How to drive excellence in the BtC space

| Maxim Integrated |1

How to drive excellence in the BtC spaceBy shaping disciplines within the business that become measurable, repeatable and predictable

ICTF, Basel Switzerland, October 21, 2013Ralph Montforts

MAXIM Integrated Overview30 Years of Innovation and Integration

1983 Founded

San Jose, CA HQ

USD 2.4B Revenue

~9,000 Employees

MXIM Stock Ticker

31 / 14 Global Presence

| Maxim Integrated | 4

31 Product Technology Centers in 14 countries


Flexible Manufacturing Capabilities


Assembly and Test Facilities


Quality and Support

The World is Getting Smaller…Faster

| Maxim Integrated 8

1980’s 2000’s Today

Analog is Evolving

BUILDING BLOCKS SYSTEM SOLUTIONS ANALOG INTEGRATION

1 2 3


Three Elements of our Strategy


Innovation Integration Balance

Great Top-Line Growth vs. Peers


Company Sep-08 Jun-13 Change

Maxim $501M $608M 21%

Company A1 $113M2 $168M 48%

Company B $310M $327M 5%

Company C1 $661M $670M 1%

Company D $1,755M $1,745M -1%

Analog Group Sum $4,933M $4,851M -2%

Company E $1,374M $1,188M -14%

Company F $219M $145M -34%

(1) Quarter ends Jul’13, using revenue guidance(2) Includes acquired company’s revenue in Sept’08


Bill to Cash• 2 Locations

> Dublin, Ireland> Manila, The Philippines

• 4 Processes> Billing> Cash application> Collections> Credit

• 22 FTE

USD 2.4B Revenue ttm per Region

USAChinaKoreaVietnamRo AsiaEuropeRo World


VISION

2015Year

Satisfaction

“efficient department”

Strategic Partnership

C&C policy Insight & documentation

Indispensable Partner

Business view BtC as a non-core tactical supplier.

Business views BtC as a strategically integrated Solutions PartnerThe Journey

Trusted Advisor

StrategicContributor

Solutions Consultant

PreferredSupplier

“Necessary Evil “

2010 2011 2011

Informal organization

Proactive behaviourAutomation

KPI / SLA’s in place

One screen solution

1 Tool ; ‘Truly Integrated’

“Lights Out” office

20162012 2013

Customers have access

“Paperless” office

QMS System in place

‘Credit Integrated’

201?

‘Collections Integrated’

2014

Achieving excellence through these disciplines

• ERP systems• Analysis and Reporting• Automation

• Policy and Procedures• Workflow and Desk Top Documentation• Business Process Owner

Process

Tools

• Hired to fit Maxim Culture• Training and Development• Motivate, Reward and Recognize

People

• Empowering people• Change support• Buy in from Executive Management

Authority


Process• Policy and Procedures

> Introduction of policies. 2-4 pages describing ownership, accountability, responsibilities and authorization/authorities.

> Daily, weekly, bi weekly, monthly, quarterly progress reviews, with action plans, post mortem, etc

• Workflow and Desk Top Documentation> Mapped all major processes> Documented all processes 465 pages

• Business Process Owner> Ownership and Execution> Continuity and CIP> Collaboration with other BPO’s> Compliance

START

Open item

Broken POPCollection strategy

/ risk categoriesGeneratecash call list

Priority settings / customer category

To do item

Dunning

Solved query

Blocked order

To do list

Blocked order

release

Query tool

Dunning process

Ageing list

Select customer

Determine type of collections call

Information on:- line items- customer

RiskCategorychange

Escalate to collections manager

Y

N

Customer agree to pay

N

Output of call:to do list: POPvalue and date

Y

N

N

N

Demand Payment

Output of call:to do listY

Y

No-pay because of: need info

No-pay because of:

query

To do list

Query already logged

Output of call: escalation in

query toolY

Output of call:log query inquery tool

N

Risk review

POP receivedOutput of call:to do list: POP value and date

Y To do list

Responsibility & Escalation matrix

Collections process 1.1 2010-10-11

Get confirmation from customer that

future payments must be on time

Go to next cust

Query tool

Query tool

Get confirmation from customer that

future payments must be on time

Put cust on block. Inform customer, collections mgr and CSR/sales

Change SAP setting (risk category)

To do list

multiplePOP broken

Information on:- payment behaviour

Escalate to collections manager

Y

RC review

RC review

Order a/o cust is already on

block

N

Keep cust block. Inform customer, collections mgr and CSR/sales

Y

N

Inform: collection & credit manager

(& controller depending on $$)

Y

Next steps: Instalments /

Legal / prepaid / financial

difficulties ??

