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Supply Chain Management

second largest risk (Figure 1). Quality risks include functionality issues such as performance variances from published specifications. When a component specified in a design does not meet quality standards, the design cost and time-to-market again suffer the consequences. In response, the design team must re-spin all or significant parts of the design to incorporate reliable high-quality components. The third risk is cost. As seen in Figure 1, the third highest ranking risk, cost, was cited by 65%

programmes that better integrate the two teams. This could be as simple as cross function coaching to embedding designers within the supply chain team itself. When designers understand what makes a good component choice from a supply perspective, designs are naturally more successful in production.

Ideally designers should have near real-time access to component supply chain information and supply chain teams need early access to product BoMs. Both teams manage data specific to their

Figure 2: Electronic components prices from June 2011 to June 2012

of respondents. One driver for cost as a risk is the accelerating monthly commodity price volatility since 2006. The standard deviation of monthly price changes for a basket of commodities including gold and copper has risen to the 8 to 9% range from lows near 5% during the late 1990s. Another source, the online electronic parts database Octopart, published a chart of global electronic pricing changes for the period 1st June 2011 to 1st June 2012 (Figure 2). Over that 12 month period, overall component pricing ranged from approximately +0.3% in late summer 2011 to a low of -2.9% early in the fourth quarter of 2011, just weeks later. Prices then rebounded with an extremely sharp spike up and down from -1.5% up to +0.3% and just as quickly dropped in the spring of 2012. This chart sampled approximately 200,000 parts, which tends to average out sharp price increases or declines in individual components. It seems safe to conclude that specific individual components may have experienced much wider fluctuations during this period.

If designers lack access to price data during the actual design process, they will find it nearly impossible to adjust the design based on price data. This lack of exposure leaps up painfully as a cost blow-out at a later point and leads to a design re- spin.

The fourth risk is feature bloating, also known as

‘creeping elegance‘. This risk almost always results in costly misdirections in the design process. Without dynamic cost data, the initial design team may unwittingly specify a challenging part. With open access to dynamic supply chain data, engineering managers can intercept such design misdirections early in the design cycle and make more informed selections. In the process, they will save considerable design time and costs.

Time to production Engineering managers now recognise the necessity of establishing common ground between their design engineers and supply chain management. In most organisations, supply chain management resides in a finance or administration function. As a first step, some companies have instituted

own domain, the key is bridging them so that everyone is speaking the same language and working from the same source. From this, a part catalogue and common BoM dashboard can be built, allowing designers to see supplier details, their ranking in terms of preference and the cost of components. As supply chain teams add, edit and rank suppliers, define component stock levels, and source alternative part choices, designers see them and can make better informed design decisions.

Because all parties are working with the same dataset, supply chain teams can see a product BoM evolve, prepare logistics and production in advance ensuring a safe supply chain. Furthermore, product BoMs can include guidance from management about individual target component costs, fostering a more focussed approach to cost reductions for the design overall.


Real-time dynamic supply chain data mitigate and reduce the clash between the classic design parameters that always require trade-offs. With a clear view of the up-to-date and costed BoM, engineering managers can more rapidly balance form factor, performance requirements and time-to- market objectives with cost.

Real-time supply chain information reduces risks, cuts design iterations and accelerates time-to- market. It also identifies any supplier interruptions or delays quickly, reducing the number one risk identified by supply chain managers. With dynamic updates, quality issues such as a change in materials or reliability appear as soon as available. The same single-view page also delivers alerts about cost and maintains a running BoM of actual versus targeted costs. These data also forestall design misadventures due to feature bloating in early stages of the design. Most importantly, access to real-time BoM information empowers design teams to achieve time-to-market objectives confidently.

Altium |

Lawrence Romine is business development manager for Altium

Components in Electronics December 2013/January 2014 43

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