The Global Semiconductor Alliance recently published a paper co-written by Tensoft, one of our fabless semiconductor customers, and Amkor Technologies entitled Anatomy of a Successful Supply Chain Integration.  Since many of the semiconductor companies that I talk to on a regular basis have become habituated to living with and working around inadequate or nonexistent supply chain vendor integration, they sometimes have trouble envisioning the benefits that real integration can bring.  I often hear “We already get our WIP data from our vendors.”  Well, we can do a lot better than that!

When we’re talking about vendor integration, we mean automating the process of getting vendor data into your manufacturing/supply chain management (SCM) system and automatically updating production transactions.  Many companies do this manually for production completion transactions.  In addition to getting more data through supplier integration, true vendor integration delivers significant benefits to the Operations, Finance, Production Procurement and Customer Service teams, as well as faster data access for the entire company . . . all the way up to the executive level.

These benefits can be grouped into three key benefits: productivity, information velocity, and visibility:

PRODUCTIVITY

If you’re notified that you have a receipt or a production output transaction (something that says that inventory is changed or moved, in the sense of major production stage, not an in-process stage) or that you have to pay for something now, you’ll need to get that information into your SCM system because that data is critical to knowing the true state of your manufacturing process (where it is at major inventory points , whether it’s OK for accounting  to pay it, and when inventory value and ownership changes occur).  You can choose to manually enter that data, or you can choose to have that data streamed in, so that it can be reviewed, accepted and automatically entered into the SCM system.  Once you have enough significant transaction volume, the decision to automate this process is a simple business case that compares the cost of manual entry (in terms of both data entry time and also the time needed to re-interpret data) compared to the cost of adding a system that can automate this process.  The productivity enhancements that result from vendor integration offer benefits to both your company’s operations and finance departments.

INFORMATION VELOCITY

When information is entered manually from supply chain vendors, continual communication is needed to make things happen.  In this scenario, data moves slowly across your organization.   Alternatively, if you can depend on the supplier’s shop floor or manufacturing execution system to kick out a file that says “change – or a paypoint or receipt transaction -- has occurred” and you have a system like Tensoft FSM Vendor Bridges that can bring that data into your SCM/ERP system, you can simply log in and accept the transaction. The data then moves through the system much more quickly because your system is being triggered by the process itself rather than waiting for someone to manually enter the required data.   Increased information velocity helps the entire company, right up to the executive level. 

VISIBILITY

The basics for SCM inventory change requires production change or receipt transactions previously described.  These can be done manually in a spreadsheet, by manual review of invoices or other methods, but at some point, you need real transactions in your SCM system.  In-process data is not required for the SCM system to move forward, but if you’re a member of the production team who is either monitoring manufacturing activity internally – either from a shop floor system or externally form an outside supplier – and you’re also responsible for getting materials to your customers on time, how then do you know that a work center is going to deliver on time?  The WIP or in-process updates pushed out by suppliers tell you the production out-date, so that you can more readily anticipate answers like: Are things going to slip? What is the impact on my plan? When do I need to call the vendor or more directly engage to resolve issues?   Integration gives you insight into the process to take corrective action, which can greatly benefit the quality of your company’s customer service.  This provides a strong benefit for your operations, production procurement and customer service teams. 

With vendor integration of process data, you can answer key questions such as: When is the vendor promising things? Have they changed their promise date, and when?  How often do they change it?  Do they hit it on-time when they ship?  This is information that would be very difficult to collect manually, and with it, you now have hard data that you can use to talk to your vendors to improve their performance and execution. 

So, visibility into this process helps both in terms of monitoring and providing access to data that you can analyze and use for vendor performance, cycle time and yield, vendor change in terms of how long processes are taking, etc.  In addition, you’ll also have the ability to collect attribute or production information about the product – a very challenging and error-prone activity if done manually.  Many Tensoft FSM customers use the FSM vendor integration service to collect ten or more production statistics from each vendor and include that data in their product genealogy -- a vital facility that would be nearly impossible to do manually. 

As you can see in detail in the GSA Forum article that I mentioned earlier, the benefits of total supply chain integration are innumerable.  If your SCM is integrated with your outsourced vendors, as it is for Tensoft FSM customers using FSM Vendor Bridges, this is an entirely automated, accurate and pain-free process.

 I'm really pleased to say that this year's user conference got great feedback from attendees!  That's always gratifying to hear, of course, but especially so when our perception matches the response.  Speaking for myself, I have to say that I was impressed with the level of participation from customers, some of whom are pretty new users.  And, this was another year for great guest speakers as well.