Act upon

N

Change SAP setting (risk category)


People• Hired to fit Maxim Values and Culture

• Training and Development> Maxim U> EBYD> Mentor Program> Development Plan> Training and further Education

• Motivate, Reward and Recognize


Tools• ERP systems

> SAP improvements: Auto Posting Cash, Credit Risk Categories, Blocked Order Logic, Automated reports and statements/Dunning

• Analysis and Reporting> Increased number of KPI’s, reports, recurring analysis, Introduction of SAP BPC, BI and now with the

introduction of EDW, really allowing Big Data analysis

• Automation> Increase quality and consistency> Reduce non value add work> The system will push the reports – We do not need to pull


Authority• Empowering people

> Be Bold, take calculated guess, Learn from mistakes, increased responsibility and authority

• Change support> Adapt to changes situations. Set winning goals and measure against metrics. Rally others behind a cause. Obtain necessary

resources to accomplish goals. Take ownership and voice opinion or make a decision

• Buy in from Executive Management (and full support!)

• And push for mindset change in the organization (if needs to be)> One day late just isn’t good enough> “…But on average it is good, isn’t it?...”

> So, is Average Normal?

Average is not normal

• The last 80 years the stock market• Averaged 10 percent

• But

• During those 80 years • Annual returns looked like this


34 38 -13 -28 -43 -8 56 5 44 3334 28 3 -7 -10 16 29 21 38 -64 2 20 30 20 14 1 50 25 8

-10 45 13 1 27 -10 21 16 14 -928 14 -10 1 16 17 -18 -28 38 27-3 8 24 33 -3 21 23 5 32 172 18 29 -6 35 10 11 0 37 21

31 24 24 -11 -11 -21 32 12 6 15


• But• How many of those returns

• Were between• 9 and 11 percent

• Or even close to: average


34 38 -13 -28 -43 -8 56 5 44 3334 28 3 -7 -10 16 29 21 38 -64 2 20 30 20 14 1 50 25 8

-10 45 13 1 27 -10 21 16 14 -928 14 -10 1 16 17 -18 -28 38 27-3 8 24 33 -3 21 23 5 32 172 18 29 -6 35 10 11 0 37 21

31 24 24 -11 -11 -21 32 12 6 15


• 2

• 2 Out of 80

• Average is not normal

Outliers matterCustomer has an average payment behaviour of about 2 days late.Customer pays only once every month.On payment, half of the invoices are already O'due, half are due in the next 2 weeks or so.At various reporting times customer still shows invoices up to 16 days O’due and is defaulting on contract.


If you almost caught the bus,You still missed it.

Ian McWhirter

Ralph’s manager & mentor@ Polaroid Inc


Continuous Process Improvement; how to get there

Provide the infrastructure to transform Maxim's business processes to eliminate waste, maximize value and unleash a company culture that empowers continuous improvement.

Customers

TeamMembers

Facilitator

TeamLead

Sponsors

Waste

The Lean Enterprise is a Strategy…

• … to turn business processes into competitive weapons• “Prime Directive” : continually seek out and eliminate waste• Lean can be used in any organization and across organizations• Lean improvements will add to the bottom line

freeleansite.com


5 Core Principles of Lean1. Identify

value

2. Map the value stream

3. Valueflow at

customer pull

5. Continuously

improve

4. Empoweremployees

Value = What Customers are Willing to Pay ForWhat are Maxim Customers Willing to Pay For?

Consistent timely delivery High quality Innovative designs Products Savings

• Customers DON’T Value: Anything else we do.

