Managing Uncertainty 2011 07

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Managing UncertaintyPresenter

Caroline DowlingPresident

Tech Services and NOVO FlexFlextronics


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Design. Build. Ship. Service.

Change is inevitable.Change is constant

- Benjamin Disraeli


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A Decade Looking Back

US boost home ownership to 70%

Fed dropped discount rate to 1%

Housing Boom 2000 - 2008

US Market sourced from S&P500World Market sourced from MSCI WorldPeriod: Dec 23 to Jan 05

S&P Case-Shiller Homegrows 93% from 2000 -

US GDP grows for 28 cquarters 2001 2008

2000


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5/28Design. Build. Ship. Service.

Digitization, Tech Convergence & Social Media Explosion


US Market sourced from S&P500, World Market sourcedfrom MSCI World Period: Dec 23 to Jan 05

20062004200320012000

Convergence drives mobile internetdevice market

2/3 of Global Internet users visit socialnetworking or blogging sites

Social media companiesmainstream, LinkedIn IPto follow.


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Subprime Crisis


US Market sourced from S&P500World Market sourced from MSCI WorldPeriod: Sep 12 to Oct 10

200820062004200320012000

US Market plunged (28%; $3.1T)

World Market plunged (29%; $7.5T)

Commodity crashedUS Dollar roseUnemployment soaredGDP dropped


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Growth Focus of China & Emerging Markets


US Market sourced from S&P500World Market sourced from MSCI WorldPeriod: Dec 23 to Jan 05

20200820062004200320012000

China becomes 2nd largest economy.

BRIC drives economic growth aroundthe world

GDP Growth 2010:Brazil - 7.6%, Russia - 4India 9%, China 10

Chinese Yuan appreciati


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TodayChange is Accelerated

GDP(Coincident In

UCPIExchangeRate

Raw Materials Energy & Food Prices Transportation P

Wage Inflation Purchasing Managers Index

Cost of Capital

Corporate SpeConsumerConfidence

Interest Rate

StockMarketInventoryChanges


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VAT Tax Refund

Decreased VAT reTech e.g. Phones,

Increased VAT rtech production pCleanTech

From Dec 2010 Forneed to pay Urban Construction Tax &Surcharge

Amount of 12% o

China Cost is Escalating

Average Hourly Wages of ChineseWorkers / Staff

0.50

0.70

0.90

1.101.30

1.50

1.70

1.90

2.10

2.30

2.50

2000 2002 2004 2006 2008 2010

+ 265%

USD

Source: National Bureau of Statistics of China, BloombergHourly wages calculated based on 2080 work hours per year


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Oil Prices (Brent Crude)

Source: Bloomberg, US Energy I

US$ per barrel$20 $137 + 585%


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The cost parity between China and other low cost regions is closing rapidly as we ltrade-offs between costs of labor, freight, inventory, ROIC vs. Time and Risk

Product Price Change requires continuous monitoring oftrade-offs (Example Smart Phone)

T o

t a l L a n

d e

d U n

i t C o s

t

Average Delivery Time (in days) to Customers2 4 6 8 10

$146

$148

$150

$152

$154Hungary

Mexico

China

Malaysia

Indonesia

Ukraine


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Technology Landscape


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Big Data Sharing

SOCIAL

SEARCH

253mn USERSUnique visitors+85% Y/Y

662mn USERS+41% Y/Y

550K+ apps500MM+ downloads

1472mn USERS

+8% Y/YCQ4: CPCs +4% Q/QPaid clicks +18% Y/Y

*
http://en.wikipedia.org/wiki/File:Bing_logo.svg


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Lagging has consequences


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And defenders eventually lose

0

10

2030

40

50

60

70

80

90

100

1935 1955 1975 1995 2005 2011E

Expected Years in S&P 500Many Pathologie

Lack of focus too m

Blindness to disruptiv

Strategic-operational

Competitor Shifts

Big Global Consume

1.

2.

3.

4.

5.


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Your Next Step Is Critical

Connected Devices: 80Bn+ by 2020

Japan Earthquake/Tsunami/Nuclear

Growth Focus of China & Emerging Markets


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Here is what we learned at kindergarten

Choose a few best friends

Share everything

Clean your room

Use your imagination


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Chose a few best friendsand Share everything

Monitor

Understand

What If?

Decide

Find a partner who is equipped with an integrated platform that orchestrates the entire value network

Create Demand based Integrated Supply Platforms to channel feedbacks from the market in real time and madevisible across the network

Connect the pieces

Starts with Raw Component availability and ends with right product right location

Assure Supply Manage a Complex Network Sync Global Distribution Manage Return & Repai

Building linkage between the consumption end of product life cycle and the supply chain members

Transparency is scary, but essential: TRUST enables SPEED


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Imagine the possibilities

Source: Thomson Reuters, CEIC, Nomura Global Economics, US Government, R

Chaos caused by natural disasters, social un-rest and financial

crisis Constantly Monitor

Explosion of technology convergence at unrelated speeds,

everything now, everything quicker, faster, better - Stay Ahead

Social Media, big data collection used to drive business decisions,

product selection, product sales Access the KEY Data

Evolution of end markets and how you will get your products to the

right customers, and right time Be FAST


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You cant expect to meet the challenges oftomorrow with yesterdays tools

- Un-Named

l h k h


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Creating Relationship Network that is

Supplier S 1

(3PL/4PL) 1 OEM Plant

CM Plant

VMI Hub

(3PL/4PL) 2

Repair Center

Supplier S 2

Retailer R 1

Ret ailer R 2

Retailer R 3Supplier S 3

B 2 B I n t e g r a t i o n & C o l l a b o r a t i o n P l a tf o r m

F l e x t r o n i c s / O E M

Value Chain Network DesignValue Chain Performance Management

Adaptive SupplyManagement

IntelligentDemand

Fulfillment

Retail/ClientReplenishment

DESIGNED FOR CHANGE

Ri h N


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Right Now..

A product is leaving a shelf

A shipment is stuck in customs A supplier has 45% available upside

A promotion is driving 37% better than expected results

A component aftermarket is forming

A child is using a sharp pencil on his moms tablet

X

What are you going to do about it?

Tomorrow it will all be different

Fl i & F i d FAST Pl f


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ACHIEVE

Flextronics & Friends our FAST Platform

Volatility

ValueVelocity

VarHANDLE

Time toMarket

Uncertainty Mo

Competitive Edge

Adapted from Curing Supply Chain Indigestion, Boston Consulting Grou

Wh t N t


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Whats Next

No one knows for sure

The new normal is there is no normal speed and change

Having a best friend with a loaded tool shed has never been more valuable

As for us, we have been blessed with some great friendships....but you can never have enou


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Managing Uncertainty is a given

Design for change is a must

Thank you


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Thank you

Documents

Managing Uncertainty 2011 07