SMU-11-0002 Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 r thee new marketting forecastss for this moonth's planninng Catthy Wong sigghed as she reviewed cyccle. She saw that the markketing forecaasts for Decem mber were much m higher than t the actuual cusstomer orders in the SAP system, but shhe knew from experience hhow quickly demand d in Asia cou uld fluctuate. It was w 8 pm on Thursday, 7 December 20007, and the forecast figuures for the diivision's entirre prooduct portfolio o worldwide had to be annalysed beforre Friday middnight. The addjusted figurees werre the final in nput for the company's c ceentral plannin ng informatioon technologyy (IT) system ms, and d would reserrve productioon capacities in the factorries, thereby creating c suppply in SAP for fo ordder confirmattion. As headd of the gloobal plannerss for the Tellevision Tuner Division at Infiineon Technoologies' Singgapore officee, Wong's deecision wouldd be final, annd her figurees wou uld impact th he entire supply chain for tthe coming months, m even fixing f certain parameters for fo oveer a year aheaad. Eveery month shhe performedd the same caareful check: detailed revview of the new n forecasteed dem mand from saales and markketing, compaarison of the forecast f with the actual cu ustomer orderrs, folllowed by lon ng calls with the division'ss marketeers in regional ooffices worldw wide. This annd the inventory forecasting alw ways took several long day ys, and she haad been starinng at data sincce Moonday. Since the t Tuner divvision was thee smallest of Infineon's buusiness divisioons, every saale wass important and a any addittional costs for fo raw materrial or capacitty would havve a significannt imppact on the division's d reveenue. Of courrse, as part of o the centrall supply chainn organisation, Wo ong was alsoo committedd to fulfillinng customer orders, but she had an nother primarry con nsideration: too keep inventoory levels undder control. Thee phone rang. Her direct boss, b Directorr of the Centrral Supply Chhain for the Tuner T division, Hannnes Brenneiisen, was caalling from M Munich, Germ many. It waas only one o'clock in thhe afteernoon in Gerrmany and hee sounded uppbeat. \"Cathyy, listen, if yoou don't see th he orders, theen we need to be very, very careful c aboutt committingg material. I know the bu usiness unit is nvinced this will w be a recorrd quarter, buut their job is to get the cusstomers to plaace their ordeers con witthin the lead-ttime. One weeek of the moonth is already y gone! Talk to Joe again tomorrow annd see what he thinks LG will puull before the end of the month\". m He hung up andd Wong sighhed again. Sittting in Singgapore with thhe business unit u had manny adv vantages: closse contact witth the head off marketing, the t business administratio a n and even thhe tuner circuit dessigners. But as a a member of the supplyy chain, she w was often squueezed betweeen the central supp ply chain in Germany, G whhose responsibbility extendeed to all business divisionns, d the Tuner buusiness division, which waas fighting to compete in a cutthroat maarket. and apore Management University. The case was prepared p solely to Thiss case was writtten by Dr Holly Ott at the Singa provvide material for class discussion n. The authors do o not intend to illlustrate either efffective or ineffecctive handling off a man nagerial situation n. The authors may have disgu uised certain na ames and otherr identifying inforrmation to prote ect conffidentiality. Copyyright 2011, Sin ngapore Managem ment University case centre Distributed by The Case Centre www.thecasecentre.org All rights reserved North America t +1 781 239 5884 f +1 781 239 5885 e info.usa@thecasecentre.org Version: 2013-09-2 26 Rest of the world t +44 (0)1234 750903 f +44 (0)1234 751125 e info@thecasecentre.org Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. TU UNING IN NTO CLIENT NE EEDS: MATCHIN M NG SUPP PLY AND D DE EMAND FOR THE T TEL LEVISION N TUNE ER DIVIS SION AT T INFINEON ASIA-PA ACIFIC SMU-11-0002 Tuning into Client Needs: Infineon Asia Pacific The semiconductor industry The basis for most integrated circuits was the semiconducting material, silicon, which could be carefully grown from a single crystal to form a perfect crystal cylinder, and then sliced and polished into silicon wafers, each with a mirror-finish. The raw wafers were sent to a wafer fabrication plant, the \"Front End Wafer Fab\". The wafers underwent hundreds of chemical and physical processes: deposition of films (insulators, metals), precise injection (implantation) of additional elements into the silicon, patterning of the chip features using a process very similar to those used in photography development, and etching away unwanted material. This journey could take months in an ultra-clean environment, known as a "cleanroom", where particle count and humidity were strictly controlled. Even the operators wore full-body cleanroom suits to protect the wafers from particles of hair or skin. Each wafer contained as many identical ICs (dies) as can fit into the wafer diameter. After the final metal layers were deposited on the wafer, the wafers were moved to a storage area (Die Bank). The assembly and testing of the individual chips were completed over a period of three to four weeks in a \"Back End Assembly\" plant. The wafers were diced and the tiny chips were mounted onto a carrier and encapsulated with ceramic, plastic, or epoxy to prevent physical damage or corrosion. After a final test, the packaged chips could then be soldered into a customer's printed circuit board (PCB) (refer to Exhibit 1 for a patterned wafer and example IC packages; and to Exhibit 2 for the entire process