Maxim Integrated |


Typical Value BreakdownFocus areas of Lean

Eliminate

Value Add; 5%

Non-Value Add; 60%

Non Value Add but Necessary; 35%

Minimize

Eliminate

Improve

Maxim Integrated |31

The 8 types of Waste

1. Defects2. Over Production3. Waiting4. NVA Processing5. Transportation6. Inventory7. Motion8. Employee (Underutilized people)

Waste is anything that uses time, resources or spaces but does not add value to the product or service from a customer’s perspective

Root Causes of Waste> lack of adherence> unnecessary approvals or signatures > reviews of reviews> multiple hand-offs> transportation> long setup time> correction> over-production

> poor maintenance> lack of training> poor supervisory skills> ineffective production planning/

scheduling> lack of workplace organization> supplier quality/ reliability

freeleansite.com

Where Can Lean Help Maxim?• Manufacturing -> being used in Maxim fabs• NPI Process -> eliminate waste to reduce time to market• CFO Services -> procurement, AP, AR, help desk, payroll• Customer Operations• Procure to Pay• Bill to Cash

Anywhere!

• How do we using Lean? We use a technique called Kaizen

Maxim Integrated |

Kaizen Deliverables

1. 2K foot process map“As Is”

2. Pain points & times

3. Future process map

4. Roadmap to future

5. 1 page Exec Summary“A3”

What is a Kaizen?i. Structured event to improve a

processii. 3-5 days with 10 – 12 subject matter

expertsiii. Focus on customeriv. Objective is to eliminate or minimize

waste: time, resources, effort






2K Foot Process Map2K = 1 Step Higher Than Desk Procedures

Team documents steps, times & pain points on wall

Facilitators transcribe steps, times & pains to Visio

Typically covers all

available wall space in IQ Zone






Pain Point Documentation & Root Cause Analysis

• Team documents pain points and process times on wall

• Team analyzes pain points for commonalities and root causes

• Team measures impact of key factors• Wasted time in process• Quality deviations due to process• Risks introduced by process

Future State Process Addresses Pain Points






Team designs and maps out future state process & times on the wall. Analyzes to assure key metrics improve and pain points are addressed.

Facilitators transcribe future state to Visio.

Effort – Impact Chart to Develop Improvement Roadmap






Qualitative “Effort – Impact Chart” developed by team to assess what it will take to fix the pain points in the future state.

Team evaluates Effort – Impact Chart to determine priorities; what ends up on the improvement roadmap vs. what is left “as-is”. Team members assigned to roadmap items.

Executive Summary Report to StakeholdersA3 is International Paper Size ~ 11x17 inches






A3 developed by team on last day summarizing• Current state issues• Impact on performance• Root causes

• Future state• Metrics• Key roadmap items

A3 presented to stakeholders soon after kaizen.Work begins on roadmap, driven by team lead.

