Are Lean Production and Global Sourcing Compatible?

• Just-in-time

Shipping times

Freight costs

• Inventory levels

30 days of inventory for shipping by sea

Time and forecast accuracy

• Design-for-Manufacturing

proximity helps

Need frequent and quick replies

Delivery Times for Each CCT Plant and Market (in days)

To MarketsU.S. Europe Pacific (Japan)

From

Plants AirSea/

LandAir

Sea/

LandAir

Sea/

Land

California-- 7 4 14 3 16

Ireland4 14 3 5 NA NA

Singapore4 25 4 35 4 18

Freight Cost and Product Type(Percentage of Cost of Goods Sold)

Low-End Product

High-End Product

Peripheral

(Monitor)

Air Freight 5.4% 4.0% 20.9%

Sea Freight 1.2% 1.0% 1.0

Inventory/Sales Ratioand Pipeline Time

Short Pipeline Long Pipeline

Mean pipeline time (in days) 23.25 40.6

Mean Inventory/ Sales Ratio 0.67 1.87

Inventory cost as % CGS 1.27% 3.54%

Distance and Monthly Sales Forecast Errors

Local Market Remote Market

Mean 30 day forecast error 12% 22%

Mean 90 day forecast error 38 45

Solutions• Frequent visits to suppliers

• Build in domestic plant first, then outsource

• Teleconferences

• Incorporate DFM rules into CAD

• DFM and TQM are more feasible than JIT and low inventory