flow). Supply chain challenges Managing this supply chain was a challenging task. The cyclical semiconductor industry, with its well-known \"boom-and-bust\" cycles, continuously swung from periods of worldwide chip allocation to periods with empty factories and severe company downsising. Supply needed to match demand in the face of market volatility, long production cycle times, high product variety, short product lifecycles and very fast product launches (refer to Exhibit 3 for examples of the volatility of the semiconductor market). In addition, the complexity of the supply chains had increased, as chip design companies moved to a \"fabless\" model, outsourcing their manufacturing to countries where labour cost was low. This resulted in a sudden surge in Asian contract manufacturers, who could benefit from economies of scale and pooled demand. Their services helped reduce manufacturing costs for the Integrated Device Manufacturers (IDM) and reduced the risk of high capital investment in chip fabrication and assembly facilities, as a single wafer fabrication plant could cost over US$1 billion to build and equip. Contract manufacturers also brought flexibility and often expertise into the manufacturing, but these benefits came at a cost: the already complex supply chain would stretch even further, sometimes requiring wafers and chips to be flown around the world before completing the fabrication and assembly before finally reaching a regional distribution centre. The supply chain staff now had to deal with communication across different companies, different time zones and different languages. Building trust and long-term 2/14 Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 Ever since the first transistor was built at Bell Labs in 1947, transistors, tiny switches made of semiconducting material, had replaced the unwieldy and power-hungry vacuum tubes for rectification, amplification, and switching of electrical signals. Integrated circuits (ICs) combined transistors with other components to perform complex functions. ICs became an integral part of almost every aspect of modern-day life found in computers, automobiles and energy to medical applications and more. IC complexity followed the predictions of Intel's Gordon Moore, who famously stated in 1965 that the number of components in integrated circuits would double every two years. In 2007, the number of transistors per chip for advanced microprocessors was approaching one billion. SMU-11-0002 Tuning into Client Needs: Infineon Asia Pacific relationships with suppliers was becoming a critical part of the semiconductor supply chain strategy. IDMs were also gradually shifting their operations to Asia. Infineon's Communications division had brought the global planners to the new Asia Pacific headquarters in Singapore in the fall of 2004 and the group had grown from just two planners and one product ramp manager to over 20 people, all coordinating with the Infineon headquarters in Munich, the factories and subcontractors, and the customer logistics managers located worldwide. Infineon Technologies AG was founded on April 1, 1999 as a spin-off from its parent company Siemens AG. As of September 2007, Infineon had 43,079 employees worldwide and the fiscal year 2007 saw sales of US$14.96 billion.1 The company was organised into three operating segments: 1) Automotive, Industrial and Multimarket, 2) Communications, and 3) the standalone memory products business, Qimonda. Each operating segment was broken down into business divisions, each responsible for their own revenues. The central supply chain organisation was responsible for managing the operations for all business divisions, including manufacturing by both Infineon-owned factories and subcontractors. The Tuner business unit was the smallest business unit in Infineon. The unit's focus was on the design; manufacture and promotion of RF tuner ICs used in televisions (TVs) and set-top-boxes for the reception of either free-to-air or paid content. The tuner ICs were the critical components in the development of the so-called \"can\" tuners. The metal \"can\" served two purposes. Firstly, it shielded the RF circuitry from interference, and secondly, it housed approximately 100 to 200 discrete components (for example, capacitors, resistors, and inductors) that made up the complete TV tuner. From a functional standpoint, the completed RF metal \"can\" tuner would receive high radio frequency signals, filter and subsequently convert them into lower frequency analogue signals, from which TVs and set-top-boxes decoded the transmitted programmes. For digital data transmission, the RF tuner would perform exactly the same function, and the low frequency analogue signal would, in this case, be then processed by a digital decoder IC that produced the digital stream for HD (highdefinition) formats. Infineon's tuners had a strategic advantage due to their high performance, production quality and the design team's intellectual capital in radio frequency IC design. Infineon tuners were considered the \"Rolls Royce\" of tuners with quality levels of three to five dppm (defective parts per million), compared to 300-400 dppm for lower quality brands. Tier 1 customers chose the Infineon brand for their high-end television/set-top boxes, but the low-end televisions could use cheaper tuner brands with lower quality levels. Since the low-end demand volumes far exceeded the high-end product demand, Infineon's Tuner division was competing in almost a pure commodity market with high price sensitivity. Since TVs and set-top-boxes themselves were commodities, TV manufacturers had to keep large levels of stock and have fast manufacturing cycle times. This meant that their forecasts to their suppliers were always high, thus creating even more volatility in the demand for the components upstream in the supply chain. The long supply chains also exacerbated volatility: all products in China and Japan were sold through distributers, adding an additional interface. In addition, tuners were often sold on the spot market, meaning that if parts were immediately available, there could be opportunities for significant revenues. But the spot market demand could not be forecasted. 