDP loan to market
which drive over capacity in
MAKE, export price flat
balance from increasing
competition and increasing
cost in China*
Competing the
limited raw
material
•Create new industry
cycle (energy, genetic,
bionic,.. )
•Build share facility to
improve cost structure
•Equal IT and global
power between
enterprise and SME
Governor from “doing
nothing” to do
something to hold job in
US
Note(*): Giles Chance, “China and the Credit Crisis: The Emergence of a New World Order”
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
• Government – Jobs & Innovation Accelerator Challenge
$26 Million Multi-Agency Advanced Manufacturing Jobs and Innovation Accelerator Challenge
The Obama Administration announces a $26 million Advanced Manufacturing Jobs and Innovation Accelerator Challenge, a partnership between the U.S. Department of Commerce’s Economic Development Administration and
National Institute of Standards and Technology, the U.S. Department of Energy, the U.S. Department of Labor’s Employment and Training Administration, the Small Business Administration, and the National Science Foundation.
This initiative will assist the development and implementation of regionally-driven economic development strategies that support advanced manufacturing and cluster development. In addition to the six partnering agencies, the
initiative will leverage technical assistance from up to eight other Federal agencies…….
• Enterprises
– Apple wants to make products in U.S., but that's not so easy Critics want Apple to manufacture more products in the U.S. CEO Tim Cook does, too. But there's a lot in the way.
• Reality
– Entire manufacturing ecosystem has been moved out and not easy to
come back
– Global market also needs global manufacturing capability either next to
customer or for taxation purpose
• Conclusion
– hybrid engineering supply chain to provide enough Degree of Freedom to
connect the facilities where it is when it needed
17
Jobs Moving Back?
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
Apple Re-engineering Acquisition Lifecycle
to Turn Hardware a 58% PFO Biz, HP 2.5%
Customer Service
Factory
Component
Assembly
Application
Channel customers Employees
1.EMS: Foxconn
4.App Store
•2.In-house:A6
CPU design
•Fabless;
Samsung
3.Participatory
Production
demand demand
1.EMS: Foxconn
1.EMS: Foxconn
<< Kill Microsoft’s value >>
~7B paid
capital in SC
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
Challenges, Apple as Example
• Kill your patterns in long value chain
– Apply eliminates Microsoft’s value in Wintel value chain by creating Apps Store
• Re-engineering value chain
– Simplify value chain: ask Foxcon does more
– Take technology enabler: A6 CPU,
– Reserve capacity: hold ~7B paid capital in SC
• Right Human Capital
– Multiple disciplines expert on complicated engineering SC
– Cloud services also complicated engineering complex
– More challenge to SME when reaching oversea resource and hybrid ESC
• Some players phasing out
– ODM industry diminishing. Taiwan ODM only 0.5% of Apple cost structure
– Product company can't have vertical integration capability both in the 2 cycles
and services integration
19
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
Significant Impact Area
20
• Rapid Changing Industries like Consumer
Market
• OEM (129$B)
• IC & EMS (395$B) going to merge due to
TSV(Through-Silicon Via) technology
• Terminal market ranking from Apple, HP,
to RIM, Lennova, Acer etc
• Rapid Changing Market in SC IT Market
• Cloud computing in SaaS sector like saleforce.com in Biz Transaction level will
continue to grow
• Loser: SAP
• New market in Hybrid Engineering SC shall grow
• Social based collaboration tool such as PM, office in the cloud
• 4PL players to support core Supply Chain Operation
• 3-15% of revenue vs. 2-3% of revenue in P&L BPO
A Human Centric Laboratory
\Timothy P. Tsai\ Flow Fusion Research. Confidential
Supporting Infrastructure
• Academics
– Supply Chain System Engineering: Framework Transforming Value Chain in
Business Domain into Manageable Virtual Enterprise and Participatory
Production
– Not popular, still in single discipline mentality within SCOR scope
• Enterprises
– Pioneers such as Foxconn, Apple, Ford, TI, Boeing,..
– One-of-a-kind, lagging indicator to Management Science
• Government
– Lagging, should have training facility to rebuild broken chain of engineering
development ladder due to moving out manufacturing ecosystem
– Suggests to create “Distributed Manufacturing Center” which is share facilities to
industries to provide molding services, and bridge to oversea resources
21
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