Supply Chain Planning Blog

Fabless Semiconductor Planning: Between A-Rock-And-A-Hard-Place!

Posted by kameron hadavi on Tue, Oct 12, 2010
Fabless Semiconductor PlanningMost fabless semiconductor companies are stuck between a rock-and-a-hard-place.  On one end, they have big customers demanding what they want, when they want it; and on the other end, they have big suppliers manufacturing their products—some 16 time zones away.    Synchronizing and managing capacities and deliveries through a complex supply chain like this cannot be easy.  Compounding the complexity is the short life-cycle of such products and the long manufacturing lead-times through outsourced Fabs.  With every new product, you basically have to revamp a good part of your supply chain, quickly.    The common theme to all of these challenges is time and uncertainty

Now let’s break the time and uncertainty factors down to their components.  When it comes to manufacturing anything, there is always a Planning cycle-time, and a Manufacturing cycle-time.  The latter, is the pure production time it takes to manufacture a product.  Fabless companies don’t control the manufacturing lead-time, since all of their production is outsourced.  However, they do have the opportunity to manage the suppliers’ capacity that is committed to them—which becomes part of the Planning cycle-time.  They also have to worry about the uncertainty of what they will order with the amount of capacity that they have been promised.  This makes the Planning cycle-time, and accuracy of the plan, twice as important to a fabless enterprise.   Planning cycle-time, is the amount of time a company needs to plan, react, and/or rollout a new plan based on market demand, inventory positions, and supplier capacity commitments.  Its reduction translates into less uncertainty and increased accuracy.  To that end, reducing planning cycle-times is a colossal competitive factor in this market.  Imagine cutting weeks out of your planning lead-times, which would directly impact your customer service, market share, and competitive positioning—amongst other things.  

How can you battle time by achieving shorter lead-times?  Or in terms of fabless, how can you reduce your Planning cycle times and increase plan accuracy?  Before I answer that, let me ask you a question, how can a manufacturer produce goods faster?  The simple answer is: better technology, and faster machines.  The same thing goes for planning systems.  If you want to fundamentally do it faster then you will need a new technology that can help you plan faster, collaborate more, and give you more visibility, thereby enabling better plans.  There are many processes that need to have faster planning times such as demand planning, operations planning, inventory optimization, and of course supply planning.  In picking the right system for your enterprise make sure you consider all these processes and how well the system adheres to your supply chain.   After all what’s the use of faster delivery times, if your inventories and cost is going through the roof.   

Adexa is one of the providers of such technologies and systems, with a great deal of focus on the fabless industry.   Below, one of our fabless customers talks about how they are using our systems to deal with fabless industry's tough challenges.   Also, For more information on this topic download: Overcoming The Shortcomings Of Fabless Planning Systems ePaper.

Kameron HadaviAbout the Author:  Kameron Hadavi is the Vice President of Marketing & Alliances at Adexa, for more information about him please click here.

Topics: Supply Chain Planning, Demand Planning, Inventory Planning, Fabless, Operations Planning, Cycle time, Semiconductor

Run Your Supply Chain Like You Are Selling Diamonds!

Posted by Cyrus Hadavi on Tue, Mar 02, 2010

Demand Planning with AttributesI want to encourage you to plan and sell your products like Diamonds!

Allow me to elaborate. Diamonds are sold based on attributes, not product-ID (i.e. SKU-number). Nobody goes to a jeweler asking for a piece of rock, spends lots of money, and walks out of the store with a smile. Instead they ask for a diamond based on the 4C's (Carat, Color, Clarity, and Cut). So the bigger, brighter, cleaner and nicer cuts get priced higher and higher. As logical as this may seem, it amazes me to see how many manufacturers still sell their products like a commodity--giving away valuable things for free. And the root cause is usually the fact that their supply chain planning systems are not capable of handling attributes, in the first place. We see many manufacturers that don't utilize attributes when it comes to planning their supply chain and inventories, and yet work with a mind-boggling number of SKU's. Most of them also complain about high inventory costs, and poor customer service, too. Let's see why that is the case, and how attributes can apply to your products and supply chain-unless you manufacturer the first generation Model-T cars.

The fact is that just about everything has attributes, people do (e.g. kind, tall, smart), Products do (e.g. red, non-combustible, fast), machines do (e.g. speed, efficiency, precision), customers do (e.g. VIP, International, new), materials do (e.g. high surface tension, low grade, hazardous), countries do (e.g. tariffs, sanctioned, no-child labor), Logistics do (e.g. Rail only, Air Express, hazardous route), etc. etc. Adding attributes to all of these objects is not too hard; just add new fields to your data base.

What is important is the ability to plan with these attributes for your entire supply chain, beginning with demand planning, to operations and inventory planning. The ability to have an algebra by which attributes are used and planned with is critical in supply chain planning systems. Imagine having an inventory of sweaters without knowing how many of them are Large, Med, or Small, and how many of them are Red, Yellow, or Green. Clearly you could not make efficient use of this inventory, or forecast and build the right products. As mentioned, there are a lot more attributes than just style, size and color. The following is a typical scenario for a top-retailer:

"A NEW customer is interested in a NON-COMBUSTIBLE product made using a HIGH PRECISION machine, from SOUTHEAST ASIA region. Also, it can not be built in any country with CHILD LABOR, and can only be transported using RAIL or SEA."

