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Supply Chain Management Risk factors


In many organisations, the prototype design team operates as a separate function to their production counterparts


Lawrence Romine explains how dynamic supply chain visibility can cut re-spins


E


very electronic design project makes compromises between four competing parameters – form factor,


performance requirements, delivery time and cost. Supply chain information impacts each of these parameters.


Many organisations manage their supply chain externally to the design team and reside in product management or procurement functions. Other companies require their design teams to flesh out the bill of materials (BoM) at the beginning of the design process. The latter approach focuses on the costly components that heavily influence functionality. In either of these conventional design processes (or their variants), limited or non-existent supply chain visibility by the design team poses a problem. In almost all current design processes, the cost parameter remains a static element. Given that the lead time on components varies as a function of global, industry or other market conditions, static cost data impose a number of risks. By making real-time supply chain data visible to the design team, they can reduce or eliminate expensive downstream design changes and re-spins. But first, let’s detail the consequences of ignoring those risks of limited design team access to supply chain data.


Four major risks


The first risk is delayed or disrupted supply. In a 2012 IHS survey, as shown in Figure 1,


42 December 2013/January 2014


more than 70% of respondents cited delayed or disrupted supplies as the number one risk.


In many organisations, the prototype design team operates as a separate function to their production counterparts. In such an organisation, the prototype team focuses on developing a design that fits form and function, free from the constraints of cost. In this design flow, the production team receives the prototype design and, in almost all cases, completely re-spins the design to reduce the costs. Their objectives: optimise the BoM, simplify supply chain requirements and meet design-for-manufacturing guidelines. In this type of organisation,


prototype and production design teams may well be located in different offices or even on a different continent. If outsourcing some of the design process, production design may even be located in a different company. Today, managers are coming to realise the difficulty of integrating such a design process. Until recently, senior management usually calculated that the additional design time and labour costs were offset by the larger savings realised during production. The previously described design process has come under


Components in Electronics


increasing scrutiny due to the raw cost of making design changes after production receives the design. Additionally, the extra design cycle delays time-to-market, imposing a potentially lethal opportunity cost. Combined, the cost of retaining this process has become prohibitive. Careful tracking of out-of-budget design costs often points the finger at a supply chain issue. In most cases, supply chain data are static elements in the process. Static access will almost certainly fail to identify component lead times accurately for one or more components. Even if lead times were reported, the


process still falls down due to the single, static point of access during the design process. An unexpected delay or disruption in supply availability will almost certainly arise, but remain unrecognised. This situation always imposes tremendous costs on the project. The team must either


re-spin the design using alternative components or wait for part availability. In either case, the lack of supply chain information penalises the engineering manager in the form of additional re-spin costs and missed time-to-market objectives. Closely related, supply disruptions due


to regional or global impacts may disrupt supplies, forcing a re-spin. During the Great Recession, a number of component vendors disappeared from the industry due to merger or bankruptcy. Such disruptions may also be caused by severe weather, environmental impacts or other causes. Recent examples include Superstorm Sandy, Hurricane Katrina, the Fukushima disaster in Japan and the major tsunami affecting south-east Asia.


The second risk is component quality. Just under 70% of respondents to the same survey reported quality as the


Figure 1: The top three risks were identified in an IHS and Supply & Demand Chain Executive Magazine survey in 2012


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