1 Exchange rate of US$ 1 = EUR 0.73, average annual exchange rate for 2007, www.oanda.com, accessed September 2013. 3/14 Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 Infineon Technologies tuner division SMU-11-0002 Tuning into Client Needs: Infineon Asia Pacific The challenge was to lower the manufacturing costs, which were still high compared to the competition. The Infineon tuner chips' superior performance attracted Tier 1 customers such as LG, NXP (formerly Philips), NuTune (formerly Thomson), Samsung and Sony. For many of these customers, Infineon offered consignment agreements. Under these agreements, the customers could request chips to be held at the customer's factory in anticipation of production but the chips would still belong to Infineon. The ownership and payment only occurred when the stocks were actually pulled by the customer for immediate use in production. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 The monthly volume rolling forecast cycle The monthly forecasting and planning cycle at Infineon followed a strict schedule, according to the 4-4-5 \"delivery week\" calendar of the fiscal year. The fiscal year began on October 1, with each month consisting of 4 or 5 weeks, and with each quarter totalling 13 weeks. A detailed timetable was announced each month for the Volume Rolling Forecast (VRFC) activities: At the start of the process, the business divisions reviewed the sales forecasts and provided a marketing forecast by product and customer for the next eighteen months. These numbers also represented the forecasted revenue for the business divisions. The central supply chain reviewed and adjusted the forecast by product, if necessary. For example, short-term order increases or cancellations necessitated a forecast adjustment. The central planning IT systems then aggregated the data to reflect the available factory capacity corridors. This aggregated data was reviewed for material and capacity capabilities at the front end and back end factories. After confirmation, the data was released into the SAP order processing system. This confirmation became supply \"Available To Promise\" (ATP) which would allow customer orders to be automatically confirmed for a specific delivery date (refer to Exhibit 4 for the overall flow). The VRFC was a critical process because the final numbers entered into the central planning IT systems determined the capacity allocation in the factories for the front end wafer processing and for the back end chip assembly and test. This VRFC directly impacted the workforce scheduling and machine allocation in the factories. The numbers also determined the ordering schedule for the raw materials to support the forecasted production, including many items (such as chemicals), which would have to be discarded after their shelf-life expiry dates. Importantly, all raw material and capacity reservations would become the responsibility of the business division. This meant that the Tuner division would be charged for any idle capacity in the future as underutilization costs. Likewise, any raw material purchased based on their forecast would be charged to the division. One of the key jobs each month for the operational planners in the Central Supply Chain 4/14 Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. The division had recently spun out of a larger division, due to the potential of the combined tuner and demodulator chip, nicknamed "Kookaburra" by the division's charismatic, Australianborn head, Giuseppe (Joe) Calarco. The price per chip for the individual tuners was low compared to the other business divisions' products, but the actual tuner chip sales (and therefore production) volumes were significant. SMU-11-0002 Tuning into Client Needs: Infineon Asia Pacific organisation was to verify the marketing forecast from the business division against the actual order situation and any last-minute customer information. For some product lines, customers would place or even cancel orders within the specified order lead-time (typically four weeks for tuner products). The planners had an overview of the entire supply chain and were able to consider the factory capacity allocations, the actual order status in SAP and the latest inputs from marketing. With experience, the planners could also become familiar with particular customer behaviour and work effectively within the huge Infineon organisation to optimize the loading situation. