In the “old days”, 10-15 years ago, cost was the number one motivator for outsourcing a variety of business operations. Cost may very well be on the top 10 list of reasons to outsource today but more and more companies have discovered other benefits for outsourcing their manufacturing and other business operations. Here are a few of the other benefits:
1. Access to other technologies
2. Reduced in-house capital equipment expenditures
3. Allowing corporate to focus on developing/marketing new products rather than fixing manufacturing issues
just to name a few.
Cost is not the only reason we outsource today, for sure. Companies have found the benefits to increased profitability not only lies in the immediate returns that were initially gained in outsourcing but using outsourcing allowed them to focus and develop aggressively to hit their markets harder with new products while essentially relying on other companies to do their part of the process which supports the bigger strategic picture.
Typical functions outsourced have been IT, HR, design engineering, recruiting and so on. It’s time for companies who outsource their manufacturing to realized more benefits can be had by outsourcing their subcontractor governance functions as well. To do this successfully you need to find people that can quickly align and understand your corporate culture, someone on the ground where your manufacturing is and people who have a demonstrated record of accomplishment in operational improvements.
3/23/2010
Why would any COMPANY consider outsourcing their subcontractor management?
If you are a Startup semiconductor company, Fabless semiconductor company, or a small to midsized IDM and answer yes to any of the following:
1. if you are a part time subcontractor manager
2. you want to improve your manufacturing performance to approach/exceed world class bench marks
3. you need to get new and older products to market without delay and on time
4. you don’t have the time to look at alternative sources for better unit pricing or new packages
5. you don’t have subcontract manufacturing expertise currently on your staff
6. you want to augment your existing subcontractor management staff expertise with additional resources
7. you want more time to focus on important projects/functions in corporate
8. you want to know hour by hour accounts of special projects in the factory
9. you don’t want to hassle with relationships that need to be built on in order to get what you need from subcontractors in crunch times
10. you are paying more than $100k a year managing your subcontractors for visits, travel expense, salaries, etc.
you should consider alternatives to how you manage your subcontractors, research http://www.semiconoutsourcemgmtco.com/ and evaluate whether you can give your stakeholders more value for their money.
1. if you are a part time subcontractor manager
2. you want to improve your manufacturing performance to approach/exceed world class bench marks
3. you need to get new and older products to market without delay and on time
4. you don’t have the time to look at alternative sources for better unit pricing or new packages
5. you don’t have subcontract manufacturing expertise currently on your staff
6. you want to augment your existing subcontractor management staff expertise with additional resources
7. you want more time to focus on important projects/functions in corporate
8. you want to know hour by hour accounts of special projects in the factory
9. you don’t want to hassle with relationships that need to be built on in order to get what you need from subcontractors in crunch times
10. you are paying more than $100k a year managing your subcontractors for visits, travel expense, salaries, etc.
you should consider alternatives to how you manage your subcontractors, research http://www.semiconoutsourcemgmtco.com/ and evaluate whether you can give your stakeholders more value for their money.
2/01/2010
What is the secret to semiconductor back end assembly cycle time?
All we care about is that our cycle time (CT) is predictable for 100% of our lots so we can accurately quote delivery times to our customers. If we are concerned about how long our lots will take to complete, we want to look at leading edge indicators to avoid delays.
Assuming we understand what our Theoretical CT is and we know that we are not within 1.5 or 2x that number; here is a tip for you.
We want to look at 2 data points for our CT, Static (SCT) and Dynamic (DCT).
SCT gives us the absolute time it takes to process a lot through any assembly line and can be looked at in individual process steps. We know manufacturing has issues on a daily basis that affects our CT such as; machine stops/breakages, non-conforming material (MRB's), lost lots, etc. All these stoppages are included in the total SCT.
DCT tells us how fast lots can move through an assembly line when all things are normal. Dynamic CT is a calculation considering line WIP and machine throughput. This is in essence line speed. The calculation is a leading indicator of what your CT will be as opposed to Static, which is a trailing data point.
