Mismatches in demand forecasting are putting semiconductor companies at risk for poor delivery performance, poor capital efficiency, excess inventory and increased costs, warns PricewaterhouseCoopers Management Consulting Services in a survey released December 2000. The Millennium Semiconductor Best Practices Survey in Supply Chain Management reveals that the lack of visibility across the industry's supply chain is perpetuating supply and demand mismatches.
The survey addresses supply chain issues impacting on the semiconductor and explores how the industry manages the flow of goods, services and information across the value web, including transactions with suppliers and customers. It also takes a look at the technology solutions and best practices being deployed throughout the semiconductor industry.
Survey participants include top executives from the world's leading multinational semiconductor companies. 20% of the participating companies are fabless, 20% are foundries and 60% are Integrated Device Manufacturers (IDM). All product segments of the industry are represented: microprocessor revenue, standard cell revenue, gate array revenue, SRAM and DRAM revenue.
The semiconductor industry is primed for a 'glass pipeline" where information sharing is more visible.
According to Forrester Research, when 50 Fortune 1000 companies were asked, "What information are you sharing today with your supply chain partners? What information will you share in 2001?" 76% of respondents said that they will share inventory and capacity information with their supply chain partners in 2001, up from 50% in 1998. The sharing of demand history and forecasts also ranked highly: 72% of those surveyed said that they would share this information with partners in 2001, compared with 30% in 1998. This appears to have more of an impact on IDMs and foundries.
While this receptivity to share information is promising, there are other issues affecting the semiconductor industry that need attention, the survey found. Other key findings include:
* Business-to-Business connectivity at various levels is increasingly critical: According to the survey, there is a growing interest in process and data standards, including RosettaNet, and an increased use of new process and data connectivity models such as trading and technology hubs. Additionally, information updates within and between businesses will become faster and occur more frequently, and the importance of linking connectivity between an organisation's external constituents to well-adapted internal processes and 'four walls' internal connectivity will increase, resulting in new 'rules of engagement' for systems implementations within and across the supply chain. Investments in connectivity infrastructure, coordinated with all players in the value chain (including competitors), will be a prerequisite for any successful semiconductor company.
* Disaggregation of the value web is creating more interaction levels and players: Disaggregation can dramatically affect strategic positioning within the value web, such as competitive strategy and strategic differentiation. The trend to focus on core competency will continue at a rapid pace with traditional companies giving way to brand-owning companies that are supported by a web of service providers as part of a value-added community. The survey highlights that companies should perform an honest assessment of their core competencies and their degree of 'disaggregation.' Should they outsource traditional functions, or should other functions be brought back internally for strategic reasons?
* Globalisation and scale are increasing the need for global coordination and integrated planning: Globalisation affects everyone - from the pure play Internet Protocol Supplier, to the IDMs, to the foundries. Establishing a single point of rationalisation between supply and demand and a single point of information dissemination on order status is critical for efficient order fulfilment. Consolidation of enterprise planning to provide global visibility and analyses while maintaining regional and divisional focus is essential. Integrating ERP and advanced planning systems ensures a 'single enterprise' view of the business.
* New and evolving semiconductor applications are driving the need for shorter design cycles, streamlined product development: A major shift is underway to improve the speed to market for new products through Intellectual Property re-use. This, combined with the need to collaboratively design products using web-based technologies is stretching the existing process and tool infrastructure for product development to its limits. This trend will accelerate over the next two years.
As companies rapidly embrace collaborative design techniques and enable transactions across the Internet, robust processes must be developed both within and across enterprises to enable seamless and timely exchange of information, the survey finds. Companies continue to struggle with internal 'edge-to-edge' connectivity issues making external connectivity more challenging. The survey also highlights the increased emphasis on internal processes and automation of these processes. These findings will be key factors for companies moving forward in 2001.
For a complete copy of the survey see www.pwcglobal.com/semisurvey, or contact Wilhelm Krige, PricewaterhouseCoopers, (011) 797 4000, [email protected]
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