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 Marketing forecast Wong had just received the new worldwide tuner marketing figures for December 2007 VRFC, titled \"VRFC 0801,\" indicating that this would set the figures for production from January 2008. She felt fortunate that she could have the entire worldwide tuner supply chain data on her workstation. Infineon's award-winning supply chain allowed her to access inventory data from all distribution centres worldwide, orders in the SAP system, and the supply used for order confirmation for the full 26-week planning horizon.2 Wong noticed that tuner's lead product, Tuner Chip A (TUA6034T), had sold 4.77 million pieces in November, over the forecasted 4.21 million pieces; approximately four million pieces per month sales was forecasted to continue through the first quarter of 2008. Tuner Chip B (TDA6192T), a driver chip, also had sold well in the last quarter, and the marketing department predicted over 2.5 million pieces per month through March 2008. A third product, Tuner Chip C (KTS6027-2), was planning to ramp to volume production in 2008, thanks to the perseverance of the Korean marketeer, Charles Kwon, who had worked closely with LG: the KTS6027-2 chip would be used in a new tuner design at LG. The outlook from marketing was rosy, but a closer look at the open orders (the orders in SAP with shipment dates in the fiscal month of December) and billings thus far in December showed only just over 2.505 million pieces for Tuner Chip A, and 1.572 million pieces for Tuner Chip B, instead of the forecasted 4.868 million and 3.333 million pieces, respectively (refer to Exhibit 5 and to the related Excel sheet, \"Tuner Stock Simulation 03Dec2007VRFC0801_Class.xls" under the worksheet "Marketing Data VRFC0801"). Risks If Wong accepted the forecasted numbers, any reduction in actual demand versus forecast would mean the finished goods stock levels would skyrocket and production would have to be drastically reduced. The shelf life for an IC was officially one year, according to international standards, but Infineon allowed shipments with customer agreement for up to two years. However, beyond two years, there was a high likelihood of scrap. In addition, if production were reduced, the business division would then have to pay underutilization costs, since their reserved capacity at the factories would not be used. As the Tuner division's revenue was small, this penalty would have a significant impact on the overall revenue, compared to other business divisions whose price-per-chip was much higher. On the other hand, if she reduced the figures manually, she risked depriving the Tuner division of enough capacity for production if there was a sudden upturn in demand. As the planning 2 Infineon Technologies, Infineon Conferred Globally Recognised Logistics Award, October 26, 2010, http://www.infineon.com/cms/en/corporate/press/news/releases/2010/INFXX201010-003.html, accessed September 2011. 5/14 Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. VRFC 0801 - tuner division's December forecast SMU-11-0002 Tuning into Client Needs: Infineon Asia Pacific head, she was responsible for both the timely delivery of the chips to the customer and timely order confirmation, as well as for controlling the stock levels. Both metrics were part of the Central Supply Chain's metrics, which were directly used to calculate the end-of-year bonuses and variable pay for the managers. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 Infineon followed the Supply Chain Operations Reference model (SCOR), developed and endorsed by the Supply Chain Council (www.supply-chain.org). SCOR was a framework for modelling and measuring the performance of supply chains using a standardised process modelling syntax and defined metrics. Supply chains could monitor their performance over time to help implement changes and could compare their performance to other supply chains in related industries. The supply chain had two main metrics defined under the SCOR model (refer to Appendix A) and Current On-Hand Inventories (AG.3.37). This meant that the planners had to strike a balance between holding enough safety stock to buffer against demand variability but could not simply build stock unchecked. In order to control the stock levels, central supply chain defined a \"stock reach\" for all business divisions. This simple calculation gave the number of days that the end-of-month stock levels would satisfy demand: Stock Reach (days) = Finished Goods Stock (pieces) / 3-months Average Demand For example, if there were 300 pieces of a certain product at the end of the month, and 3-month average sales were 100 pieces per month, the stock available would "reach" 300/100 = 3 months, or about 90 days. The stock reach was a measure of the safety stock. Infineon's stock reach target was set at a maximum of 23 days, reducing to 21 days over the next two quarters; in line with the industry norm of about three weeks buffer stock. The stock reach targets gave a guideline for stock control, and were directly linked to the year-end bonus targets for both Wong and her management in the supply chain. Stock reaches greater than target would result in less than 100% bonus achievement. She was also held accountable to the Perfect Order Fulfilment metric, but with the allowed stock reaches, there was normally not a problem to ship all the Tuner orders on time and in the right quantity. Wong looked again at the numbers. She had come from Malaysia to work in Singapore, and she loved working for a German company with its high quality systems, clear workflow and emphasis on life balance. However, the German company culture expected a high level of autonomy and responsibility at all levels, and the impact of her planning figures would reach up and down the supply chain for months, even years to come. The forecast was the responsibility of the business division, but the supply chain could not afford to blindly allow the figures to be released into the systems without careful scrutiny. About a year ago, the division had convinced the supply chain to produce chips to use up expiring raw material. The finished goods were still in the distribution centre, now over one year old, with no customer forecast expected. The stock clearly indicated that someone had made a mistake, and, in the end, the supply chain was responsible for the stock levels. To make matters worse, since the stock