Xerox 2007 Annual Report Download - page 52

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50
Manufacturing and supply
We are currently in the fi rst year of a 2007 master supply agreement with Flextronics,
a global electronics manufacturing services company, to outsource portions of
manufacturing for our Offi ce segment. The agreement is for three years with two
additional one-year extension periods at our option. Our inventory purchases from
Flextronics currently represent approximately 20% of our overall worldwide inventory
procurement. We have agreed to purchase from Flextronics some products and
consumables within specifi ed product families. Flextronics must acquire inventory in
anticipation of meeting our forecasted requirements and must maintain suffi cient
manufacturing capacity to satisfy these requirements. Under certain circumstances,
we may be obligated to purchase inventory that remains unused for more than
180 days or becomes obsolete, or on the termination of the supply agreement.
We acquire other offi ce products from various third parties, to increase the breadth of
our product portfolio, and to meet channel requirements. We also have arrangements
with Fuji Xerox under which we purchase some products from and sell other products
to Fuji Xerox. Some of these purchases and sales are the result of mutual research and
development arrangements. Our remaining manufacturing operations are primarily
located in Rochester, New York and Dundalk, Ireland for our high-end production products
and consumables, and in Wilsonville, Oregon for solid ink products, consumable supplies,
and components for our Offi ce segment products.
In 2007 Xerox opened a $60 million emulsion aggregation (EA) toner plant in Webster,
New York. EA toner was developed by Xerox and is protected by more than 300 patents.
EA toner is chemically grown enabling the size, shape and structure of the particles to
be precisely controlled which leads to improved print quality, less toner usage, less toner
waste and less energy required for manufacturing and for printing. Xerox also opened
in 2007 a $24 million state-of-the art automated ink manufacturing plant in Wilsonville,
Oregon to serve growing demand for its proprietary solid ink color printers.
Fuji Xerox
Fuji Xerox Co., Limited is an unconsolidated entity in which we currently own 25% and
FUJIFILM Holdings Corporation (FujiFilm) owns 75%. Fuji Xerox develops, manufactures
and distributes document processing products in Japan, China, Hong Kong and other
areas of the Pacifi c Rim, Australia and New Zealand. We retain signifi cant rights as a
minority shareholder. Our technology licensing agreements with Fuji Xerox ensure that
the two companies retain uninterrupted access to each other’s portfolio of patents,
technology and products.
Our business