2010 infineon technologies ag submission

8/2/2019 2010 Infineon Technologies AG Submission

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AWARD for EXCELLENCE 2010

Infineon Technologies AG 1

The Global Supply Chain is our new Fab: Using the SCOR principles to

achieve an Agile and Adaptable Semiconductor Supply Chain

Infineon Technologies AG

Executive Summary

Diminishing trade barriers make global resource sharing attractive, as well as enhanced information

technologies allow supply chains to be efficiently managed and controlled. Today flexible global

supply chains are a must for survival in the IT, electronics, and semiconductor businesses. Infineon

Technologies AG (IFX) has proven that this theoretical approach from the late 90 s is practically

possible and could transform a struggling company into success.

Infineon provides semiconductor and system solutions, focusing on three central needs of ourmodern society: energy efficiency, communications, and security (respectively, 60%, 30%, and 10%

of company revenue). Infineon reaches the first place worldwide on power, industrial, and chip card

markets. It also holds significant market shares for automotive and wireless applications. With some

25,000 employees worldwide (as of January 2010) Infineon generated revenue in Fiscal Year 2009

(ending in September) of 3,027 billion EUR. Infineon has a strong technology portfolio with about

22,900 patents and patent applications and more than 30 major R&D locations.

In addition to cutting-edge chip design, mastering the supply chains complex mix of Infineon -owned factories and partner factories (i.e. wafer foundries and assembly/test subcontractors) has

become the differentiating factor of the company. Infineons flexible supply chain, taking full benefitof globalization and supply chain innovations, had a major impact to the recent achievements of the

company. And the project The global supply chain is our new fab had a significant contribution tothis success story. Infineon had started to face these new challenges by implementing a corporate

supply chain organization with all key functionalities in a matrix and regional setup.

Two strong indicators of a companys success are the development of its inventory value and theconfidence of the capital markets. Not alone but also due to its superior supply chain design and its

flexibility, during the recent worldwide financial crisis Infineon, although the demand collapsed, was

able to reduce its stock to healthy levels within few months. This and other business achievements

increased the confidence of shareholders and lead to a surge of the Infineon share price from below

half a Euro to over 5 Euro within few months and a re-entrance into the DAX (stock index of German

technology companies).


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General Information and Project Complexity

(1) Provide the name of the submitting organizationInfineon Technologies AG (IFX)

(2) Identify the name of the organizational unitCorporate Supply Chain / Innovation

Fig.1: shows Infineons central supply chain organization, which enables efficient management of theentire supply chain

Infineon has a strong technology portfolio with about 22,900 patents and patent applications and

more than 30 major R&D locations. In addition to cutting-edge chip design, mastering the supply

chains complex mix of Infineon-owned factories and partner factories (i.e. wafer foundries andassembly/test subcontractors) has become the differentiating factor of the company.

Infineon had started to face these new challenges by implementing a corporate supply chain

organization with all key functionalities in a matrix and regional setup. To do this Infineon followed

whenever possible the international supply chain standard, SCOR (Supply Chain Operations

Reference Model), from the Supply Chain Council (SCC).

(3) Mission statement of the organizationWe operate and proactively manage the Infineon supply chain to increase turnover and decrease costs:

We increase the turnover and we enable the business of our customers by offering deliveryperformance, delivery reliability, time-to market ramps, and supply chain services.

We decrease costs and we optimize Infineon financial performance by reducing inventory levels,scraps, underutilization costs, and supply chain operation costs.

(4) Indicate the award category of submissionGlobal Award for Supply Chain Excellence

(5) Scope: Provide a brief description of the supply chain and the processes the submission spansThe Infineon supply chain includes raw material suppliers, a global network of internal and external

production sites (i.e. own production sites, silicon foundries, and subcontractors) and the customers

(i.e. end customers, distributors). The submission encompasses all processes of the SCOR model:

Source, Make, Deliver, Plan, and Return.


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Fig.2: shows Infineons supply chain and the linkage with the SCOR model processes with one

responsibility to manage the whole supply chain. Key focus is to overcome the gap between

operational requirements and market requirements.

(6) External: Provide the names and number of people involved from each supply chain partner

organization in the project

All customers were involved in the projectMore than 400 customers, All suppliers and mainly our production partners (i.e. subcontractors and silicon foundries) were

involved in the projectMore than 20 partners.

(7) Internal: Provide names and the number of people involved from each functional

organization and category of each organizationThe main partners in the supply chain are the Global Logistics Planners (GLP) at the business

divisions and the Production Logistics Partners (PLP) at the production sites. Many other functions

such as Customer Logistics Manager (CLM), Volume Planning (VP), Business services (BS),

Production Partner Management (PPM), and SC Strategy, as well as the classical Logistics (i.e.