DCT is my first line of defense to avoid being late on customer deliveries. Monitoring my DCT, I can see the problems coming down the line and probably do something quickly to avoid having late lots. Looking at SCT alone will merely tell me history and offers no way to change the outcome.
Depending on how fast we fix relative issues on the line we would expect that DCT and SCT would intersect at some point in time, once issues on the floor are resolved and the line normalizes.
To me, it is as simple as breaking the problems down into smaller issues that can be accurately categorized and fixed during the processing, not after the lot is processed. This is real time correction to problems in the line and I use to DCT to alert me. If I see the DCT increasing on a daily monitor it is a good point to ask why and help put the problem to bed before it affects customer delivery.
I have read numerous articles talking about a myriad of ways to look at reducing assembly cycle times in semiconductor manufacturing. Using SCT and DCT have allowed me to achieve world class cycle times in past lives.
Assuming we understand what our Theoretical CT is and we know that we are not within 1.5 or 2x that number; here is a tip for you.
We want to look at 2 data points for our CT, Static (SCT) and Dynamic (DCT).
SCT gives us the absolute time it takes to process a lot through any assembly line and can be looked at in individual process steps. We know manufacturing has issues on a daily basis that affects our CT such as; machine stops/breakages, non-conforming material (MRB's), lost lots, etc. All these stoppages are included in the total SCT.
DCT tells us how fast lots can move through an assembly line when all things are normal. Dynamic CT is a calculation considering line WIP and machine throughput. This is in essence line speed. The calculation is a leading indicator of what your CT will be as opposed to Static, which is a trailing data point.
DCT is my first line of defense to avoid being late on customer deliveries. Monitoring my DCT, I can see the problems coming down the line and probably do something quickly to avoid having late lots. Looking at SCT alone will merely tell me history and offers no way to change the outcome.
Depending on how fast we fix relative issues on the line we would expect that DCT and SCT would intersect at some point in time, once issues on the floor are resolved and the line normalizes.
To me, it is as simple as breaking the problems down into smaller issues that can be accurately categorized and fixed during the processing, not after the lot is processed. This is real time correction to problems in the line and I use to DCT to alert me. If I see the DCT increasing on a daily monitor it is a good point to ask why and help put the problem to bed before it affects customer delivery.
I have read numerous articles talking about a myriad of ways to look at reducing assembly cycle times in semiconductor manufacturing. Using SCT and DCT have allowed me to achieve world class cycle times in past lives.
1/06/2010
The number one reason companies struggle with their subcontractors is inadequate governance.
Assuming you look at your subcontractor sites as an extension of your own factory, can you image visiting your factory manufacturing floor once a quarter or year? This is how most companies conduct business at their subcontractors and outsourced groups.
To get the best results from your subcontractors you need to approach them as your virtual factory. We say “I pay them for a service and I expect them to deliver”. Of course you pay them for a service as you would pay an employee in the factory, but the best results produced by managers comes from the old management term, “manage by walking around”. If your visits to your in-house factory floor were as infrequent as your visits to your subcontractors, the results of your manufacturing would be catastrophic to capturing the very essence of good management. The product of good management is producing quality products as fast as you can with the most competitive cost available.
There's no difference to me in my own employees or a subcontractor. I need to provide leadership to get them going in the right direction and I need to provide them with the right information and tools to get the job done correctly, I need to listen to their feedback and I need to keep them motivated.
Frequent visits to your subcontractor will improve the relationship and performance at the subcontractor as it would with your own factory employees on your own factory floor performance.
To get the best results from your subcontractors you need to approach them as your virtual factory. We say “I pay them for a service and I expect them to deliver”. Of course you pay them for a service as you would pay an employee in the factory, but the best results produced by managers comes from the old management term, “manage by walking around”. If your visits to your in-house factory floor were as infrequent as your visits to your subcontractors, the results of your manufacturing would be catastrophic to capturing the very essence of good management. The product of good management is producing quality products as fast as you can with the most competitive cost available.
There's no difference to me in my own employees or a subcontractor. I need to provide leadership to get them going in the right direction and I need to provide them with the right information and tools to get the job done correctly, I need to listen to their feedback and I need to keep them motivated.
