Www.gxs.comGlobal eXchange Services – Confidential Information Why Manufacturing Companies Will Create and Join B2B Trading Networks David Kraemer, Vice

www.gxs.com Global eXchange Services – Confidential Information

Why Manufacturing Companies Will Create and Join B2B Trading Networks

David Kraemer, Vice President, Global Industry Marketing


Some Common Background Premises

• Shorter cycle times reduce costs.

• Inventory “postponement” reduces costs.

• Logistics services increase profit, differentiation.

• Coordination of physical, data, and financial flows speed time

to money.

• Information (vs. data) is needed to manage complexity.

• Process management has replaced transaction speed.


UpshotNon-core activities are being outsourced or managed by partners. Information is necessary to manage these processes.

The EnterpriseExtends

Suppliers Customers

Factories & Manufacturing PartnersRetailers

LogisticsOther Private NetsVirtual Storefronts

Manufacturing Pain Points:

Mastering Global Value Chain ComplexityManufacturing Pain Points:

Mastering Global Value Chain Complexity


86% of Manufacturers

Today’s Global Value Chain Profiting From ComplexityCourtesy Deloitte: “Mastering Complexity in Global Manufacturing”

Glo

bal

Val

ue C

hain

Com

plex

ity

Value Chain CapabilitiesLow High

Low

Hig

h

(37%)

17% more profitable

100% = base profit

(49% ofmanufacturers)

(7%)

73% more profitable

(7%)

19% more profitable

Profiting From ComplexityProfiting From Complexity

Del

oit

te R

esea

rch

Del

oit

te R

esea

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Profitable Revenue Growth

UpshotConsumer products are characterized by high volumes and variability – this is new to the industrial manufacturing way of thinking.

EXAMPLE

Supplying to Industrial Computing was easy and predictable.

AMKOR, a supplier to chip makers, is affected by how cameras, autos, laptops, and cell phones are made

NOKIA must handle 30 million components -- a DAY!

2004 CONSUMER ELECTRONICS SHOW BREAKS ALL RECORDS!

With hundreds of new products and technologies announced this January in Las Vegas, the 2004 International CES spanned 1.38 million net square feet and brought together:

•129,000+ industry professionals

•2,400+ exhibiting companies

•18,000 international travelers from 110 countries

http://www.cesweb.org/shared_files/press/ces_photos/BellSouth.JPG

http://www.cesweb.org/shared_files/press/ces_photos/CobraPersNavSys.JPG

http://www.cesweb.org/shared_files/press/ces_photos/samsung80.jpg

http://www.cesweb.org/shared_files/press/ces_photos/SonyEricP900.JPG

http://www.cesweb.org/shared_files/press/ces_photos/ApeXtreme.JPG

http://www.cesweb.org/shared_files/press/ces_photos/Xact.JPG

http://www.cesweb.org/shared_files/press/ces_photos/MonsterCable.JPG

http://www.cesweb.org/shared_files/press/ces_photos/IconTV.JPG



Reducing Time to Market

UpshotLife cycles are short and profits are made early in the cycle. Reduction of unnecessary delays is needed to hit market windows.

Time

Vol

ume

ProductLifecycleProductLifecycle

Time

Vol

ume/

Pro

fit ProductLifecycleProductLifecycle

ProfitMarginProfit

Margin

Example

Sony has eight week life for each PC model. They plan for 75 weeks and purchase 36 weeks before production. Process data such as supplier product and availability information integrated into their system weekly helps them succeed.

Sony’s catalogue of products must be constantly updated and republished.



Aligning Supply and DemandAcross the Value Chain

UpshotInventory anywhere in the value chain will be a charge against profits and will become obsolete due to new technology and substitution products.

Lost SalesAnd Profits

InventoryBuild

Time

Vol

ume

ManufacturingDemand

EXAMPLECisco Systems scrapped2+ Billion dollars of excesscomponent inventorywhich was acquired in advance for builds which were not forecast.

Avnet must manage inventory for their customers and is accountablefor missed deliveries toDEMAND — even if notforecasted.


designer

distributors

suppliers customer

Business Process: More Than Exchanging DataFiles

•Material Purchasing •Order Release •Work Order/Pick Creation•WIP Status Updates•Shipping Notifications• Invoicing

•Material Purchasing •Order Release •Work Order/Pick Creation•WIP Status Updates•Shipping Notifications• Invoicing

•Shipping Notifications

•Material Receipt

•Package

Documentation

• Invoicing

•Shipping Notifications

•Material Receipt

•Package

Documentation

• Invoicing

•Collaborative Engineering & Testing

•Collaborative Engineering & Testing

Design

Logistics

Suppliers Customers

• WIP Status Updates

• Inventory Reconciliation

• Sales Order Distribution

• Demand Forecast Sharing

• WIP Status Updates

• Inventory Reconciliation

• Sales Order Distribution

• Demand Forecast Sharing


GXS Value Proposition

By integrating their complex global value chains, GXS helps manufacturers become “Complexity Masters” that:

Are better informed and make decisions faster;

Bring more products to market quicker than their competitors;

Satisfy demand for their products while minimizing excess inventory;

Deliver superior revenue growth and profitability for their shareholders.


