The preferred order process will be:

1. Customer to provide a firm order to VTech for at least three months and rolling forecast for at least six months.
2. Order quantity and delivery schedule in first two months are not preferred to be changed significantly, as all material and capacity plans had been allocated.
3. For Upside order/forecast, VTech will try the best to achieve the upside by pulling in the material order from vendors.
4. For Downside order/forecast, VTech will carry the inventory, customer will be required to be responsible for the unique material used after a period of time if there is no order to consume the material.
5. VTech can provide 'build to order' service to their end customer based on requirement.
6. Partial shipment of each order can be done upon request.
7. Further flexibility in order variance can be discussed on a case by case basis.

   Reducing lead times is critical. The supply lead times will be greatly affected by the component lead times. With the order and forecast system in place, VTech can plan to have material come in time based on the schedule.

   For sudden or urgent order requirements, VTech works with customers to get an agreement to purchase a buffer inventory of long lead items (lead-times longer than 8 weeks). Hence those order lead-times can be reduced to 10 weeks (8 weeks for short lead item plus 2 weeks production) if the buffer inventory in place. The long lead item inventory will be refilled automatically. The customer will be required to be responsible for those items that are unique to the product with no consumption ultimately.

   VTech will be quite flexible to fulfil customer's requirement for inventory management. VTech can help to stock inventory as VTech has warehouses and facilities in Mainland China. VTech can also discuss a 'build to order' system with the customer and its end customers to reduce full assemblies or components inventory. An on-site inventory management system is also possible. It is possible to have VTech to maintain a buffer stock on site and establish a push-pull system to delivery finished products.

   VTech is using an EDI system with some or our customers and suppliers. Intranet within the VTech organisation is established. VTech is now enhancing the platform to include all supply chain elements and part of the data will become visible to our customer through the Internet, e.g. order tracking, testing data, etc. The first stage will be completed in 6 months and further enhancement problem is committed within the coming 2 years.

   Our on-time shipment or delivery percentage was over 95% in the past 12 months. VTech measures this on-time delivery based on the shipment commitment VTech provided when VTech received the order request from the customer.

   VTech have global distribution locations that would service our customer and their global customers:
   For manufacturing locations:
     Dongguan, China - with over 3 Million Square feet Manufacturing and Warehouse Area

   For Distribution locations:
     - Hong Kong
     - Dongguan
     - California/Portland, USA