2010 state of supply chain performance in semiconductor industry

8/6/2019 2010 State of Supply Chain performance in Semiconductor industry

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2010 State of Supply Chainperformance in Semiconductor

industry

Luc Kremers

Principal Supply Chain Consultant


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iCognitive, an Expert in Supply Chain Management

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CONSULTING BENCHMARKING

TRAINING TECHNOLOGY

RESEARCH IN

SUPPLY CHAIN


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Introduction

iCognitive organizes a public Supply Chain Benchmarkstudy annually on behalf of Supply Chain Council: Southeast Asia (last 11

years)

China(last 6 years)

Europe(last 6 years)

In addition, each year we focus on a specific industrysector In 2010 this was the Semiconductor Industry


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Study approach

The 2010 State of supply chain performancestudy in Semiconductor industry was conductedwith 52 companies with annual turnoverexceeding USD 400 million

The study was conducted from September toNovember 2010 by iCognitive consultants

The Study used the same standard onlinequestionnaire in all countries

In addition, telephone interviews were carriedout for verification of online results andadditional qualitative data


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Study population profile

Total of 52 respondents, with annual

turnover exceeding USD 400 million

By geography

FRANCE, 4%

USA, 50%

JAPAN, 8%

GERMANY,

10%

SINGAPORE,

8%

TAIWAN, 10%

CHINA, 4%

KOREA, 8%

IDM, 53%Fabless,

31%

Foundry,

10%

Assemble/Test/Ma

rk/Pack, 6%

Assemble/Test/

Mark/Pack, 65%

By industry segment


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Study population profile

65% from Middle Management

By seniority

Senior management,

35%Middle

management,

65%

Incl. SCM

director, VP

Supply

Chain,

Operations

Director,

Head of

SCM

department

etc.

Incl. SCM manager,

(Demand) Planning manager,Logistics Manager, Manager

Business Optimization, IT

manager etc.


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RESULTS OF THE STUDY


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Results of the study

Top Supply Chain Concerns In a context of high demand volatility, the top 3 supply

chain concerns expressed by the respondents are:1. Improving the demand forecasting (96%)

2. Increasing the delivery reliability (88%)

3. Reducing the inventory levels (78.5%)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Improve demand forecasting

Develop collaboration within the supply chain partners

Fasten operations with supporting technology

Reduce and optimize inventory levels

Improve utilization rate

Reduce logistics costs

Reduce manufacturing costs

Improve distribution network

Reduce time to introduce new product

Reduce delivery leadtimes

Increase delivery reliability

Improve supplier performance

Paradoxically, while the introduction of new

product is facing tremendous pressures for the lead

time to become as short as possible, the growing

outsourcing trend in the semiconductor supply chain

is considerably stretching the production and

logistics cycle times


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Best Practices employed

The top 3 best practices that can improve the demandvisibility and collaboration with supply chain partners are:

1. Suppliers collaboration (95%)

2. Sales and Operations Planning Process (92%)

3. End-to-end supply chain visibility tool (74.5%)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Collaborative forecasting

Sales and Operations Planning Process

Performance management

Supply chain costing (Activity Based Costing)

Customer collaboration

Joint service agreement (JSA)

Customer segmentation

Supplier collaboration

Financial supply chain (cash flow management)

Advanced training in Supply Chain Management

End to end Supply chain visibility toolFor the past 40 years, innovation and

improvements in the semiconductor industry have

been driven by technology, in order to increase the

number of chips on wafers for instance, but now

there is a clear shift in people mindset about the

importance of the supply chain management


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Supply Chain Configuration

The trend in outsourcing shows the constantdisintegration of the semiconductor supply chain for

the past 10 years with the emergence of contract

services such as design, foundry, assembly & test

Make to

stock, 10%

Make to

Order,

20%

Mixed of

Make to

Stock /

Make to

Order,

50%

Engineer

to order,

20%

What is your supply-demand model?

Logistics,

60%

Design,

20%

What are the activities outsourced?