Protoypical Case Studies

Findings from Deloitte: Advantages of utilizing and mastering Increased supply chain complexity

Seagate Connects with 11 suppliers and 1 Logistics Services Company

LGSiltron Connects with Samsung


86% of Manufacturers

Today’s Global Value Chain Profiting From ComplexityCourtesy Deloitte: “Mastering Complexity in Global Manufacturing”

Glo

bal

Val

ue C

hain

Com

plex

ity

Value Chain CapabilitiesLow High

Low

Hig

h

(37%)

17% more profitable

100% = base profit

(49% ofmanufacturers)

(7%)

73% more profitable

(7%)

19% more profitable

Profiting From ComplexityProfiting From Complexity

Del

oit

te R

esea

rch

Del

oit

te R

esea

rch


Seagate: VMI Automation with RosettaNet

11 Suppliers

Third Party Logistics Provider

Seagate


Seagate: VMI Automation with RosettaNet

Suppliers

Third Party Logistics Provider

DeliveryReplenishment

Physical Goods Movement

Information Flow

Legend:

3.Inventory Reporting (PIP 4C1)

3. Inventory Reporting (PIP 4C1)

4.Shipment Receipt (PIP 4B2)

4.ShipmentReceipt (PIP 4B2)

7. Consumption Reporting (PIP 4B2)

8.Invoice (PIP 3C3)

2. Forecast Acceptance (PIP 4A5)

1. Notify of Forecast (PIP 4A2)

5,6.Request and Fulfill Demand (PIP 3B2)

5,6.Request and Fulfill Demand (PIP 3B2)

Seagate


Seagate: 12 Trading Partners Survey

Note:Information compiled by and provided independent of Seagate.

IT Staff

ExistingERP

InternetConnection

Solution Installed

Other B2B Plans

0-2 3-6 Yes No <56K <128K >128K PC Server Yes No

6 6

6 6

2 2 8 12 0

7 5


Lucky Gold Star (LG) Siltron & Samsung B2B Implementation

PIP3A4

PIP3A4

Sales Order

PO Confirm VMI,

Purchase Order

PO Confirm

P/O S/O

P/O ConfirmP2

PIP4A4

PIP4A5

PIP3A1

PIP3A1

PIP3A7

PIP3A8

PIP3C3

PIP3C4

PIP4B2

PIP3B2

PIP3C6

Demand Planning

Forecast Response

Receive Inquiry

Quotation

PO Pending

PO Change

Billing

Billing Cancel

Delivery of Goods

G/R

Settlement confirm

Weekly Forecast

Domestic

Domestic

Forecast

Forecast Confirm

RFQ

Quotation

PO Pending

PO Change

I/V

I/V Cancel

입 고 확 인

G/R

Settlement

Forecast

RFQ

P/O Change

Invoice Reject

Goods Receipt

Payment

Forecast Reply

Storage In

Quotation

P/O Pending

Invoice

P0

P1

Sam

su

ng

Sem

icon

du

cto

r

LG

Siltro

n B

2B

i


LG Siltron Benefits

. Reduce Out-of-stocks

. Improve customer services through accurate delivery promise

. Reduce Out-of-stocks

. Improve customer services through accurate delivery promise

. Reduce raw material costs by decreasing unplanned purchasing. Reduce time by decreasing unplanned repetitive purchasing

. Reduce raw material costs by decreasing unplanned purchasing. Reduce time by decreasing unplanned repetitive purchasing

. Reduce uncertain business process procedure

. Value creation via the fast response for PO

. Reduce errors which occurs by the manual processes and repetitive jobs. Reduce Cycle Time of Purchasing / Manufacturing / Sales

. Reduce uncertain business process procedure

. Value creation via the fast response for PO

. Reduce errors which occurs by the manual processes and repetitive jobs. Reduce Cycle Time of Purchasing / Manufacturing / Sales

. Increase customer satisfaction which provides for the location and quality of the products at the proper time. Reduce manual jobs through the analysis of product location and circumstance which customers request

. Increase customer satisfaction which provides for the location and quality of the products at the proper time. Reduce manual jobs through the analysis of product location and circumstance which customers request

. Increase customer satisfaction which provides for delivery information at the proper time. Increase customer satisfaction through on time delivery of the order

. Increase customer satisfaction which provides for delivery information at the proper time. Increase customer satisfaction through on time delivery of the order

Collaborative Forecasting

Demand Allocation

Order Management

Product Configuration

Logistics Management


LG Siltron Business Process Impact

Possible to analyze change history which is requested by customers using database and use analysis of customer’s trend.

Customer requests data through the system and operator receives response right away. Customer can verify the result through Web UI by Real Time.

Automatic/Real Time processing based on the integrated system which has EAI concept

Automatic processing through system to system structure

After ImprovementBefore ImprovementIndicators

Not possible to maintain statistics /history leaving Forecast & PO data which customer sends in the operator PC by the file format.

Maintenance of change history such as Forecast, PO etc

Enter data which is requested by customer and verify openness of Customer Satisfaction of FA

Request/Analysis

On/Off Line parallel processing which needs processing time by operator using FAX or e-Mail

Real Time Processing

Manual input processing using Fax or e-Mail

Level of System Automation

Possible to analyze change history which is requested by customers using database and use analysis of customer’s trend.

Customer requests data through the system and operator receives response right away. Customer can verify the result through Web UI by Real Time.

Automatic/Real Time processing based on the integrated system which has EAI concept.

Automatic processing through system to system structure.

After ImprovementBefore ImprovementIndicators

Not possible to maintain statistics /history leaving Forecast & PO data which customer sends in the operator PC by the file format.

Maintenance of change history such as Forecast, PO etc

Enter data which is requested by customer and verify openness of

data, then inform customers.

Customer Satisfaction of FA Request/Analysis

On/Off Line parallel processing which needs processing time by operator using FAX or e-Mail.

Real Time Processing

Manual input processing using Fax or e-Mail.

Level of System Automation

Documents

Www.gxs.comGlobal eXchange Services – Confidential Information Why Manufacturing Companies Will Create and Join B2B Trading Networks David Kraemer, Vice