could only be kept for two years, after another year the parts would be scrapped. Wong wanted to avoid a repeat of that disaster. Talking to the boss Wong had approached Joe Calarco, the Head of the Tuner division, earlier in the day to discuss 6/14 Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Supply Chain Metrics SMU-11-0002 the top-down view of the tuner business. Joe had over 27 years of working experience in the region, from design and manufacturing to marketing in South Asia Pacific for European, American and Japanese multinational companies. Joe was optimistic: October and November tuner sales had been near records for Tuner, and he expected their quarterly revenue to exceed 10 million Euros for the first time. Admittedly, the spot market for tuners in China was unpredictable. One customer kept 400,000 complete can tuners in stock in order to fulfil any spot demand in China within 24 hours. With Chinese New Year only two months away, the UEFA European Football Championship in June, and the Beijing Olympics in August, the tuner business could expect positive surprises for 2008, and the higher margin from Kookaburra would have a significant impact on Infineon's overall revenue. Certainly, recent billings had been higher than expected a few months ago, and there were some exciting events planned for 2008, many of which would be televised world-wide. Mobile TV was not widespread, but the market was expanding rapidly, and Asia was always unpredictable. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 Planning decision - back to the data Wong studied her stock simulation for the back end assembly of the three top tuner products. If she changed the planned finished goods inventory at the end of every month to stay below the maximum allowed stock reach target, she would produce enough that month to fulfil the entire VRFC-0801 marketing forecast and have a buffer stock (the stock reach) at the end of each month. Her planned figures would affect the amount of back end assembly utilisation, since all three products used the same assembly capacity. Planning end-of-month stocks - stock reach Wong first looked at the Tuner Chip C which was planned to ramp in the next six months. She knew the actual dates were uncertain, so she entered rough numbers for the six months, keeping a very conservative days reach (~ 2 weeks = 14 days) for the part itself (refer to Figure 2 the related Excel sheet, \"Tuner Stock Simulation 03Dec2007-VRFC0801_Class.xls" under the worksheet "Stock Simulation VRFC0801," Cells E30:J30). The small and inexpensive Tuner Chip B could be produced according to the reach targets for the part itself (refer to the related Excel sheet, \"Tuner Stock Simulation 03Dec2007VRFC0801_Class.xls" under the worksheet "Stock Simulation VRFC0801," Cells E22:J22). For the high volume Tuner Chip A, however, she adjusted the figures to exactly meet the stock reach targets for all three parts combined. This meant that the Tuner Chip A actually had a higher stock reach than the target, but that the overall stock reach for all products was at the target (refer to the related Excel sheet, \"Tuner Stock Simulation 03Dec2007VRFC0801_Class.xls" under the worksheet "Stock Simulation VRFC0801," Cells E13:J13 for Tuner Chip A and Cells E40:J40 for the overall stock reach for all products.) Her figures now gave her an overview of the forecasted production for the tuner division for the next six months if the overall stock reach targets were met exactly. The capacity requirements in the back end Assembly factory were calculated for each month for each part (refer to the related Excel sheet, \"Tuner Stock Simulation 03Dec2007-VRFC0801_Class.xls" under the worksheet "Stock Simulation VRFC0801," Cells E14:J14 for Tuner Part A, Cells E23:J23 for Tuner Part B, and Cells E31:J31 for Tuner Part C. The total capacity requirement is shown in Cells E36:J36.) Capacity utilisation With this planned stock scenario, the capacity reservation was exceeded in January by 16% 7/14 Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Tuning into Client Needs: Infineon Asia Pacific SMU-11-0002 Tuning into Client Needs: Infineon Asia Pacific Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 The business unit would not be happy to see that there would already be underutilisation charges in February with the VRFC-0801 forecast. But what would happen if even this December forecast did not materialise? Then the stocks would be much too high and further capacity reductions would be required. On the other hand, if Joe's predictions were right, there would be no concern next year. In fact, the Tuner division would be fighting for additional capacity. Wong sighed again. Any forecast reductions for this VRFC required hours of phone calls to marketeers worldwide, who would be reluctant to change their forecasts because of the impact on the division's revenue projection. She needed to understand the customers' behaviour, particularly in the case of the consignment customers, and the best information generally came from Infineon's customer logistics managers, also seated in offices worldwide. Finally, her decision would set the capacity allocation, raw material purchase, and production starts for the Tuner division. She had to take a stance and make a decision. She was taking a risk either way, and, in the end there would be either excess inventory in the warehouses or angry customers clamouring for Tuner parts. 8/14 Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. (refer to the related Excel sheet, \"Tuner Stock Simulation 03Dec2007-VRFC0801_Class.xls" under the worksheet "Stock Simulation VRFC0801," Cell E36). Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 SMU-11-0002 Tuning into C Client Needs: Inffineon Asia Paciific APPENDIX A: SCOR METRICS - SCOR S VERS SION 9.1 Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 SMU-11-0002 Tuning into Client Needs: Inffineon Asia Paciific urce: www.supply-chain.org Sou Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 SMU-11-0002 Tuning into Client Needs: Inffineon Asia Paciific Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 Sou urce: Infineon teechnologies inteernal data. EXHIBIT T 2: TELEVIS SION TUNER DIVISION AT T INFINEON TECHNOLOGIES - INTEGRATED CIRCUIT SU UPPLY CHAIN N Sou urce: Infineon teechnologies inteernal data. Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. SMU-11-0002 Tuning into C Client Needs: Inffineon Asia Paciific EX XHIBIT 1: TEL LEVISION TU UNER DIVISION AT INFIN NEON TECHN NOLOGIES - WAFER AND D CKAGED CHIPS PAC Sou urce: Infineon teechnologies inteernal data. Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 SMU-11-0002 Tuning into C Client Needs: Inffineon Asia Paciific EXHIBIT 3: RELATIVE CYCLES C OF THE T SEMICO ONDUCTOR MARKET VS S GLOBAL GROSS DOME G ESTIC PROD DUCT AND CONSUMER ELECTRONIC E C PRODUCT LAUNCHES S AND D LIFECYCLE ES SMU-11-0002 Tuning into C Client Needs: Inffineon Asia Paciific Sou urce: Infineon Technologies T intternal data. EX XHIBIT 5: TEL LEVISION TU UNER DIVISIO ON AT INFIN NEON TECHN NOLOGIES - MARKETING G FORECAST FOR TU UNER PRODU UCTS A, B AND A C FROM M DECEMBER R 2007 Sou urce: Infineon Technologies T intternal data Purchased for use by Leslie Sackey on 01-Sep-2017. Order ref F302540. You are permitted to view the material on-line and print a copy for your personal use until 1-Sep-2018. Please note that you are not permitted to reproduce or redistribute it for any other purpose. Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F302540 EXHIBIT 4: TELEVISION N TUNER DIV VISION AT IN NFINEON TEC CHNOLOGIE ES - VRFC PROCESS Running Head: INFINEON 1 INFINEON 1. What are the reasons for volatility in the tuner chip market and how do multinationals such as Infineon structure their supply chains/networks to cope with it? The reason for volatility in the turner chip market is mainly caused by the seasonal variations of the market. The demand for the turner chip increase during some months such as in December and may reduce greatly in some other months (OTT, 2011). In the article we are told that Cathy Wong's projection for the market in December was high because from her experience she believed that the demand for the products would be more than the orders that were already placed. The \"boom and burst\" cycle are experienced by Infineon is an expansion and contraction of the market and it is mainly influenced by the market, that is Asia, and the nature of the products that they are selling in the market, turner chip in this case. Multinationals such as Infineon should structure their supply chains/ networks in an efficient manner and employ proficient managers to help in dealing with the challenge of volatility. The supply network should be able to effectively serve the market and cope with the varying changes in the market. A good network supply network should be able to provide the products that are sufficient for serving the market during the high season without any shortage and they should not have excess products in the market during low season. Making projections based on an extensive scrutiny of the market variable is very important for any organization including Infineon before making the supply decision. For instance the logistics department can give logistical explanations for various decisions made while other departments may also give more insight on the effects of various decisions that can be made by the organization. Seeking the advice of supply experts is very important because the expertise usually have more experience about the volatile markets and they may help to make the required INFINEON 2 decisions more effectively or give good possibilities for the organizations to choose from (Do, Powell, Singh & Yong, 2016). For companies such as Infineon to effectively control volatility should take into consideration some of the factors like, knowing the \"whys\". It is important for organizations to understand why every action is taken in the organization (Figlewski, 1997). The second thing that organizations should always do is remain optimistic and avoid panic. Being optimistic gives the managers the strength to make decisions more confidently about the volatile market. Organizations should also follow advice and should not have huge expectations before the organization executes its plans and makes the desired profit. 2. Discuss the risks involved in this supply chain and the resultant types of failure. Suggest how these may be reduced or mitigated and critically appraise Kathy Wong's approach? The main risk that is involved in the supply chain of Infineon technologies is loss of important production rights for their products and also time wastage. The idea of outsourcing may be important and relevant for the company because of the boom and burst nature of the market but it poses a great danger to the organization. A lot of information about the product is shared by different temporary employees from various part of the world and this can result to loss of very important information especially about the production rights of the Infineon. A lot of time is also lost when the products have to be moved in many countries before they are finally assembled at the market place. The risk of loss of information can be reduced by employing the workers within the market area, which is within the country of supply so that the production process is centralized. INFINEON 