October 21, 2011

From S&OP to Mobility Business and System Roadmap Cirrus Logic, Inc.

Tom Strandwitz

Introduction

Tom Strandwitz, Director – Program Development Company: Cirrus Logic, Inc. – 2002 to present Previous roles: Director – IT, Business Analyst – SAP ECC (MM/PP) Past employment: Consultant – PricewaterhouseCoopers

3 year program aimed at addressing supply chain challenges

Improvement needed, but not sure where to start Faced with considerable growth, processes not scalable Reporting was difficult, considerable time spent merging files off-line / Excel Bottoms up approach, foundational changes required first

More than 3,000 active customers with 700 innovative products

~600 Worldwide

1984 – Headquarters in Austin, Texas

~$156 Million in cash, with no debt

~1,100 Issued and pending U.S. patents

Founded

Fabless pioneer since early ’80s

Cirrus Logic Overview (NASDAQ: CRUS)

How can we plan and execute more efficiently?

Topics that come to mind:

Forecast Accuracy MRP Capacity Planning Available to Promise Business Planning Metrics Vendor EDI – commits and ship out dates Vendor Evaluation

All have value, but where to begin?

Terms “plan” and “execute” can take on a variety of meanings

“Plan”

DEMAND Forecasted Requirements -> FP level (independent) -> Wafer / die level (dependent) Sales Orders Deliveries Safety Stock targets

SUPPLY Inventory on-hand -> Finished goods -> Die bank Work In Process / Yields Wafer POs Assembly POs Test POs … etc. – other POs for services

FUNDAMENTAL ELEMENTS

(backlog)

“Plan”

DEMAND Forecasted Requirements -> FP level (independent) -> Wafer / die level (dependent) Sales Orders Deliveries Safety Stock targets

SUPPLY Inventory on-hand -> Finished goods -> Die bank Work In Process / Yields Wafer POs Assembly POs Test POs … etc. – other POs for services

SYSTEM TRACKING ADX – Adexa

CAM – Camstar SAP – SAP ECC

EXC – Excel

ADX

EXC

SAP

EXC

SAP

CAM

SAP

(backlog)

Loosely tied to FP via lot number, PO delivery dates not used

consistently

“Plan”

DEMAND Forecasted Requirements -> FP level (independent) -> Wafer / die level (dependent) Sales Orders Deliveries Safety Stock targets

SUPPLY Inventory on-hand -> Finished goods -> Die bank Work In Process / Yields Wafer POs Assembly POs Test POs … etc. – other POs for services

ADX – Adexa CAM – Camstar SAP – SAP ECC

EXC – Excel

ADX

EXC

SAP

EXC

SAP

CAM

SAP

(backlog)

BUILDING A FOUNDATION

SAP

Wafer POs Production Orders (FP, Die) -> Assembly POs -> Test POs -> etc. – other POs for services

SAP

Production Orders represent lots, and will have expected start and

finish dates

SAP

Forecast results uploaded into SAP software as input

for Planning

SAP

SAP

All necessary Planning elements will be on one system.

SAP ECC Sales Orders (BBB)

Finished Goods WIP EXECUTION

End-State – systems

Integration Layer

SAP APO Forecasting

MRP / Capacity Backlog ATP

Sterling Integrator

EDI / B2B

SAP BusinessObjects

portfolio Reporting

SAP NetWeaver BW

Business Warehouse Data Queries

SAP systems

Partner systems

Model N Opportunities

Quotes POS

Roadmap of Project Efforts

….

….