Warehouse and Transit) are centralized in the Corporate Supply Chain (CSC). The number of

employees can be grouped into:

Global Logistics Planners (GLP) and Ramp-up Mangers at the business divisions,

Production Logistics Planners (PLP) at the production sites, and Corporate Supply Chain (CSC) organization, globally.More than 500 Infineon employees in total.

(8) Provide a point of contact for each supply chain partnerMain contact: Hans Ehm, Principal Logistics Systems

Tel.: + 49 (0) 89 234 22200

[email protected]
mailto:[email protected]:[email protected]:[email protected]


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Implementation

(1) Describe the reason that the supply chain project was undertaken and how it was selectedDiminishing trade barriers make global resource sharing attractive, as well as enhanced information

technologies allow supply chains to be efficiently managed and controlled. Nowadays, flexible global

supply chains are a must for survival in the IT, electronics, and semiconductor businesses. Infineon

has proven that this theoretical approach from the late 90s is practically possible and that it cantransform a struggling company into a success.

Besides cutting-edge chip design, mastering the supply chains complex mix of Infineon-owned

factories and partner factories (i.e. wafer foundries and assembly/test subcontractors) has become the

differentiating factor of the company.

Infineon had started to face these new challenges by implementing a corporate supply chain

organization with all key functionalities in a matrix and regional setup. In parallel, a sustained effort

has been made to implement the international supply chain standard, SCOR (Supply Chain Operations

Reference Model), from the Supply Chain Council (SCC). It resulted in the so-called Demand-to-Cash

(DtC) process.

Fig. 3: Infineon follows with its internal DtC (Demand-to-Cash) process the international Standard

SCOR from the Supply Chain Council; Infineons 1stand 2ndlevels of the process model are identicalto the SCOR Model.

Fig. 4: shows an example of the DtC-second level for the Plan sub-process; the main processes are

equivalent to the SCOR processes with an abbreviated wording, e.g.Demand Planning = Identify,

Prioritize and Aggregate Supply Chain Requirements; Capacity Planning = Identify, Assess and

Aggregate Supply Chain Resources; Supply Planning = Balance Supply Chain Resources with Supply

Chain Requirements; Order Management = Establish and Communicate Supply Chain Plans;

Production Management = Establish and Communicate Supply Chain Plans.


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These initiatives have enabled Infineon to actively manage one of the most complex supply chains

to be found. It spans external from hundreds of suppliers to hundreds of customers in the automotive,

industrial and communication business. Further parts of the supply chain are Infineon-owned Frontend

factories (i.e. wafer fabrication), supplemented by wafer foundries and of Infineon-owed Backend

factories (i.e. assembly and test), supplemented by subcontractors. The fast introduction of changes for

more cost efficient and higher functionality components (Moores Law, 30% cost reduction per year)is the reason why the semiconductor industry supply and value chain faces challenges higher than in

most other industries.

(2) Indicate the duration of the project. Note if the project was a pilot that is being rolled out.

Note if the project is ongoing / still in processThe project had a duration of 18 months. It started right after the implementation of a new

organization in October 2008 and it ended with the announcement of a Diploma in Supply Chain

Management in March 2010.

(3) Describe, in detail, the process used to complete the projectThe project milestones have been the following:

Introduction of a new Corporate Supply Chain organization (October 2008), which considers theglobal supply chain as a fab was considered in the past.

Detailed documentation of the global supply chain (not only of regional fabs) based on the SCORmodel in ARIS (i.e. ARchitecture of integrated Information Systems). It replaces older tools like

Visio combined with WinWord and orchestrates former regional and local views of the supply

chain. The standard way to (re)-view a process is by using ARIS process model within the

intranet of the Infineon.

Introduction of weekly global Supply Chain Calls. These meetings bring production and supplychain communities together in order to identify hot topics and to discuss alternates and solutions.

This enables early recognition of supply issues, high flexibility in the face of short-term

disruptions, better usage of production and supply chain capacities, as well as higher customer

demand fulfillment. It also serves as risk management tool.

Introduction of a Supply Chain Academy, a worldwide training platform based on e-learningmodules and classroom workshops (see more details in part Knowledge Transfer).

Creation of a Diploma in Supply Chain Management (Bachelor, level 7) in collaboration with theUniversity of Limerick, Ireland. The goal is to offer the possibility to Infineon employees to get

to know state-of-the-art processes and challenges of supply chain management after a one-year

part-time study program. The focus is on global processes based on the SCOR process model.

(4) Identify significant challenges encountered, the process for resolution, and the solutions.

