State of Supply Chain Semiconductor Industry Performance

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©2011CopyrightiCognitivePte.Ltd.Allrightsreserved
2010 State of Supply Chain
performance in Semiconductor
industry
Luc Kremers
Principal Supply Chain Consultant

iCognitive, an Expert in Supply Chain Management
2
CONSULTING BENCHMARKING
TRAINING TECHNOLOGY
RESEARCH IN
SUPPLY CHAIN

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
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

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

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
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%
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…”

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”

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…”

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… ”

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

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”

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 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 (%)

– 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
Supply Chain Performance Benchmark [2/2]

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

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

www.icognitive.com
Thank you
For more information please
contact us at
info@icognitive.com or
+65 6325 2810

State of Supply Chain Semiconductor Industry Performance

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