TAGMfg030811

Using Technology to speed up the Sourcing &

New Product Introduction Process

Roger Blumberg – Vice President, Business Development

[email protected]

Safe Harbor Statement

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Our discussion may include predictions, estimates or other information thatmight be considered forward-looking. While these forward-lookingstatements represent our current judgment on what the future holds, theyare subject to risks and uncertainties that could cause actual results todiffer materially. You are cautioned not to place undue reliance on theseforward-looking statements, which reflect our opinions only as of the date ofthis presentation. Please keep in mind that we are not obligating ourselvesto revise or publicly release the results of any revision to these forward looking statements in light of new information or future events. Throughouttoday’s discussion, we will attempt to present some important factorsrelating to our business that may affect our predictions. You should alsoreview our most recent Form 10-K and Form 10-Q for a more completediscussion of these factors and other risks, particularly under the heading“Risk Factors.”

Release of Harm Statements

Statements made today may not reflect the opinion of TAG Manufacturing Society, Georgia Tech, MFG.com as well as the speaker (me).

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MFG.com – The Facts• Founded in 2000

• Global Company headquarteredin Atlanta, with operations in Shanghai and Paris

• Marketplace available in 7 languages, over 50 currencies

• Serves over 300 manufacturing categories

• Over 200,000 members in 50 countries

• Suppliers pay an annual subscription to participate in the quoting and collaborative process with buyers

“One of the 15 companies that will

change the world”

-CNNMoney.com

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Technology has vastly changed how business is conducted

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How we Network

How we Communicate

How we stay connected

How we do comparisons

How we place orders

Intelligent Matching is an example of technology creating tremendous efficiency gains

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Help in finding the right partner: Socially Help in finding the right partner: Professionally

If only the dating websites allowed for references and recommendations from previous boyfriends/girlfriends……..

Assess SupplyMarkets

Analyze CategorySpend

• Collect and refine data by supplier, BU, pricing, quantity

Approve Category Strategy

Executive Approval of Business Case

DevelopSourcingStrategy

• Collect supplier data• Develop supplier list• Supply market

economics• Cost drivers

• Segmentpurchases

• Determine bargaining position

• Develop negotiation technique approach

ExecuteStrategy

• Conduct negotiations (RFP, auction, face to face)

• Establish criteria and evaluate suppliers

• Determine savings, investments, risks

• Develop recommendation

• Develop plan to transition to new suppliers

• Develop implementation plan for demand management opportunities

• Develop change management plan

Supplier discovery is a critical component to any sourcing strategy you deploy

DetermineBusiness Req’s

• Collect specifications, service level requirements and volume forecasts

Monitor /ManageSuppliers

• Develop process to monitor savings and compliance

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5.6. 7.

DevelopTransitionand ChangeManagementPlans

Sample

Information on current suppliers is primarily found inside the organization…

Mailing Lists

Purchasing Files

Individual Rolodex

Accounts Payable Files

Personal Relationships

Internal RFI

Searches for new Suppliers vary greatly based on bandwidth and sourcing competency

Complete research is key to a successful

strategic sourcing campaign!

Supply Markets

Supplier Directory

Supplier Catalogs

Search the Internet

Current and Past Suppliers

Competitors’ Suppliers

Cost Estimator Vs. e-Sourcing

Cost Estimator Tool

• Real Time Response

• Identify parts with greatest cost savings

• Examine re-design opportunities to maximize cost savings

• Evaluate lower cost manufacturing and sourcing alternatives

e-Sourcing Tool

• Slower but more fact based (committed) pricing

• Gives potential suppliers the opportunity to make design recommendation

• Gives you an opportunity to see how large of a supply market you have before starting production

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Cost Estimator tools reside in Engineering, e-Sourcing tools are in Strategic Sourcing and Supply Markets straddle both organizations

Examples by Category

Cost Estimator E-Sourcing

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Supply Markets

Note: Not an exhaustive list

A Quick Case Study

Goal

A Medical Device Manufacture was constantly missing their on-time Shipments

Background

Predictable Sales Forecast/Demand (+/- 10%)

Mature Product Line with updates every 2 to 3 years

Currently not meeting the commitment date to customers• Results in customer dissatisfaction• Results in lack of trust• Potentially losing sales

Consumes resources – Customer support & others• Money• Time• Reactive culture• Lacking internal trust

Disruptions in production schedule & flow

DeliveryOn Time

Environment

Measurements

Methods

Material

Machines

Personnel

Training

Planning

WO Performance

Labor capacity

Equipment capacity

Equipment failure

Bad data

Supplier delivery

Supplier quality

Lost inventory

Internal quality

Kanban processLack of std work

ConfirmationConsolidation

DistributionForced Orders

ECOForecast

Alignment

variationCustomer demand

Cause-and-Effect Diagram

List of Potential Causes

Project Key Findings• Engineering spent 1/3 of their time doing sourcing

related work including supplier meetings & visits

• Average Engineer made 2x Salary of Sourcing

• Suppliers called on Engineering, not sourcing

• Sourcing team was not embedded in the engineering department

• Majority of the stock outages due to sole source relationships established by the Engineering department

• Engineering did not negotiate with supplier or consider the impact of sole sourcing

• Sourcing did not question the supplier assigned to the part and did not look for alternative solutions

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What I have learned in Multiple Sourcing Engagements

• Most companies still have engineers source for prototypes & first run

• Most engineers have little training on sourcing best practices

• Many engineers actually like to source?

• Companies on e-sourcing tools have contained engineering sourcing

• Forward thinking Companies are now embedding both sourcing and e-sourcing in Engineering

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Who is using MFG.com?

• Engineers

• Product Development

• Sourcing

• Inventors

• Students

• Companies without an IPO who want to source in low cost countries

• Any company looking for a hard to source item

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A Quick MFG.com Case Study

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• Very large mining and aluminum producer• Significant turnover in the sourcing team• No deep knowledge of this particular

category (Charge Bucket)• Last known supplier of the product is no

longer in business• Only documentation they have is a drawing

of the item• Needed to find a source in under a week• Interested in global sourcing if the

transportation costs made sense

They rapidly found suppliers who could handle their requirements

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Detailed supplier profiles reduced their research efforts

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All Certifications were validated within the MFG.com platform

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Supplier references were readily available

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Intellectual property was protected

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Electronic Signatures Captured

Quote volume was significant but not over burdensome

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They easily evaluated quotes

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Example of Interesting projects we Assisted with this year

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Conclusion

• Asking Engineers to Source is very common but is not adding value in the product development process

• Consider either embedding Sourcing in Engineering or educating Engineering on Sourcing

• Consider Marketplaces and Cost Estimator tools as an alternative to doing nothing or instead of e-sourcing

• Keep an eye out for the trend in which supplier marketplaces and e-sourcing convene

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