Case Study Stratexs New Automated Approach to Supplyside

Case Study: Stratex's New Automated Approach to Supply-side Order Management Stratex Networks Scott G. Snyder Assistant Controller 1 Nor. Cal OAUG Use Only

What You Will Hear From Me Today · Stratex Networks – who we are and what we do · System topology and metrics · Our economic situation and initiatives · Our solution · Implementation · Where we are today · Where we are going 2

Who Is Stratex Networks? · Founded in 1984 · Headquartered in San Jose, CA with major manufacturing operations in Wellington (New Zealand), Cape Town (South Africa) and Taiwan · We are one of the world’s leaders in providing high-speed wireless transmission solutions · We design, manufacture, and market advanced wireless solutions for mobile applications and broadband access to enable the development of complex communications networks worldwide · $157 million in sales for fiscal 2004 3

Our System Topology · ERP - Oracle 10. 7 q q q Started on Oracle in January, 2000 Use Oracle for finance functions, Purchasing, Order Entry, Inventory & Mfg. Upgrading to Oracle 11 i (11. 5. 9) in October, 2004 · Concur for web-based, automated expense reports · Use ADP for payroll · T&E card – American Express 4

Current environment. Pre-Sales Customer Sales Cycle Order Submission Order Fulfillment Support Customers Customer Online Ordering Licensing Web Interface Customer Support Portal (Service) Network Configurator Online Ordering Tool (sales focused) Opportunity Management Items Configurator (node/site) Quotes MDS Product Ordering Guides Orders (pre-book) Pricing • Forecasts • TAS • Approval Siebel 7. 5 Data Management Systems • Order Management • Items, BOMs • Shipping/Logistics • Finance (GL, AP, AR, FA) Vitria (EAI Framework) Oracle 11 i • Product data mgmt • Items, BOMs, ECOs Agile • Service • Contracts and Billing • Installed Base • Depot Repair • Inventory Management • Purchasing • Manufacturing • Planning • i. Procurement • Time and Expense Data Warehouse/ Repository People. Soft Enterprise Portal (Employee/Exec/Business Intelligence) Employees – Management and Staff 5 Suppliers/Contract Manufacturers • • Supplier Portal Employees – Sales Oracle 11 i, Siebel 7. 5, and/or Custom

Metrics (U. S. operations) · 1, 210 – Average Invoices Per Month (2003) · $18. 3 M in disbursements (2003) · 797, 446 – POs q 1 – 60 Pages q 1 – 80 Revisions · 5 buyers · 3 key receiving areas · 2 AP clerks, 1 supervisor 6

Economic Situation (Our Challenges) · $418 million in sales in FY-01, down to $229 million in FY-02, now $157 million in FY-04 · Cost reductions were required, decision to outsource manufacturing from San Jose to Taiwan & other locations · Outsourced model meant large portion of shipments to drop-ship direct from key suppliers · Documents all paper and in various locations geographically around the world 7

Economic Situation (Our Challenges) · Reductions in force meant very lean accounting staff to get the work done (AP staff reduced to two clerks and one supervisor-including T&E) · AP staff were in constant “fire-fighting” mode with no time to address issues on a timely basis · Turnover in receiving due to reductions in force and outsourced manufacturing · Receiving worked in a reactionary mode, not a proactive mode 8

Initiatives (Where we needed to go) · Corporate Goals q Reduce costs from anywhere possible q Manage contract manufacturers q Improve existing supplier interactions · Finance Goals q q 9 Automate wherever possible while keeping costs down (started as Evaluated Receipts Settlement (ERS)) Make an impact on the company through change

Solution: Automate and Improve Supply-Side OM · Automate the routine matching of invoices to receiving documents & purchase orders · Migration to a paperless AP environment through integration of our paper (images) with the transactions (data) into one source · Solve discrepancies within hours not days – avoid “fire drills” to resolve invoice discrepancies · Automatic sending of invoice images for approval of expense purchases (2 -way match) · Overcome our geographical problems · De-Compartmentalize supply chain – one team (receiving, purchasing & accounting) · Focus our employees on our core competencies and outsource the rest (AP clerks to issues analysts) 10

Parts To Our Solution (In-House / Outsourced) · In-House q Supplier communication q Receiving transactions q Discrepancy resolution q Payment · Outsourced or Outtasked 11 q Data entry (routine matching) q Data conversion q Image archival and storage

The Implementation · We chose Acce. LIM to meet our company goals and initiatives while keeping costs down · We had to outline the handoffs in the process between Oracle and Acce. LIM · We identified what items would be our responsibility and what Acce. LIM would do · Required some work from IT, but not months of development 12

The Implementation 13

Implementation – Flow of data · Purchase orders (and changes to PO’s) and receiving data downloaded daily from Oracle to Acce. LIM · Receiving paperwork (packing slips, bills of lading & receipt travelers) sent by fax or scanner to Acce. LIM daily · Invoices faxed directly from suppliers or from us to Acce. LIM daily · Acce. LIM matches daily and provides daily exceptions reports · Matched items are downloaded daily from Acce. LIM back into Oracle as payables objects for payment · Issues are highlighted daily for resolution 14

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rcarbajal@stratex. com Just curious, who did we windup sourcing the other wire from? 17

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- ssnyder 20

- ssnyder There was problem with this supplier’s data, please reprocess tomorrow. 21

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Where are we Today · Signed agreement in October 2003 · Pilot in November and December · Started production in February · Successes and struggles 23

Our Successes - Accounts Payable · Currently about 30% of invoices come through the automated Acce. LIM system for payment · Images of invoices are e-mailed for approval on expense PO’s · Document images along with the data from invoice to packing slip to PO can be accessed while discussing with a supplier · Proof of receipt documents can be easily accessed and printed during audit · Better collaboration with purchasing and receiving 24

Our Successes - Receiving · Receiving used to have a complete row in the warehouse for receipts with various issues, this has been reduced to one shelf and now just a small pile · Majority of receipt issues are resolved the following day, based on the exception report, rather than only when suppliers call · Better collaboration with purchasing and accounting 25

Our Successes - Purchasing · Real-time resolution of purchase order issues and invoice issues · Addressing issues on a daily basis rather than waiting for a crisis · Access to all data related to a purchase order: PO, order confirmation, receiving documents and supplier invoices · Better collaboration with receiving and accounting · Faster identification and resolution of problems 26

Where we struggle(d) · Initial buy in and acceptance from all departments involved · Overcoming the challenge of defining and implementing the data flow in and out of Oracle · Achieving supplier support for sending invoices directly to Acce. LIM and the right method of sending that data · Clearly documented training and help material for new users · Lessons learned 27

Lessons Learned · Implementation timeline needs to be realistic, not too aggressive · Involve all departments early in the process, do not wait to include any departments · Clearly define what our I. T. department will do and what Acce. LIM will do · Have a clear method for discussing and resolving issues as they arise 28

Where are we going · Within the next 12 months have over 90% of all suppliers sending their invoices directly to Acce. LIM, no paper coming to Stratex · Have all key warehouse locations sending receiving documents directly to Acce. LIM for all U. S. purchase orders · Further develop purchasing and accounting departments as analysts and not data entry clerks · Automate purchase order changes through Acce. LIM · Achieve over 50% of invoices on automated matching 29

Questions · Questions… 30