Can you imagine having hundreds of customers, with thousands of products, and then trying to forecast and commit with so many different attributes involved. Don't forget, raw material and inventories also need to be planned with just as many attributes. In its full sense, Attribute-Based planning means the ability to take all the relevant product parameters into account when forecasting, planning, sourcing, selecting, pricing, promoting, differentiating, allocating, building, storing, committing, transporting, pegging and more. Without a planning system that considers the attributes, it would be impossible to do the math, plan the supply chain, and commit orders accurately. In fact, lack of attributes in the planning process causes some level of "commoditization," which reflects a company's inability to correctly distinguish its products from the others. In turn, customer requests are undermined, and products' costs and prices are not represented accurately. In most cases, this hurts the profitability of the enterprise in the long run, even if it has a monopoly over the market.

There are a lot more benefits to Attribute-Based planning. I highly recommend reading the more comprehensive ePaper that we just published on this topic: Attribute-Based Planning: How to Avoid Commoditization. Also, Feel free to comment on how you use attributes in your supply chain, or if you are looking for any ideas on how to make better use of attributes specific to your environment.

 

Dr. Cyrus HadaviDr. K. Cyrus Hadavi is the president and CEO of Adexa, for more information about the author please click here

 

 

For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.

 

Topics: Supply Chain Planning, Demand Planning, Inventory Planning, Attribute Based Planning, Manufacturing Planning, Operations Planning, Differentiate

What is a Profit-Driven Supply Chain?

Posted by Cyrus Hadavi on Tue, Oct 27, 2009
Profit Driven Supply ChainsSupply chain decisions impact internal operations, customers, suppliers and, at the end, revenue levels and profits.  The complexities of all the interactions in the supply chain makes it very difficult to understand the true impact of your decisions even if the decisions made are consistent with your previous ones. How would you know what the consequences are under today's circumstances? How would you measure the impact in different areas?  

A Supply chain is really one big inter-linking Jigsaw puzzle.  Let's say demand is going through the roof for red iWidgets, then should you build more of them at the expense of green iWidgets? If so, which key customers are now going to receive their green ones late, as a result?  How much effort should you make to avoid the lateness?  Should you reallocate your inventories going to the distributors? Or should you add a shift at the plant to increase production capacity? If so, can you count on your current raw-material inventories at the production sites, or can the suppliers get the components to you fast enough? And so on.  I am sure you know what I am talking about here.  Operational managers have to make tough decisions like these on daily basis to preserve the flow of the supply chain.  But can they make the right decisions consistently, time after time, especially when it come to what is best for the Company's bottom-line?  Usually these complex supply chain decisions are made based on which customer is screaming the loudest, the experience of an "old timer," or sometimes a person who is only worried about his or her own bottom-line.  But can you blame them?  Since in many cases, their planning capabilities are based on disparate spreadsheets and their visibility is limited to separate organizations with different incentives. Sales people want to increase customer service and have abundant Just-in-Case inventory, Production people want to decrease inventory and reduce cost, but the financial Side of the business wants to increase profit and decrease working capital. How do we resolve these conflicts and make a decision which is right for the Company?

Supply chain planning technologies have evolved a great deal in the past decade.  The right planning system can now model and define competing objectives, such as higher efficiency vs. higher customer service, and calculate the impact of specific decisions in terms of cost, revenue, and profits.   In that way, every major supply chain decision becomes "optimized" for all the interrelated pieces that it touches, rather than just one.  In Adexa, we call this a Profit-Driven Supply Chain©.  In PDSC's, you have the visibility to see the problem, capability to analyze your decision's impact, and then take the best course of action, knowing for certain how it affects the entire picture.  Keep in mind, the "best" course of action may not always be the one with the highest short-term profit, but at least you will know how your profit levels were affected by keeping your best customers happy.    

Profit Driven Supply Chain is more than a concept! It's defining the future of planning technology, since in most progressive enterprises, the finance people are becoming more and more involved with sales and operational decisions, rather than dealing with its aftermath.  For the past two years Adexa has focused its direction on developing PSDC-based planning solutions to marry critical supply chain processes such as Demand Planning, Operational Planning, and Inventory Planning, with full financial visibility.  So we have a number of resources available to you if you would like to learn more about this topic.   I highly recommend to start by reading an important S&OP benchmark study of 214 companies, by Aberdeen Group, entitled Sales and Operation Planning: Integrate with Finance and Improve Revenue.  We also have a great paper entitled: Demand Planning for Profit Driven Supply Chains.  Enjoy the reading, and feel free to comment on this blog with any questions, as I will personally answer you back.  

Cyrus HadaviDr. K. Cyrus Hadavi is the president and CEO of Adexa, for more information about the author please click here.

Topics: Supply Chain, Demand Planning, Inventory Planning, Operations Planning, S&OP