Identify best practicesAs a semiconductor manufacturer, Infineon has to deal with three different challenges:

1) Steep product ramps, as well as short product life cycles,2) Long production lead times (usually 3 to 4 months), positioned early in the Value Chain,3) The differentiation between booming products and those with slower ramping than forecasted is a

key challenge


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Fig. 5a): Semiconductor manufacturers like Infineon are facing 3 distinct challenges: 1) Steep product

ramps; short product life cycles; 2) Long production lead times; early position in the Value Chain

Fig. 5b): Semiconductor manufacturers like Infineon are facing 3 distinct challenges: 3) Difficult

forecasting of product ramp-ups.

To address these challenges, Infineon has implemented an agile and adaptable global supply chain.

Beyond a global supply chain organization, a structured data model has been introduced, which

enables heightened flexibility and reduced complexity to due aggregation of information.

As an example for bringing agility and flexibility into Infineon supply chain processes, we show on

Figure 6 the data model that is used by the different processes: Plan, Source, Make, Delivery, and

Return. The picture shows how 10,000 stock keeping units (SKUs) are aggregated up to 1,000

planning items. This allows planning production, confirming orders, reserving supply, adjusting

capacities, tracking distribution (among others) on appropriate level of detail, also called data

granularities. It also shows how a divergent data structure can involved both production and Sales and

Operations (S&OP) views.


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Fig. 6: Data model used by Infineon supply chain processes: Plan, Source, Make, Delivery, and

Return, which allows flexibility and agility.

As a best practice we would like to highlight the case of an innovative chip developed by Infineon

for entry level mobile phones. This chip had an extremely steep demand ramp-up. In only few months,

customer requirements tremendously increased. In order to gain more production capacities, Infineon

took advantage of its global agile and adaptable supply chain to re-shape the production routings for

this product between own manufacturing sites and partners facilities (i.e. silicon foundries and

subcontractors). In one single year, more than 50 new routes / supply chains have been successivelydefined and used (see Figure 7). As more chips could be built, it resulted in increased revenues in

detriment of other competitors. Rapid adaptation to the market demand was and is still the only way to

survive in a dynamic environment.

Fig. 7: shows the successive production routings for an innovative chip developed by Infineon for

entry level mobile phones. The only way to satisfy the extremely steep demand ramp-up was toconstantly re-shape the supply chain. Rapid adaptation to market has been the success factor.


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(5) Indicate the metrics used to measure (a) progress and (b) successWe describe two metrics: the forecast accuracy and the delivery reliability.

Metric 1: Forecast AccuracyOne important metric to improve the input into the supply chain is the forecast accuracy. Customer

and supplier collaboration works best when there is clear visibility over the whole supply chain. The

semiconductor industry itself is very volatile due to its speed of innovation coupled with periodic

expansions and contractions, allowing only the fittest to survive. This volatile situation produces a

bullwhip effect (amplification of demand fluctuations along the supply chain).

Fig. 8: The semiconductor market has a high volatility, which is a burden but also fuels innovations

for those surviving downturns

In this environment, a near-perfect demand forecast will never be reached; the goal is to have cost

effective benchmark forecast accuracy. The rest of the deviations between forecast and actual must be

buffered by capacity flexibility. With the introduction of a forecast accuracy measurement (e.g. for the

Sales Forecast) at Infineon using the SMAPE formula, Infineon was able to improve its collaborationwith key customers. This yielded better demand forecasts on the one hand and higher attentions to

flexibility to meet the customers needs on the other hand.

Fig. 9: The SMAPE formula and the process to calculate forecast accuracy


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Metric 2: Delivery ReliabilityAnother important key performance indicator that is used at Infineon is the Delivery Reliability (DR).

It compares the confirmation date with the actual delivery date of a line item. Indeed, it measures how

well we meet our commitment to the customer.

Fig. 10: shows the measure of the Delivery Reliability which is close but not equal to the SCOR

definition. It fits the needs of Infineon.

By means of a DR tracking tool we are able to automatically categorize all unreliable line items

regarding the root cause of unreliability. The automatic categorization is partially improved by post

manual adjustments. It has been used for 6-Sigma initiatives in order to better understand

discrepancies and loopholes.

Fig. 11: shows an example of the DR tracking tool that enable root cause analysis for

continuous improvement

(6) Document and quantify cost and performance improvement benefits

The forecast inaccuracy has impact on product mixes in short-term (i.e. higher stocks, scrap costs, andmissed opportunities), on Backend capacity utilization in mid-term (i.e. underutilization, additional

subcontractor costs), and on Frontend capacity utilization in long-term (underutilization and additional

foundries costs). The forecast accuracy improved by nearly 10% within 18 months; this leads to

savings of several millions Euros per year.

Fig. 12: Savings of several millions Euros due to improved forecast accuracy


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As a result of implementing agile and adaptable supply chain, Infineon was also able to

significantly reduce the finished goods inventory level also during a downturn phase.