| Maxim Integrated | Company Confidential40

ROADMAP

Initiatives Type Team members, reach out Complete FY13 Q4 FY14 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY15 FY16Interview: What do our customer(s) want: Bruce, Sales, Cust Ops Fund/Strat C&C Mgt, Cust Ops, Sales, FY14 Q1 Interview: How are we going to grow & Do we allow different policies ? Fund/Strat C&C Mgt, CFO Group, Sales Exec. FY14 Q1 Collections team Kaizen event : From As Is to To Be, process improvement, roadmap and CIP CIP Collections team FY14 Q1 Reporting automation - plan, scope, deliverables, constraints. Decide on Ticket system Efficiency C&C Team & Mgt FY14 Q1 Credit team Kaizen event : From As Is to To Be, process improvement, roadmap and kick off CIP CIP Credit team FY14 Q2 ADL report - BI report Compliance 1 Coll, 1 CR, 1 BI reporting specialist FY14 Q2 Minimum order/invoicing level and/or Minimum yearly spent Strategic FY14 Q2 C&C 'stall' --> representation at the Global Sales event ?? Cust Service 1 Coll, 1 CR, team manager FY14 Q2 Collections Kaizen event process improvement & documentation CIP CIP Collections team FY14 Q3 Updated payment terms in SAP - Dunning Compliance 1 Coll analyst, 1 CR analyst, SAP FICO FY14 Q3 More Cust on CC? Fewer customers? More direct customers? Disti support? Strategic FY14 Q3 Query Management system - including process, procedures, SLA, reporting, etc CIP Efficiency Coll Team, CR team, C&C Mgt FY14 Q3 Unclaimed property policy and process Compliance Coll team + C&C Mgt, Corp Tax FY14 Q3 Group CL Efficiency CR Team - C&C Mgt FY14 Q3 Credit Kaizen event process improvement & documentation CIP CIP Credit team FY14 Q4 New C&C processes & Procedures : Training and dissemination to others CIP Fundementals C&C team FY14 Q4 CL request in the cloud Cust Service Credit team, 3rd party provider FY14 Q4 Customer classification and Customer scorecard Cust Service Coll, CR, Cust Ops, Sales, Mgt FY14 Q4 Real time bank posting and statement depository. Dependencies: AR team deliverable Cust Service 2 coll analyst, AR team FY14 Q4 Eliminate / streamline Cash in Advance Efficiency 1 CR team, 2 Coll team, Cust Ops, FY14 Q4 Involvement in pricing/ yearly contract negotiations Strategic C&C Mgt, Sales, Cust Ops FY14 Q4 SAP forecast on cash collections, overdue, queries and SOA direct from SAP to Cust email Cust Service C&C Team - SAP FY15 Refined, automated refund process. Dependencies: through SAP? Direct in banking? Treasury? Efficiency 2 coll, AR team, AP team? Treasury? FY15 Industry/peer reviews. Credit Insurance. RC review. Concentration risk & Country Risk reviews Efficiency CR team FY15 Automated CL calculation Efficiency Credit team, 3rd party provider FY16 Customer access their own accounts in a portal Cust Service CR team, Mgt, Executive review FY16 One screen info solutions. Dependencies: Own solution - SAP solution - SalesForce.com? Efficiency Collective effort FY16 Customer visits and Customer satisfaction survey (Half yearly?) Cust Service C&C team Ongoing Better reward & recognition excellent performance - high engagement and increased morale Strategic Team management Ongoing Training staff - FCIB - ICTF - REACH - IICM - etc Fundementals Team Mgt Ongoing Improved communications with customer, cust ops, other departments Cust Service Continuing Ongoing

PROCESSESDeliver on commitmentProcess 1st, Automation 2nd

Effective Change Mgmt

Delight CustomerKnow Customer & BusinessOffer Strategic Solutions

CUSTOMER SERVICE

Depend on Each OtherValue Add & ResultsChallenge

WIN

PEOPLEDevelop PeopleTrainingCareer Path Centre

ofExcellence

O’due ageing & CEI

FY11 P01

FY11 P02

FY11 Q

1

FY11 P04

FY11 P05

FY11 Q

2

FY11 P07

FY11 P08

FY11 Q

3

FY11 P10

FY11 P11

FY11 Q

4

FY12 P01

FY12 P02

FY12 Q

1

FY12 P04

FY12 P05

FY12 Q2

FY12 P07

FY12 P08

FY12 Q3

FY12 P10

FY12 P11

FY12 Q

4

FY13 P01

FY13 P02

FY13 Q

1

FY13 P04

FY13 P05

FY13 Q

2

FY13 P07

FY13 P08

FY13 Q

3

FY13 P10

FY13 P11

FY13 Q

4

FY14 P01

FY14 P02

FY14 Q1

-2%

0%

2%

4%

6%

8%

10%

12%

82%

84%

86%

88%

90%

92%

94%

96%

98%

>90 O'due61-90 O'due31-60 O'due1-30 O'dueCEI (Right axis)