3 Centralizing the production area can be very efficient in reducing the risk of loss of information to foreigners and also reduces the time spent to assemble the final products to the market place. The supply chain method by Infineon can also result to the overall collapse of the organization if the one of the stakeholders does not effectively perform his or her duty effectively resulting to delay of the commodities in the market. The loss due to delay of the commodity in the market can be experienced in the market because of the volatility of the market. Late submission of the products in the market may find the high season over hence low demand for the product. Kathy Wong's approach towards the volatile market is quite effective because she has sufficient knowledge about the trends of the market which is very significant in justifying her decisions. She takes time to efficiently seek for information and advice from other qualified and personnel who have more experience about the volatile market like her boss Joe Calarco. Seeking the advice was an effective move by Wong because to make appropriate decisions it was good to have a wide scope of the possibilities that she had and the risk that came with the possibilities. Wong's experience and analysis of the market trends way also important for making her decisions for the business. 3. Could modern production methodologies such as lean or agile improve the situation here? Analyze the relevance of these or other recent initiatives in SCM to this market. The modern methodologies such as lean or agile can improve Infineon production method. Agile manufacturing for instance, can improve the production process by integrating the information technology communication system of the company to produce the products more efficiently as compared to the current process of outsourcing from different countries (WHAT IS INFINEON 4 THE DIFFERENCE BETWEEN LEAN AND AGILE MANUFACTURING?, 2017). If the company adopt the Agile method of production, it can increase the time speed of responding to the customers' needs and serving the entire market more efficiently. Lean manufacturing method can also be efficient for the Infineon Company because it will cut substantial amount of production cost for the company. The volatile market needs the modern methods of production to help the organization to cut its cost and to reduce the production time and that taken to avail the products to the market. The modern production methodologies and changes within production are important for the organization because they help to solve the challenge posed by the volatility of the market. The supply chain model chain operation model that was adopted by the organization was also important because it gives directives to the production of the company by analyzing its performance as the organization operates. The model that is the supply chain operation model like all the other modern methods is important for Infineon because it enables the organization to make comparisons about the performance of the business and its decisions. INFINEON 5 References OTT, H. (2011). Tuning into Client Needs: Matching Supply and Demand for the Television Tuner Division at Infineon Asia-Pacific. WHAT IS THE DIFFERENCE BETWEEN LEAN AND AGILE MANUFACTURING?. (2017). Team Quality Services. Retrieved 2 September 2017, from https://teamqualityservices.com/whatis-the-difference-between-lean-and-agile-manufacturing/ Figlewski, S. (1997). Forecasting volatility. Financial markets, institutions & instruments, 6(1), 1-88. Do, A., Powell, R., Singh, A., & Yong, J. (2016, December). Selection of a Model for Exploring Cross Market Linkages: A Review of E-GARCH, Markov-switching Framework and Structural Break Models. In ECU Business Doctoral and Emerging Scholars Colloquium 2016 (p. 1). Running Head: INFINEON 1 INFINEON 1. What are the reasons for volatility in the tuner chip market and how do multinationals such as Infineon structure their supply chains/networks to cope with it? The reason for volatility in the turner chip market is mainly caused by the seasonal variations of the market. The demand for the turner chip increase during some months such as in December and may reduce greatly in some other months (OTT, 2011). In the article we are told that Cathy Wong's projection for the market in December was high because from her experience she believed that the demand for the products would be more than the orders that were already placed. The \"boom and burst\" cycle are experienced by Infineon is an expansion and contraction of the market and it is mainly influenced by the market, that is Asia, and the nature of the products that they are selling in the market, turner chip in this case. Multinationals such as Infineon should structure their supply chains/ networks in an efficient manner and employ proficient managers to help in dealing with the challenge of volatility. The supply network should be able to effectively serve the market and cope with the varying changes in the market. A good network supply network should be able to provide the products that are sufficient for serving the market during the high season without any shortage and they should not have excess products in the market during low season. Making projections based on an extensive scrutiny of the market variable is very important for any organization including Infineon before making the supply decision. For instance the logistics department can give logistical explanations for various decisions made while other departments may also give more insight on the effects of various decisions that can be made by the organization. Seeking the advice of supply experts is very important because the expertise usually have more experience about the volatile markets and they may help to make the required INFINEON 2 decisions more effectively or give good possibilities for the organizations to choose from (Do, Powell, Singh & Yong, 2016). For companies such as Infineon to effectively control volatility should take into consideration some of the factors like, knowing the \"whys\". It is important for organizations to understand why every action is taken in the organization (Figlewski, 1997). The second thing that organizations should always do is remain optimistic and avoid panic. Being optimistic gives the managers the strength to make decisions more confidently about the volatile market. Organizations should also follow advice and should not have huge expectations before the organization executes its plans and makes the desired profit. 