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Response Management in the Semiconductor Industry July 28, 2015

General Overview

The semiconductor industry is constantly under pressure to deliver better, faster & cheaper products. Today the industry is consolidating rapidly as product portfolios are ballooning at most semiconductor manufacturers. Furthermore, short product life-cycles and highly volatile markets compound the complexity. The product structures are also getting complex with various intricacies like chipsets, multiple manufacturing stages, and inventory points.

Chipmakers are becoming lean to handle these ramifications and stay commercially viable. Asset-lite approaches and outsourcing strategies are very prevalent. Wafer fabrication is moving to foundries where as assembly and test functions are moving to external contract manufacturers, who specialize in these functions. A highly specialized supply chain across multiple partners is becoming the norm. Unfortunately, this is not enough to ease pressure on the customer side due to intense competition and shorter lead times. The supplier side is also under an immense about of pressure due to the longer cycle times.

Seeking Opportunities in the Semiconductor Industry

Despite the enormous challenges these companies face, they are expected to showcase superior bottom-line results. They need to seek opportunities that will enable them to be ahead of the game. A great opportunity lies in supply chain management if the main points listed below are addressed.

  • Fix Forecasting in isolation and resulting in lower forecast accuracies
  • Maintain right granularity and timing of the forecasts
  • Lacking cross-functional decision making involved in these processes through an S&OP Process
  • Limit visibility on potential risks and lack of effective alerting mechanisms to all stakeholders
  • Master the art of balancing inventory & service levels
  • Ensure that operational decisions are made not only to react to the planned deviations (yield bust, increased scrap & reduced manufacturing efficiencies) but also are consistent with commitments and strategic plans

The Path towards Excellence

To outperform in this intense competitive market, chipmakers need to have robust response mechanisms incorporated in their supply chain. They should have the ability to predict and understand the impact of changes in supply chain rather than just in demand & supply terms. It is important that this is looked at from a financial opportunity and trade-off perspective.

Companies need to have systems enabling them to do quick “What-if” analysis in real-time and be able to share these scenarios with relevant teams. Companies need to understand the impact of these scenarios (some are listed below) on their overall supply and value chains.

A few possible scenarios we come across are:

  • What happens if there is a sudden decrease in order quantity?
  • What are my options if my supplier becomes bottleneck due to capacity constraints?
  • What are my options to fulfill a potential huge order or a “big deal”?
  • Is my existing order getting fulfilled as per plan, and what can I do in anticipation of the potential risks?
  • How does build plan changes affect the Supply/Demand situation?
  • Can I launch new products based on current constraints or should I look for capacity?

To orchestrate a right response to these scenarios and many more, quick & effective mechanisms must be built to collaborate with all stakeholders before an opportunity is lost. Fast and informed decisions always help to master the art of effective balance between inventory & service levels.

Every company has its unique set of problems, no matter what insights their systems may reveal. Many factors play an important role in achieving success. Architecting solutions, designing proper business processes and training all users, are few of the many factors that are vital to solving problems for success.

–Tej Bonagiri, Solutions Consultant, Intrigo Systems