State of Supply Chain Semiconductor Industry Performance

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The 2010 State of supply chain performance study in Semiconductor industry was conducted with 52 companies with annual turnover exceeding USD 400 million.

The study was conducted from September to November 2010 by iCognitive consultants.

The Study used the same standard online questionnaire in all countries.

In addition, telephone interviews were carried out for verification of online results and additional qualitative data.

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State of Supply Chain Semiconductor Industry Performance

  1. 1. PLAN SOURCE MAKE DELIVER RETURN ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 2010 State of Supply Chain performance in Semiconductor industry Luc Kremers Principal Supply Chain Consultant
  2. 2. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved iCognitive, an Expert in Supply Chain Management 2 CONSULTING BENCHMARKING TRAINING TECHNOLOGY RESEARCH IN SUPPLY CHAIN
  3. 3. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Introduction • iCognitive organizes a public Supply Chain Benchmark study 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 industry sector – In 2010 this was the Semiconductor Industry
  4. 4. 4 ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved STUDY APPROACH AND POPULATION PROFILE
  5. 5. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Study approach • The 2010 State of supply chain performance study in Semiconductor industry was conducted with 52 companies with annual turnover exceeding USD 400 million • The study was conducted from September to November 2010 by iCognitive consultants • The Study used the same standard online questionnaire in all countries • In addition, telephone interviews were carried out for verification of online results and additional qualitative data
  6. 6. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 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
  7. 7. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 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.
  8. 8. 8 ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved RESULTS OF THE STUDY
  9. 9. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 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…”
  10. 10. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Results of the study Best Practices employed – The top 3 best practices that can improve the demand visibility and collaboration with supply chain partners are: 1. Supplier’s 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 tool “For 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”
  11. 11. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Results of the study Supply Chain Configuration – The trend in outsourcing shows the constant disintegration 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…”
  12. 12. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Results of the study Process and Organizational Enablers – Best-in-class companies have reshaped their organization in a more customer-centric supply chain supported by master processes such as ‘Customer fulfillment, planning and logistics’ or ‘Customer value chain’, 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… ”
  13. 13. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Results of the study 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 year generally supported with customized e-learning portal and in-house workshops 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 (operational fundamentals) 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
  14. 14. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Results of the study Technology Enablers – The top 3 IT tools used by the respondents were mentioned: • 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 management… Warehouse 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”
  15. 15. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 0 10 20 30 40 50 60 70 80 BIC Median Laggard Order fullfilment cycle time (days) Results of the study 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 asset management. – 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 (%)
  16. 16. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved – The excellent performance of the best-in-class companies is 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 Results of the study Supply Chain Performance Benchmark [2/2]
  17. 17. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Conclusions [1/2] • Managing the supply chain has become critical to maintaining a competitive 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 of the lack of visibility of the demand signal. • Inaccurate forecasts generally lead to higher inventory levels and a significant decrease in the service level, due to the inability of the company to plan and align its resources accordingly. • Best practices employed – The top 3 best practices (Supplier’s collaboration, Sales and Operations Planning Process, End-to-end supply chain visibility tool) are mainly those that can improve the demand visibility and the collaboration with the supply chain partners
  18. 18. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 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 driver of high performance
  19. 19. www.icognitive.com ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Thank you For more information please contact us at info@icognitive.com or +65 6325 2810

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