The conference kicked off with a brief opening session, followed by "What's New in Tensoft FSM?"  After that, the break-out sessions began.  This year we had such diverse topics as Production Operations Review and Updates, How to Survive Your Next Audit & Spend Less Time with your Auditors, An Order to Cash Process Tune-up, Getting the Most Out of Dynamics GP, Understanding Inventory Data, and Product Configuration.  This year we added more two hour Hands-on Training Labs, such as the popular Report Writing and Planning labs.  

We got to see some really impressive customer presentations during Innovative Extensions and Uses for Tensoft FSM, and awarded a Kindle Fire to the presenter with the most votes for their "Best Innovative Extension and Use."  The guest presenters were outstanding this year too.  Supply chain expert Mel Nelson's presentaation was Best Practices in Sales and Operations Management, a discussion on the challenges of Sales & Operations Planning (S&OP) and strategies for overcoming these.  Amkor's Trisha Giacopazzi, Amalfi Semiconductor's Heather Salonga and Tensoft's William White joined forces for a Vendor Integration Case Study, discussing the goals unique to each participant in the integration process, along with pointers on what makes for a successful integration process.  

Finally, we wrapped up the last day with our traditional closing session on product direction.  As usual, there was lively discussion around the product wish list, and plenty of great, actionable suggestions.  And, again as usual, next year at the opening session of Momentum 2013, we'll demonstrate the enhancements that were developed from Momentum 2012's closing session - hope to see you there! 

 It's not that traditional ERP Inventory systems don't work for everyone - they just don't work well for fabless semiconductor operations. Trying to make them fit is much like trying to force your left foot into your right shoe - you may be able to jam it in, but it won't be comfortable or highly functional.

So, what's missing in traditional ERP inventory systems that fabless semiconductor companies really need to have in their systems?  Here's a short list:

1) Genealogy (Process History Tracking) - Traditional ERP Inventory functionality simply does not provide genealogy tracking. Fabless semiconductor operations typically need to track their entire process history, mapping every step the product has been through, including re-work. For each production step you need to know the process completed, the vendor used, the procurement and production information, and all of the key attributes collected. Once you have this genealogy attached to a product, fabless operations typically need complete forward and backward tracking by genealogy from the production process to the customer and back (returns).

2) Specific Product Identification (Lot Number/Date Code) - Most traditional ERP systems only offer Lot Tracking or Serialization - with one tracking number associated with the part.  Most fabless companies mark their product with more than one key tracking attribute - often the Fab Lot Number and Date Code. A common additional complexity is lot splits and lot merges - which makes it more important to accurately collect the individual tracking attributes for your product.

3) Product Attributes - Beyond the product identification attributes, there is often other information that fabless companies would like to collect during the production process. Examples include the test program used, the test board, the mask set, an internal lot number, and the assembly lot number. Traditional ERP Inventory systems typically do not let you collect unlimited attributes about your product during the production process.

4) Process Cost History - Traditional ERP Inventory systems offer no solution for maintaining a process cost history. They also do not support semiconductor product costing and inventory earned value requirements.  Semiconductor costing has complexities and unique requirements unlike any other product. Fabless operations typically need to maintain complete cost history by step in the production process. They need to understand standard and actual cost and yield by step in the production process, and detailed cost variances by step.

5) Reclamation Handling - Traditional ERP Inventory systems lack the ability to allow previously discarded materials to be brought back into the system.  Fabless semiconductor operations often need a system for reclamation of previous yield loss (bonus). They need to have the ability to bring back previously discarded materials, including the full product genealogy, and allow them to be put back into inventory with appropriate costs.

6) Location Tracking - Traditional ERP Inventory systems do not distinguish inventory by company.  Fabless Semiconductor operations typically need to track locations by vendor. Ideally, they should be able to track unlimited locations for each vendor. For example, if your fabs, test houses and packaging house have multiple locations, you should be able to track materials at each location.

7) Integration with Operations Management - Traditional ERP Inventory systems are not designed to integrate with semiconductor WIP tracking or WIP costing.  For fabless semiconductor operations, ERP Inventory integration with WIP tracking and WIP costing is a bare minimum for an effective business system.