Warehousing,

40%Manufacturing,

40%

In this highly outsourced environment, the discipline

of supply chain management has become complex

yet critical to control costs and to reduce lead-times

within a chain composed of many players: Fabs,

tester /assemblers, distribution etc


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Process and Organizational Enablers

Best-in-class companies have reshaped theirorganization in a more customer-centric supply chainsupported by master processes such as Customerfulfillment, planning and logistics or Customer valuechain, rather than in functions

0% 20% 40% 60% 80% 100%

Manufacturing driven

Demand driven

Considered as a Cost center

Considered as a Profit center

Collaborative with End-to-End partners (Suppliers / Customers)

Process oriented (PLAN/SOURCE/MAKE/DELIVER/RETURN/ENABLE)

Function oriented (LOGISTICS/PRODUCTION/PURCHASING)

How is your supply chain organization considered?

We can see that the maturity level in this industry is

relatively high, especially regarding the collaboration

aspect between supply chain partners. One of these

large scale initiatives was the RosettaNet project.

Even though most of the expectations have not been

completely met, it shows the trend


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Supply Chain Knowledge and Human

Performance Most of the respondents recognize that their supply chain organization

has an average level with basic knowledge on supply chain

Best-in-class companies provide training above 10 times a yeargenerally supported with customized e-learning portal and in-houseworkshops

20%

50%

30%

How is the level of knowledge of your supply chain

organization?

Mature with knowledge about

advanced models such as SCOR and

supply chain best pratices (S&OP, VMI,

etc)

Average with basic knowledge about

supply chain (operationalfundamentals)

Low with ad-hoc knowledge on

supply chain

20%

50%

20%

10%

What is the frequency of the training for the supply chain

staff?

Never

Below 5 times a year

Between 5 to 10 times a

year

Above 10 times a year


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Technology Enablers

The top 3 IT tools used by the respondents werementioned: Forecasting tools (86%)

Supplier management portal (75%)

Performance measurement (60%)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Forecasting tool

S&OP tool

Supplier management e-portal

Performance measurement

Transportation managementWarehouse management

e-invoicing

CRM application

SRM application

Other

Which technology are you using to support your supply chain operations?The 3 key components, ie. Investment, Innovation

and Information, are all critical but Information is

probably the most overlooked yet the most important

for collaboration and visibility along the supply chain


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0

10

20

30

40

50

60

70

80

BIC Median Laggard

Order fullfilment cycle time (days)


Supply Chain Performance Benchmark

[1/2] To evaluate the supply chain performance, the participants were

asked to describe the performance levels of their supply chain,in terms of reliability, responsiveness, costs and assetmanagement.

SCOR level 1 metrics were used to make the results comparable

between companies

0%

10%

20%

30%

40%50%

60%

70%

80%

90%

100%

BIC Median Laggard

Perfect Order Fullfilment (%)


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The excellent performance of the best-in-class companiesis due to their end-to-end supply chain which integrates

processes and systems with suppliers, customers and

partners

0%

2%

4%

6%

8%

10%

12%

14%

BIC Median Laggard

Supply chain management cost (%revenue)]

Note that level 1 SCOR metric total scm cost can

be further broken down into six components:

SCM IT related cost

SCM Finance related cost

SCM Planning related cost

Inventory carrying cost Material acquisition cost

Order management cost

Benchmark results on these 6 components were

also available for the participants


Supply Chain Performance Benchmark [2/2]


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Conclusions [1/2]

Managing the supply chain has become critical to maintaining acompetitive edge in the semiconductor supply chain

Top Supply chain Concerns in Semiconductor industry The top 3 concerns (Improving demand forecasting, Increasing delivery

reliability, Reducing inventory levels) are all the direct consequences ofthe lack of visibility of the demand signal.

Inaccurate forecasts generally lead to higher inventory levels and a significantdecrease in the service level, due to the inability of the company to plan andalign its resources accordingly.

Best practices employed

The top 3 best practices (Suppliers collaboration, Sales andOperations Planning Process, End-to-end supply chain visibility tool)are mainly those that can improve the demand visibility and thecollaboration with the supply chain partners


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Conclusions [2/2]

This Study shows that there is a substantial gap between

best-in-class performers and median companies when it

comes to supply chain management

The Study provides practical insights that allows your

company to compare itself with others in the industry and

identify potential opportunities for improvement

By drawing on the broad experience of the participants, the

Study provides a perspective that can help your company

strengthen its ability to use the supply chain as a key driverof high performance


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2010 state of supply chain performance in semiconductor industry

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