You want it when? New tools for cycle-time reduction
11/01/2001
Jeff Donnelly, BlackHog Inc.
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For a chipmaker, the frustration is palpable and measurable: production lines sitting idle — costing millions in potential revenue — awaiting a special component or a new production tool. These unacceptable delays are exacerbated by the frustration of equipment suppliers, who simply can't get what they need any faster from their component suppliers. And the component supplier feels the burden and often receives blame for slowed manufacturing cycles, despite the fact that his visibility into a customer's need is limited or, at best, skewed by inconsistently communicated requirements. It's a continuous loop of supply chain angst.
Now integrated device manufacturers (IDMs), equipment producers, and their suppliers are working together in unprecedented ways, using powerful new tools, such as the Internet, to minimize patterns of broken commitments, poor responsiveness, and high anxiety.
At the heart is the reduction of manufacturing cycle time, which ultimately results in fab managers getting the tools they want, configured as they want them, when, and where they need them. In an industry with complex manufacturing challenges, it is estimated that even a 10% reduction in manufacturing cycle time by equipment suppliers can improve lead-times in deliveries to chipmakers by as much as 25%.
At the recent Value Chain Optimization Conference sponsored by Semiconductor Industry Suppliers International (SISA), Dave Anderson of International Sematech outlined results of that organization's cycle-time reduction impact survey. His top findings? At least five of the top ten equipment cycle-time issues — those having the greatest negative impact on cycle time — centered on buyer-supplier interactions.
In particular, the high number of specials or nonstandard customer requests was second only to inconsistent customer communication of demand in its impact on cycle time. Anderson estimates that, on average, a whopping 75% of all equipment shipments are custom products, and these "specials" are responsible for 25% of total average lead-time for equipment.
Yet even as equipment makers scramble to speed cycle times with a myriad of programs, at least one potential solution — the move to greater outsourcing of equipment subsystems — actually contributes to cycle time problems. Increasing dependence on suppliers for more critical parts serves to complicate communication issues exponentially.
Echoing the sentiments of IDMs worldwide, at the same SISA Conference, Joel Levinson of Intel urged equipment manufacturers to adopt e-business and e-manufacturing initiatives that would improve communication and responsiveness between all parties.
Unquestionably, broad e-solutions are the wave of the future, but it's a strategy not likely to be resolved overnight or by a single technology or architecture. Yet some aspects of the problem, namely improvement of supply chain communications and the controlled exchange of information, are being addressed in solutions that are readily available, easily implemented, and capable of providing immediate, measurable returns.
A number of large equipment manufacturers are embracing Internet-based technologies that work to standardize communication among multiple tiers of the supply chain, within and outside their own organizations, to improve predictability, minimize errors, and shorten delivery lead times.
Unlike e-commerce initiatives that enable chipmakers to order consumables or standard parts on-line, a new breed of supplier relationship management (SRM) solutions tackles difficult direct materials procurement problems between equipment manufacturers and their suppliers. With typical production tool orders, special requests commonly include customized automation, safety or gas distribution configurations; facilities, footprint, or layout requirements; or special peripheral components. These needs may be known at the time the order is placed, but more often, they evolve over the course of machine manufacture — a period of about three to six months, on average — resulting in numerous changes to purchase orders. Configuration or engineering changes are communicated through a process that is largely manual and informal, consisting of exchanges of faxes, phone calls, e-mails, personal meetings, or courier packages. Inherent in this process is the likelihood that someone will be left out, or at least, the last to know about the changes, resulting in significant delays, errors, or missed deadlines.
With new, collaborative applications, it is now easy to fill many of the gaps that exist within the equipment supplier between sales, marketing, procurement and manufacturing, and outside the enterprise with critical-component suppliers and their sub-contractors. Using a secure, interactive electronic workplace, where all information relevant to the order can be synthesized and communicated instantaneously and consistently across the supply chain, the lag in communication can be reduced from days to hours and the latest changes are clear to everyone. This results in a dramatic reduction in mistakes and improved execution against delivery commitments. For the IDM, it means more effective and predictable equipment installation and production-readiness planning.
Most equipment manufacturers recognize that reduced cycle time can be achieved by automating their supply chain management business processes. But there were roadblocks to the adoption of the technology in the form of security issues in the handling of sensitive customer documents, and concerns about automated systems that were so complex their employees wouldn't use them. Additionally, their information technology (IT) people, already saturated with an abundance of technologies to run the business enterprise, feared they would encounter difficulty and great expense in implementing yet another software application, particularly if it interfered with existing enterprise resource planning (ERP) or manufacturing requirements planning (MRP) systems.
Moreover, component suppliers, many of whom are small shops with limited resources and little technology capability, worried that supply chain automation would mean huge investments in equipment and cost them dearly in the time required to manage a complex computer application.
These concerns are being addressed, however, with highly sophisticated programming technologies embodied in new supplier relationship management tools. Residing on high-security servers either inside or outside the enterprise, the applications don't interfere with, but can easily integrate to equipment makers' existing in-house ERP or MRP systems, if desired. Designed to mirror the way procurement professionals normally work, these applications are easy to launch, requiring only Internet access, and simple to learn and use, thus streamlining, rather than complicating, the way buyers and suppliers interact.
This new capability can't address every issue that contributes to long equipment cycle times. However, it does help automate business processes that have been a major bottleneck in the supply chain — not by taking people out of the procurement process, but by giving them the tools to do the job more easily, efficiently, and cost-effectively.
Jeff Donnelly is CEO of BlackHog Inc., 932 Hamlin Court, Sunnyvale, CA 94089; ph 408/542-2900, e-mail [email protected].