Here are some notes from the WMS Analyst Day
- Harrah's is looking to have a facility in Vegas with all the newest products
- Speed to market is a key advantage for WMS - makes it easier to do business with WMS. Bluebird 1 + 2 have a 2 week lead time for delivery; xD has a 6 week lead time.
- Their sales people cover fewer accounts which allows them to cover clients more thoroughly. Recently increased salesforce by 50%.
- In the past, customers didn't have to justify ROI of new machines; now they do. Two weeks ago, Ho-Chunk was visiting - haven't bought machines for 2.5 yrs and just ordered machines from WMS.
- xD took 18 months from conception to market. They are spending a lot of time to continuously improve their supply chain. Goal is to reach 60% gross margin and 30% operating margin. 60/40 product sales vs participation - once replacement ramps - running at 30% capacity for manufacturing. Combine that with continued product improvements.
- xD should get to BB2 gross margins or better by 4Q2011. xD margins were weaker at launch - multiple new suppliers and new product (not BB1 evolution) - so there is some ramp time. Beginning to see some improvement already in the Sept quarter; should continue through 4Q. Will show QoQ improvement. They shipped a decent # of units this Q.
Strategy & Development:
- Lean Sigma: started in manufacturing and now headed into product development
- Strategy Deployment:- focusing efforts and priorities on a critical few. 3-5 year strategic initiatives.
Supply Chain & why speed is so important:
- Now that they are a bigger supplier, there are a lot more suppliers that will deal with them.
- 85% of their inventory is replenished based on consumption; replenished within 2 hrs
- They closed 3 outside warehouses because they consolidated their inventory so well. Midwest is a hotbed of supplier activity. 65% of their suppliers are located within a 100 mile radius.
- Inventory was 30% of revenues 5 yrs ago - now 4.5%
- Goal is to get to $25mm of inventory balance - spent $18mm on chips for their BB2s recently - which they will work through.
- Have a little bit of finished goods from Barcelona, in Waukegan, and some in Vegas (where they keep the product that comes back (participation) and repurposed).
- Working on putting USB technology into the cabinets - i.e. simplifying what goes in the box.
- 90% of their games are built out with only 10% to be customized
- They doubled their manufacturing capacity without additional money or people; have industry leading supply times
- Feel like they still have lots of room for improvement
- BB2 just looks slimmer. Can make 100 games per day per line. Track production goals hourly. Can build reels and videos on same lines now - 80 reels per hour. Have constant employee cross training.
- xD not cannibalizing their other products. Lots of the margin improvement will come from training their workers, redesigning, negotiating, working better with suppliers. xD also has a different finish.
- Strip them down, clean them up and then repurpose them. Will remove a lot of components for testing and cleaning (bill validator/cpu)
- 5 yrs ago, it used to take days to get supplies from the dock to the factory - now it's 5 hours - goal is 2hrs
- Cut inventory space needed in half
- Everything is barcoded now
- Takes them 2 days to do a physical inventory count
- Inventory reduced from $72mm in June 05 to just $31mm last quarter
- Scan out empty bin - and they get replenished
- Super core : 90% complete - can be turned into video or reel. 80% of their customers take games that are pretty plain vanilla. Margin on the custom games are even better. Only impacts lead times (so 4-5 weeks).