Logical sequence to meet our business needs

WIP Execution Forecasting Planning Backorder Processing

Not your standard Forecast

Product / Location is not enough Channel, Purchasing Customer, Design Customer – all play a role

Customers – Types and Attributes Purchasing Customer – territory drives forecast ownership Design Customer – tier drives forecast strategy and planning priority

Statistical vs. User Input Still employ user input for key customer-product combinations Introduced automation for run-rate business or lower tiers Collect necessary transaction history (Direct, POP and POS) to support both

More foundation building – Sales data

All Sales data was normalized into common structure

Channel Product Purchasing Customer Design Customer

Direct Disti by Name

Division Product Line Product Group Product Family

Geography Region Territory Tier Corporate Customer

Geography Region Territory Tier Corporate Customer

ATTRIBUTES AND DIMENSIONS FOR ANALYSIS

Sales Orders, Backlog, Billings (direct, POP, POS), Opportunities All Sales data “tagged” with a common set of master data from SAP ECC Serves as the basis for all forecast and actuals reporting

All five steps of the process are

integrated

1. Baseline Forecast Create CVCs Load History Alerts and Exceptions Manual Adjustments 2. Sales Forecasting

Planning View by Purchasing Customer

Tiering by Design Customer Inclusion of Price/ASP’s

3. Marketing Review and Adjustments View by Product Hierarchy /

Material NPI/EOL Product Transitions

4. Consensus Review and Adjustments Single Number Forecast Discuss Gaps Plan vs. Actual Exception Management Identify Gaps between S&OP and

Strategic Goals

5. Release to SNP Net POS Disti Inventory Overlay Consensus

Demand on Warehouses Planning runs – Material

and Capacity Planned Starts – Wafer and

Assembly

Systematic S&OP Process SAP APO

Slide courtesy of SAP

Demand Flow to Warehouses

CHANNELS CUSTOMERS WAREHOUSES

$ Transactions

CONSENSUS DEMAND Forecasting Combinations

Channel / PC / DC / Product

Direct and POP Distis Needs to funnel down to the

appropriate warehouses

POS Distis Needs to be netted against on-hand inventory at the specific

distributor, then funnel down to the appropriate warehouses

Sell-In POS

HK

AUS

TUC

SH

SZ

POS Distribution Disti 4 Disti 5 Disti 6

Consensus Demand

(netted by POS

Distributor)

Consensus Demand to correct warehouse:

Single warehouse or disaggregated to multiple

Direct

POP Distribution Disti 1 Disti 2 Disti 3 …

Ability to Provide Accurate and Timely Commit Dates to our Customers… the Final Piece of the Puzzle.

SAP APO SAP ECC

Demand Planning SNP, PP/DS, GATP

Production Planning

Sales and Distribution

Demand: By Channel By Product

By Purchasing Cust By Design Cust

By Tier

Demand: By Product

By Tier By Location

Planning Runs: MRP / Bottoms Up

Infinite / Finite Capacity

Wafer Starts Assembly Starts

Test Starts

WIP Die Bank

Finished Goods

SALES ORDERS By Tier, Location, CRD

Can we allocate and confirm? GATP

BOP – Backorder Processing

B2B – Vendor WIP

End State – processes in SAP software Forecasting – SAP APO – Demand Planning

Statistical, User-input -> drive to consensus -> released to SAP APO – SNP

Requirements and Capacity Planning – SAP APO – Supply Network Planning Unconstrained and Constraint-based planning – materials and resources (vendor or floor capacity) Results – Planned Orders for Fab, Assembly, Test, subassemblies; PRs for purchased components

WIP Execution – SAP ECC – Production Planning Planned Orders from APO – executed as Production Orders (Lots)

Material Availability – SAP APO – Backorder Processing Allocation based on book date and tier

Reporting – SAP Netweaver BW, SAP BusinessObjects portfolio SAP BEx information broadcasting option (analyzer tools); SAP BusinessObjects Explorer, and SAP

BusinessObjects Web Intelligence software

Reporting and Analysis

Dashboards in SAP BusinessObjects tools

SAP NetWeaver BW

SAP APO

SAP ECC

Model N

Tools BI – SAP BEx SAP BusinessObjects Explorer,

analyzer, and SAP BusinessObjects Web Intelligence

Content (examples) BBB – summary and detail Revenue vs. Consensus Wafer Starts Sales Funnel / Design Wins Gross Margin Forecast

Devices PCs Macs iPhone iPad

Everything in BI Eliminate local user data marts

One version of the truth

Data in SAP BusinessObjects

tools

Query as a Web Service

Extranet Intranet Other systems

…And now, Mobile Access

Dashboards in SAP BusinessObjects tools

SAP NetWeaver BW

SAP APO

SAP ECC

Model N

Thank you …

For the opportunity to share our journey

Overview of Cirrus Logic’s supply chain challenges Steps we took to make foundational changes first How we employed SAP tools to meet those challenges

Back-up slides

How can we Plan and Execute more efficiently?

