Enginerring Sc Interview With Dustin V1

A Human Centric Laboratory

\Timothy P. Tsai\ Flow Fusion Research. Confidential

Interview with

Dustin Mattison

3rd July, 2012

http://www.linkedin.com/profile/view?id=3193620&authType=name&authToken=4guD&trk=mp_view_prf_t

http://www.linkedin.com/profile/view?id=3193620&authType=name&authToken=4guD&trk=mp_view_prf_t



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?



1.How do you distinguish between

traditional SCM and the engineering

supply chain?

3



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

http://supply-chain.org/scor/





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

http://supply-chain.org/f/SCOR-Overview-Web.pdf






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



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

http://www.landlearnnsw.org.au/production-chains/what-is



2.What are the two important cycles

before a finished product appears

to the customer?

8



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

https://dap.dau.mil/aphome/das/














http://www.dtic.mil/whs/directives/corres/pdf/424507m.pdf



http://en.wikipedia.org/wiki/Product_lifecycle_management



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



Example: DoD 5000 Process Life Cycle Framework

11

http://www.public.navy.mil/spawar/PEOC4I/ASPG/Documents/APSG_Manuals/files/Integrated_Def_Acq_Management_Frmwk.pdf



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



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



3.Can you talk about the importance

of the hybrid engineering supply

chain?

14



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



“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”



• 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?

http://www.manufacturing.gov/accelerator/index.html

http://www.manufacturing.gov/accelerator/index.html

http://news.cnet.com/8301-13579_3-57444117-37/apple-wants-to-make-products-in-u.s-but-thats-not-so-easy/



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



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



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



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

http://www.intechopen.com/articles/show/title/supply-chain-system-engineering-framework-transforming-value-chain-in-business-domain-into-manageabl