2. Discuss the risks involved in this supply chain and the resultant types of failure. Suggest how these may be reduced or mitigated and critically appraise Kathy Wong's approach? The main risk that is involved in the supply chain of Infineon technologies is loss of important production rights for their products and also time wastage. The idea of outsourcing may be important and relevant for the company because of the boom and burst nature of the market but it poses a great danger to the organization. A lot of information about the product is shared by different temporary employees from various part of the world and this can result to loss of very important information especially about the production rights of the Infineon. A lot of time is also lost when the products have to be moved in many countries before they are finally assembled at the market place. The risk of loss of information can be reduced by employing the workers within the market area, which is within the country of supply so that the production process is centralized. INFINEON 3 Centralizing the production area can be very efficient in reducing the risk of loss of information to foreigners and also reduces the time spent to assemble the final products to the market place. The supply chain method by Infineon can also result to the overall collapse of the organization if the one of the stakeholders does not effectively perform his or her duty effectively resulting to delay of the commodities in the market. The loss due to delay of the commodity in the market can be experienced in the market because of the volatility of the market. Late submission of the products in the market may find the high season over hence low demand for the product. Kathy Wong's approach towards the volatile market is quite effective because she has sufficient knowledge about the trends of the market which is very significant in justifying her decisions. She takes time to efficiently seek for information and advice from other qualified and personnel who have more experience about the volatile market like her boss Joe Calarco. Seeking the advice was an effective move by Wong because to make appropriate decisions it was good to have a wide scope of the possibilities that she had and the risk that came with the possibilities. Wong's experience and analysis of the market trends way also important for making her decisions for the business. 3. Could modern production methodologies such as lean or agile improve the situation here? Analyze the relevance of these or other recent initiatives in SCM to this market. The modern methodologies such as lean or agile can improve Infineon production method. Agile manufacturing for instance, can improve the production process by integrating the information technology communication system of the company to produce the products more efficiently as compared to the current process of outsourcing from different countries (WHAT IS INFINEON 4 THE DIFFERENCE BETWEEN LEAN AND AGILE MANUFACTURING?, 2017). If the company adopt the Agile method of production, it can increase the time speed of responding to the customers' needs and serving the entire market more efficiently. Lean manufacturing method can also be efficient for the Infineon Company because it will cut substantial amount of production cost for the company. The volatile market needs the modern methods of production to help the organization to cut its cost and to reduce the production time and that taken to avail the products to the market. The modern production methodologies and changes within production are important for the organization because they help to solve the challenge posed by the volatility of the market. The supply chain model chain operation model that was adopted by the organization was also important because it gives directives to the production of the company by analyzing its performance as the organization operates. The model that is the supply chain operation model like all the other modern methods is important for Infineon because it enables the organization to make comparisons about the performance of the business and its decisions. INFINEON 5 References OTT, H. (2011). Tuning into Client Needs: Matching Supply and Demand for the Television Tuner Division at Infineon Asia-Pacific. WHAT IS THE DIFFERENCE BETWEEN LEAN AND AGILE MANUFACTURING?. (2017). Team Quality Services. Retrieved 2 September 2017, from https://teamqualityservices.com/whatis-the-difference-between-lean-and-agile-manufacturing/ Figlewski, S. (1997). Forecasting volatility. Financial markets, institutions & instruments, 6(1), 1-88. Do, A., Powell, R., Singh, A., & Yong, J. (2016, December). Selection of a Model for Exploring Cross Market Linkages: A Review of E-GARCH, Markov-switching Framework and Structural Break Models. In ECU Business Doctoral and Emerging Scholars Colloquium 2016 (p. 1)