Tensoft's Fabless Semiconductor Management (FSM) delivers an affordable, flexible alternative to traditional ERP Inventory systems. Tensoft FSM provides a sophisticated, web-based solution to all of problem areas described above, as well as extensive semiconductor accounting, sales, production, supply chain, and manufacturing execution functionality. Tensoft FSM can also integrate with your manufacturing subcontactors.

Talk to us before you begin a lengthy and expensive ERP implementation, or before you resign yourself to another year of inefficient, error-prone systems. For a reasonable cost today, you can make a long-term investment that will scale as you grow.

 We're gearing up for our 7th annual Tensoft Fabless Semiconductor Management (FSM) User Conference, which will be held at a new local venue next month.  For those of our Tensoft FSM customers who still need justification to attend, here's my Top Ten List of reasons to attend!

TOP TEN REASONS TO ATTEND MOMENTUM 2012:   

10) Hands-on product training on both days.

9) Learn what's new in Tensoft FSM and related systems, including all the enhancements that have been added as a result of your suggestions during Momentum 2011. 

8) Step back from the daily grind and discover new ways to approach your current processes.

7) Momentum 2012 is where your industry peers will be on May 21-22!

6) Influence the future direction of Tensoft products.  (Hint: So that - next year - you can take credit for those great enhancements at Momentum 2013).

5) Learn tips and tricks from Tensoft product experts - both those who work at Tensoft, and those who use Tensoft FSM every day.

4) Meet the Tensoft support and management teams, and put faces to those names.

3) Special guest appearances by Tensoft FSM's Technical Lead and Tensoft FSM's Vendor Integrations Lead.

2) The best line-up ever of informative, interactive sessions - all based on your suggestions from past conferences.

1) A chance to soak up all of this accelerated learning, get answers to all of your questions, brainstorm new ideas with the user community and Tensoft staff, and network with industry colleagues during breakfast, breaks, lunch and the Monday night reception - what a deal!

 It's always great to see local companies celebrate milestones, and even better you have some tie to them.  Campbell-based fabless semiconductor company and Tensoft customer iWatt recently announced shipment of one billion IC units to customers - definitely a huge milestone.  In addition, they also recently christened their new offices in Campbell CA with festivities that included lion dancers, shown in the photo here.  Not saying that there's any cause and effect between the lion dance and shipping a billion units, but what could it hurt?

 At times the question arises of how to best manage inventory cost.  In manufacturing operations, the role of finance is usually a partnership with operations related to inventory – cost reduction and management, inventory valuation, and appropriate inventory levels to maintain.  The partnership works best where each team’s feedback matches responsibility in the partnership.

At Tensoft, we are strong believers in the benefits of standard costing (compared to actual costing).  Standard cost is commonly associated with a swift inventory value that streamlines transaction processing and at times is viewed as ignoring the reality of inventory value as it changes.  However, we believe this is the result of a lower level of engagement that is required in any organization actively trying to manage inventory value.

When manufacturing and finance partner over inventory costing (and cost reduction) using a standard cost model, you can think of standard cost as a plan.  You are setting goals for what inventory cost should be based on the inputs and manufacturing requirements.  Variances identify reasons for moving away from the plan – such as yield hits, productivity (units absorbed for throughput), PPV variances, rework variances, and so on.  Correctly identifying and categorizing the variances allows manufacturing operations and finance to review why the goals were not met, and what the specific variances tell you about not meeting the goals.  Approached in this way, standard costing plus variance analysis actually requires the most active engagement in cost modeling and results management – setting a plan and measuring performance against the plan. 

Years ago I met with the VP of Operations of a high volume electronics component company who told me their inventory cost reduction committee met weekly – a finance and operations partnership.  Their stated goal was to reduce the cost of inventory value by $.01 each week, which achieved a $0.52 cost per unit reduction annually.  For them this amounted to millions of dollars in additional margin each year.  Results like that aren't possible unless you have an active engagement through standards (plan) and measurement (partnership review).

 One of the highlights of this year's MOMENTUM 2011 was guest presenter Charlotte Diener's session entitled "Planning Rhythm."  Diener has created an excellent Slideshare version of this that's available now to anyone who's interested.  You can link to it here, or search for "The Planning Rhythm: Managing Risk Through Marching to the Same Drum" on Slideshare. 

This brief description of Diener's presentation from the conference agenda applies to the revised slides on Slideshare as well: "Just as world-class manufacturing operates to the drum beat of critical equipment, the excellent supply chain operates to a regular rhythm of processes. The use of a process rhythm is critical to the performance of supply chain planning, irrespective of software. This presentation will explore the critical processes necessary in semiconductor planning, their frequency and duration."

