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2010 State of Supply Chain performance in Semiconductor industry

Luc Kremers Principal Supply Chain Consultant

PLAN SOURCE MAKE DELIVER RETURN

iCognitive, an Expert in Supply Chain Management

CONSULTING

BENCHMARKING

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RESEARCH IN SUPPLY CHAIN

TRAINING

TECHNOLOGY

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)

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In addition, each year we focus on a specific industry sector

In 2010 this was the Semiconductor Industry

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STUDY APPROACH AND POPULATION PROFILE

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

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Study population profile

Total of 52 respondents, with annual turnover exceeding USD 400 million

By geography
KOREA, 8%
CHINA, 4% TAIWAN, 10%
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By industry segment
FRANCE, 4%

Foundry, 10%

Assemble/Test/Ma Assemble/Test/ rk/Pack, 6% Mark/Pack, 65%

SINGAPORE, 8%

USA, 50%

GERMANY, 10% JAPAN, 8%

Fabless, 31%

IDM, 53%

Study population profile

65% from Middle Management

By seniority
Senior management, 35%
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Middle management, 65%

Incl. SCM manager, (Demand) Planning manager, Logistics Manager, Manager Business Optimization, IT manager etc.

Incl. SCM director, VP Supply Chain, Operations Director, Head of SCM department etc.

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RESULTS OF THE STUDY

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%

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Paradoxically, while the introduction of new Develop collaboration within the supply chain partners Fasten product is supporting tremendous pressures for the lead operations with facing technology Reduce and optimize inventory levels time to become as short as possible, the growing Improve utilization rate outsourcingReduce logisticsthe semiconductor supply chain trend in costs Reduce manufacturing costs is considerably stretching the production and Improve distribution network logistics cycle times Reduce time to introduce new product
Reduce delivery leadtimes Increase delivery reliability Improve supplier performance

Improve demand forecasting

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. 2. 3. Suppliers collaboration (95%) Sales and Operations Planning Process (92%) End-to-end supply chain visibility tool (74.5%)
Forto end past 40 years, tool the Supply chain visibility innovation and End improvements in the semiconductor industry have Advanced training in Supply Chain Management Financial supply by (cash flow management) been driven chaintechnology, in order to increase the Supplier collaboration number of chips on wafers for instance, but now Customer segmentation there is a clear shift in people mindset about the Joint service agreement (JSA) importance of Customer collaboration management the supply chain
Supply chain costing (Activity Based Costing) Performance management Sales and Operations Planning Process Collaborative forecasting
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

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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
What are the activities outsourced?
Logistics, 60%
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What is your supply-demand model?

Engineer In this highly outsourced environment, the discipline to Make to order, stock, 10% of supply chain management has become complex 20% Warehousing, 40% yet critical to control costs and to reduce lead-times Manufacturing, 40% within a chain composed of many players: Fabs, Design, 20% tester /assemblers, distribution etc

Make to Order, 20%

Mixed of Make to Stock / Make to Order, 50%

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
How is your supply chain organization considered?

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We can see that the maturity level in this industry is Function oriented (LOGISTICS/PRODUCTION/PURCHASING) relatively high, especially regarding the collaboration aspect between supply chain partners. One of these Process oriented (PLAN/SOURCE/MAKE/DELIVER/RETURN/ENABLE) large scale initiatives Customers) Collaborative with End-to-End partners (Suppliers /was the RosettaNet project. Even thoughConsidered asthe expectations have not been most of a Profit center completely met, it shows the trend
Considered as a Cost center Demand driven Manufacturing driven
0% 20% 40% 60% 80% 100%

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
How is the level of knowledge of your supply chain organization?
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What is the frequency of the training for the supply chain staff?
Never

Mature with knowledge about advanced models such as SCOR and supply chain best pratices (S&OP, VMI, etc)

20% 30% 20%

10%

20%
Below 5 times a year Between 5 to 10 times a year

Average with basic knowledge about supply chain (operational fundamentals)

Low with ad-hoc knowledge on supply chain

50% 50%

Above 10 times a year

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%)
The 3 key components, ie. Investment, Innovation 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% and Information, are all critical but Information is Forecasting tool probably the most overlooked yet the most important S&OP tool Supplier management e-portal for collaboration and visibility along the supply chain
Performance measurement Transportation management Warehouse management e-invoicing CRM application SRM application Other

Which technology are you using to support your supply chain operations?

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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
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Perfect Order Fullfilment (%)

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

Order fullfilment cycle time (days)

BIC

Median

Laggard

Results of the study

Supply Chain Performance Benchmark [2/2]

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
Supply chain management cost (%revenue)]
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14% 12% 10% 8% 6% 4% 2% 0% BIC Median Laggard

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

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.
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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 (Suppliers 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

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

2011 Copyright iCognitive Pte. Ltd. All rights reserved

 2011 Copyright iCognitive Pte. Ltd. All rights reserved

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