Fig. 13: Its innovative supply chain enabled Infineon during the recent crisis to reduce stocks within

few months to healthy levels.

(7) Outline how the success of this effort supports organizational objectives described in Section

1, Item 3Two strong indicators of a companys success are the development of its inventory value and theconfidence of the capital markets. Due to the superior supply chain design and its flexibility, during

the recent worldwide financial crisis Infineon, although the demand collapsed, was able to reduce its

stocks to healthy levels within few months. This and other business achievements increased the

confidence of shareholders and lead to a surge of the Infineon share price from below half a Euro to

over 5 Euros within few months and a re-entrance into the DAX (stock index of German technology

companies). Infineons flexible supply chain, taking full benefit of globalization and supply chaininnovations, has had a major impact to the recent success of the company.

Fig. 14: Evolution of Infineon stock price shows how the company quickly recovered after the

financial crisis in 2008-2009 by taking advantage of its Agile and Adaptable global supply chain.

Knowledge Transfer

(1) Describe the efforts to share lessons from this effort with other internal organizationsFor the knowledge transfer, Infineon introduced in 2009 a Supply Chain Academy. This is a

worldwide training platform for supply chain and Sales and Operations communities based on e-

learning modules and classrooms workshops that allows sharing the same view of supply chain

management concepts and processes.

Start of

Project


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We excel in SC management and reach a competitive advantage via differentiation in know-how

because:

We have verified globally identical always up to date knowledge on (IFX) SC We enable each employee everywhere to gain Supply Chain Know How for their direct need -

and beyond,

We keep & attract the best talents because we offer superior SC knowledge @ best trainingconditions.

Hence, we are faster than competition in adapting ourselves to changing SC conditions.

We are part of the IFX HR LD (Learning & Development) and eLearning training landscape. We use internal and external networks to continuously improve.

Fig. 15: Infineon introduced in 2009 a Supply Chain Academy, a worldwide training platform based

on e-learning modules and classrooms workshops, which allows sharing the same view of supply

chain management concepts and processes.

The highest level structure is according to Demand to Cash process. We have specific modules

realized by supply chain experts that describe Plan, Source, Make, Deliver, Return and Enablers

processes in general and in detail at Infineon.

Fig. 16: shows some of the web-based e-learning trainings offered by the Supply Chain Academy

Fig. 17: This graph shows some statistics of the supply chain academy usage: Number of users whostarted eLearning modules; Number of eLearning modules available; Number of modules that have

been started; Number of modules that have been finished.


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In addition to the education topic, we also gained more visibility and transparency on Key

Performance Indicators (KPIs) by introducing across the Corporate Supply Chain organization a so-

called Supply Chain Cockpit. This is an intranet-based reporting framework that displays graphs and

figures on-demand.

Fig. 18: Screenshot of the Supply Chain Cockpit that helps to gain more visibility and transparency on

KPIs across the Corporate Supply Chain organization.

(2) Indicate how these results can be transferred to other organizations, and specify the likely

candidates for transferenceIt is Infineons policy to promote continuous learning and to promote a highly skilled workforce by

providing an educational assistance program to eligible employees. Therefore, we cooperate with theUniversity of Limerick, Ireland to offer diplomas in supply chain management for High Tech industry.

These diploma programs offer:

A broad theoretical knowledge of the supply chain with a special focus on the fast changingglobal supply chain in the high technology industry,

Knowledge concerning interface from development to production, information systems andinformation technology needed for the supply chain,

Knowledge concerning typical humans factors in an organisation, Practical training by working on case studies and a project.

This program is open to any Infineon employee with more than 3 years experience. It is based on a

part-time study. It encompasses following topics:

Introduction to Supply Chain Management, Introduction to Plan within Supply Chains, Introduction to Make within Supply Chains, Introduction to Source within Supply Chains, Introduction to Deliver and Return within Supply Chains, Integrating Development to Production within Supply Chains, Information Systems and Decisions Making, Lean Sigma, Improvement Methodologies, Team Work, Change and Cultural diversity, Industry Project.


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Source:http://www.idaireland.com/news-media/press-releases/infineon-and-the-universi/index.xml

Fig. 19: Excerpt from the press release related to the collaboration between Infineon Technologiesand the University of Limerick for a Diploma of Supply Chain (Bachelor, Level 7)
http://www.idaireland.com/news-media/press-releases/infineon-and-the-universi/index.xmlhttp://www.idaireland.com/news-media/press-releases/infineon-and-the-universi/index.xmlhttp://www.idaireland.com/news-media/press-releases/infineon-and-the-universi/index.xmlhttp://www.idaireland.com/news-media/press-releases/infineon-and-the-universi/index.xml

2010 infineon technologies ag submission

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