FY08 Q

1

FY08 Q

3

FY09 P01

FY09 Q

1

FY09 P05

FY09 P07

FY09 Q3

FY09 P11

FY10 P01

FY10 Q1

FY10 P05

FY10 P07

FY10 Q

3

FY10 P11

FY11 P01

FY11 Q

1

FY11 P05

FY11 P07

FY11 Q

3

FY11 P11

FY12 P01

FY12 Q1

FY12 P05

FY12 P07

FY12 Q

3

FY12 P11

FY13 P01

FY13 Q1

FY13 P05

FY13 P07

FY13 Q

3

FY13 P11

FY14 P01

FY14 Q

139

41

43

45

47

49

51

53

55

80%

82%

84%

86%

88%

90%

92%

94%

96%

98%

DSO Monthly & % Current

FY08 Q

1

FY08 Q

2

FY08 Q3

FY08 Q4

FY09 Q

1

FY09 Q

2

FY09 Q

3

FY09 Q

4

FY10 Q

1

FY10 Q

2

FY10 Q

3

FY10 Q

4

FY11 Q

1

FY11 Q

2

FY11 Q

3

FY11 Q

4

FY12 Q

1

FY12 Q

2

FY12 Q

3

FY12 Q

4

FY13 Q

1

FY13 Q

2

FY13 Q

3

FY13 Q

4

FY14 Q

135

37

39

41

43

45

47

49

51

53

55

DSO Quarterly

60+ O’due w/o Bad Debt & CR balances

FY11 P01

FY11 P02

FY11 Q

1

FY11 P04

FY11 P05

FY11 Q

2

FY11 P07

FY11 P08

FY11 Q

3

FY11 P10

FY11 P11

FY11 Q

4

FY12 P01

FY12 P02

FY12 Q

1

FY12 P04

FY12 P05

FY12 Q2

FY12 P07

FY12 P08

FY12 Q

3

FY12 P10

FY12 P11

FY12 Q

4

FY13 P01

FY13 P02

FY13 Q

1

FY13 P04

FY13 P05

FY13 Q

2

FY13 P07

FY13 P08

FY13 Q

3

FY13 P10

FY13 P11

FY13 Q

4

FY14 P01

FY14 P02

FY14 Q1

-10000

-8000

-6000

-4000

-2000

0

2000

4000

6000

800060plus DT's only w/o BD

60plus w/o Bad debt

Credit Balances

FY09 Q

1

FY09 Q

2

FY09 Q

3

FY09 Q

4

FY10 Q1

FY10 Q

2

FY10 Q

3

FY10 Q

4

FY11 Q

1

FY11 Q

2

FY11 Q3

FY11 Q

4

FY12 Q

1

FY12 Q

2

FY12 Q3

FY12 Q

4

FY13 Q

1

FY13 Q2

FY13 Q

3

FY13 Q4

FY14 Q

1

-500

500

1,500

2,500

3,500

4,500

5,500 Bad debt Accrual

Trend Bad Debt Accrual

Write Offs

Bad Debt Accrual & actual Write Off


FY11 P10

FY11 P11

FY11 Q

4

FY12 P01

FY12 P02

FY12 Q

1

FY12 P04

FY12 P05

FY12 Q

2

FY12 P07

FY12 P08

FY12 Q

3

FY12 P10

FY12 P11

FY12 Q

4

FY13 P01

FY13 P02

FY13 Q

1

FY13 P04

FY13 P05

FY13 Q

2

FY13 P07

FY13 P08

FY13 Q

3

FY13 P10

FY13 P11

FY13 Q

4

FY14 P01

FY14 P02

FY14 Q

10%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% of customers >90% of customers 61-90% of customers 31-60% of customers 1-30% of customers Current

% of Customers in Ageing buckets


Cash posted to customer account within 24 hours

40 41 42 43 44 45 46 47 48 49 50 51 52 1 2 3 4 5 6 7 8 9 10 11 12 1395.00%

95.50%

96.00%

96.50%

97.00%

97.50%

98.00%

98.50%

99.00%

99.50%

100.00%

Other48<7224<48<24 hrs


Cash allocated against invoices within 24 hours from posting

1 2 3 4 5 6 7 8 9 10 11 12 1370.00%

75.00%

80.00%

85.00%

90.00%

95.00%

100.00%

91.59%92.72%

93.72%

87.44%

84.80%

92.00%

93.83%

96.16%

89.80%

92.42%

94.73% 94.38%93.17%

<24 Hrs (# Items)

| Maxim Integrated | Company Confidential49

Payments on customer accounts 14+days – not allocated

5 6 7 8 9 10 11 12 13 -

50,000

100,000

150,000

200,000

250,000

14-30 Days31-60 Days61-90 Days90+


Electronic Invoicing

P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 Yearly Total0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

9.81% 10.13% 11.05% 10.44%

8.23%10.70% 10.08% 9.69%

32.54%32.10% 33.46% 32.83%

49.42% 47.07% 45.41% 47.05%

EDIEmailElectronic (with changes)Print

Q & A

How to drive excellence in the BtC space

Documents

support maxim

countries maxim

smallerfaster maxim

strategy maxim

test facilities maxim

maxim bump fabwe

analog functions

analog fits