Increased forecast accuracy Reduced cycle times Forecast preparation Demand planning / re-planning Supply chain – wafer fabrication to finished goods

Reduced obsolescence Increased on-time commit to Customer Request Date Enhanced capacity planning

How can we improve?

Boiling it down – what do we want?

REQUIREMENTS FEATURES OPTIONS

An ROI analysis was performed on each option.

Options – Feature Comparison

The ROI and features provided lead us to choose the “Full” option.

Best option to meet our goals

Integration of Pricing

SAP BI (data stores)

SAP APO (cubes)

SOURCE SYSTEMS

Bookings

Backlog

Billings

POS

Opps

Quotes

Bookings

Backlog

Billings*

Opps

Quotes

SAP Model N

Combined Billings

Backlog

Opps

/rev sub

Material Price

File Material Price

Sales Price Report Sales Price

* CRD used for baseline forecast

POS

Corrected Price -> Last cycle

Planning CVCs

Product Flow to Customers

CHANNELS CUSTOMERS WAREHOUSES

Direct

POP Distribution Disti 1 Disti 2 Disti 3

POS Distribution Disti 4 Disti 5 Disti 6

Purchasing Customers

$ Transactions

Sell-In POS

HK

US

TUC

SH

SZ

Shipments

Stocking Orders

Direct Receipt

Sales from Disti

Sales from Disti

…

Design Customers

GEO: APAC REG: PRC

TER: S China

GEO: AMER REG: West

TER: Northwest

How can you adequately come up with a

Demand Forecast?

Where are we now …

Unified data model Consolidated billings – Direct, POP and POS By Channel, Purchasing Customer, Design Customer, Product Hierarchy

Highly integrated demand planning system Billings, backlog, opportunities, ASPs, product introductions / transitions Comparison – Statistical vs. Sales vs. Marketing vs. Consensus vs. History Input into revenue planning process

Access to centralized data Migrating from user Excel data marts – push into SAP BusinessObjects BI suite Old adage – “one version of the truth”

BENEFITS REALIZATION

Where are we going …

Clear finished product demand statement Aggregated by Product, Location and Design Customer Tier Maintain fidelity in supply planning, dynamic pegging to resolve bottlenecks

Forecast consumption by Design Customer Tier Early response to upside when product/tier forecast is fully consumed Careful monitoring of unconsumed forecast and adjust accordingly

Sales order allocation and confirmation When the order hits, allocate and confirm against CRD Multiple factors to be considered – Booking lead time, Tier of Design customer,

check against feasible build plan

Forecast Consumption – with Tier Nov Fcst

Tier 3

Tier 1

Tier 2

1000

7000

2000

Nov 3

10,000

Fcst

10,000

fcst:

6000

Revised Build: 11,000

Nov 27

Tier 3

Tier 2

Tier 1

Revised Build: 13,000

Nov Fcst

Tier 3

Tier 3

Tier 2

1000

7000

2000

10,000

Nov 3

Remaining fcst to build:

9000

Revised Build: 13,000

Tier 3

Tier 1

Tier 2

Tier 3

4000 Tier 3

It took almost 3 weeks for the system to begin reacting to the upside!

Nov 23

Tier 3 Tier 3

4000

Tier 2 Tier 2

7000

Forecast Consumption – without Tier

Once a forecast for a tier has been consumed within a predefined

window (e.g. 14 days backwards / 28 forwards) the system will plan for

the overage and consider it as additional demand.

Dashboards in SAP BusinessObjects tools

“One View”

SAP BusinessObjects

BI suite

JIRA Issue Tracking

JIVE Content Management Repository Collaboration

SAP APO

SAP ECC

Model N Activity Tracking, Issue Tracking Extranet … and more?

Account Plans

Trip Reports

Existing Master Data Structures e.g. Corp Customer, Div, Product Groups

Data Views