Ms. Diener is an independent consultant with extensive supply chain, turn-around, M&A integration and international experience. Ms. Diener has completed several global multi-million dollar M&A integration projects and the re-engineering of several corporate processes, including a complete re-work of both the supply chains and new product development processes at ON Semiconductor.  Her contact information is included on the slides. 

 This year at Tensoft FSM's annual user conference, we had the privilege of hearing from several really terrific guest presenters and panelists.  Semiconductor supply chain consultant Charlotte Diener kicked things off on the first day with her presentation on "Planning Rhythm."  Here's a brief description of what she covered: "Just as world-class manufacturing operates to the drum beat of critical equipment, the excellent supply chain operates to a regular rhythm of processes.  The use of a process rhythm is critical to the performance of supply chain planning, irrespective of software."  This presentation explored the critical processes necessary in semiconductor planning, their frequency and duration. A great session and a very warm response from MOMENTUM 2011 attendees! 

On Day 2, Ron Jones of the N-Able Group provided some fascinating - and very sobering - insight into "The Tragedy in Japan and the Semiconductor Supply Chain."  He covered how the immediate and subsequent events of the recent earthquake and tsunami in Japan are impacting products and markets around the world, and discussed both possible recovery scenarios and implications to supply chain management in the future.  Ron has been doing a great job covering this topic in his newsletter too, so be sure to sign up for that on www.n-ablegroup.com if you're interested.

Following that, Ron moderated a panel discussion on supplier integration.  The conference agenda described this session as follows: "Supply chain execution is about the fabless company managing the process.  It is also about partnering with your suppliers, exchanging data across your production flow, and communicating the right information to all parties on a timely basis.  Our supplier panel brings together leading industry suppliers (UMC, AMKOR) with fabless companies and an electronics supply chain experts to discuss relevant and current topics important to the semiconductor Industry.  Panelist presentations and a moderated Q&A session provide interesting and helpful insights for all participants."  The guest panelists were Amkor's Trisha Giacopazzi, UMC's K.T.Goh, Dean Strausl from V-Case (and the former Executive Director of the Electronics Supply Chain Association), and the VP of Operations at iWatt, Alex Sinar.  Apologies to our attendees that we didn't plan more time for this distinguished group - this session could easily have stretched to half a day or more!

One small world observation during the conference this year: unbeknownst to us, 2 of the guest presenters had worked together some years ago, and had a chance to catch up over lunch.  Great to see such a strong degree of collegiality among both guest presenters and conference attendees!

Outsourcing some or all of your manufacturing is old news for technology companies. The focus on core competencies, the need to scale quickly while managing cash, and the availability of high quality suppliers have all helped to drive this trend. At the same time technology companies retain the ultimate responsibility for production and on-time delivery to customers. Supply Chain Management (SCM) systems help tech companies manage their supply and demand, and integrating and consolidating information from the distributed suppliers is often an important part of this process.

Advancements have been made in SCM systems and technology support data integration – yet the reality of SCM data integration eludes many. Technical Standards Committees, including RosettaNet, have tried to improve this process by developing data dictionaries and transfer protocols. Recently I’ve partnered with semiconductor industry veteran Ron Jones ( n-Able Group CEO) on a white paper that looks at data integration in the fabless semiconductor industry. If you’d like to review our insights, this paper is now available by clicking here.

We’ve recently posted a great new customer case study to the Tensoft website that beautifully illustrates the benefits of cloud deployment. Focusing on our customer, Syndiant, the four-page case study describes how this technology industry start-up has been able to leverage Tensoft’s industry-specific solutions in the cloud to quickly gain better visibility, control, and efficiency.  .

 Syndiant’s V.P. of Operations, Tupper Patnode, provided much of the commentary in the document, discussing in detail how Tensoft FSM and Microsoft Dynamics GP, running on a cloud platform provided by Tensoft partner SaaSplaza, enabled the company to comfortably plan and scale their growth from a $1 million company to $20 and up to a $60 million enterprise. Take a look at the Syndiant case study and tell us what you think by responding to this blog.

And, if you’re planning to attend Microsoft Dynamics Convergence in Atlanta on April 10-13, discuss the particulars of the Syndiant project or your own future project with our own Michael Chadwick and Sonam Thandi in the SaaSplaza booth #1316. They will only be at the booth part of the time, so contact me ASAP if you’d like to arrange a time to meet.

See you in the Cloud!