Frequent visits to your subcontractor will improve the relationship and performance at the subcontractor as it would with your own factory employees on your own factory floor performance.
12/17/2009
“The top 10 mistakes companies make when outsourcing their semiconductor manufacturing to Asia.”
I. Ineffective Strategy and Plans
a. outsourcing before you’re really ready, i.e. fully developed strategic plans, corporate lacking an outsourcing strategy, i.e. what gets outsourced, where it gets outsourced, time line to execute, key drivers, associated cost, benefits to be realized, ROI
b. lacking knowledge involved in manufacturing product with a subcontractor, i.e. registering IP rights, tax considerations
c. holding unrealistic expectations, i.e. cost savings, subcontractor performance, delivery times, quality
d. having insufficient disaster-recovery plans and backup, i.e. if production shipments stop
II. Corporate Support Insufficient Relative to Staffing, Budget and Time Lines
a. not allocating sufficient time and resources to transition, i.e. accurate documentation, BOM’s, AVL’s, planning cycles, engineering support
b. insufficient/inadequate corporate staffing and skills to support the outsourcing project plan
III. Subcontractor Selection/Relationship Misfit
a. lacking knowledge to select the optimum subcontractor to support the manufacturing requirements, i.e. capabilities, unit cost and capacity of the subcontractor
b. not having a clear understanding of the nuances of the countries you plan to conduct business in, i.e. stability of government, weather, earthquakes, poor infrastructure, brown outs, unions
c. not making the appropriate choice between outsource and captive line, i.e. not knowing if your products would be better served in the subcontractor’s mainstream or is there benefit from a total captive line.
d. choosing a vendor for the wrong reason, i.e. narrow focus on cost only
e. not achieving a level of partnership with a subcontractor, i.e. a strategic and tactical
working relationship
f. lack of openness and flexibility, i.e. no hidden agendas
IV. Due Diligence for Prospective Subcontractor Not Performed Well
a. poor due diligence due to inexperience, i.e. accepting what is said and not looking at the details of what’s being done
b. how ready is the subcontractor for your business, i.e. top tier, bottom tier, competency, organization, ability to effect change
c. does the subcontractor have the ability to grow to meet your business needs, i.e. capacity, staffing, floor space, committed to spending for capital
d. is the quality sufficient to support your expectations
V. Contract/Administration – Lack of Attention To
a. accurately defining the scope of work the client will do and what the subcontractor will do
b. poor mutual understanding of the contract
VI. Inexperienced Staffing to Manage the Outsourcing Project
a. ineffective deployment of key contributors i.e. wrong person for the job, lacks manufacturing skills, lacks negotiation skills, lacks people skills, packaging skills
b. try to manage subcontractors on a part time basis
c. trying to manage too many subcontractors
VII. Transition Product/Software/Hardware – Poor Preparedness
a. not clearly defining the necessary steps and processes to effectively and efficiently transition product to Asia for manufacturing
b. loss of key talent creating poor knowledge transfer to the subcontractor
VIII. Management of the Subcontractor - Inadequate
a. inadequate governance, control, monitoring by management; if not managed properly, a company can lose visibility of performance and control of their manufacturing operations
b. subcontractor provides unsatisfactory performance results, i.e. cost, quality, CT
c. the gap between change making and implementation, i.e. clearly define, monitor and executed properly, subcontractor internalized
d. blaming outsourcing or the client for all the problems
e. providing unclear specifications is a sin
f. introducing too many scope changes is a recipe for disaster
g. poor operational and logistics planning, i.e. raw materials supplies and die availability
h. not creating sufficient visibility/reports of operational indices
IX. Poor Communication Between Corporate and the Subcontractor
a. difference in time zones adds difficulty
b. not having real-time communication when required
c. incomplete or inconsistent written report formats
d. language differences can create barriers or incomplete understanding between customer and subcontractor
X. Cultural Differences Not Recognized
a. lack of knowledge in dealing with different cultures and language barriers required to effectively manage the subcontractor for optimum results, i.e. different communication styles, attitudes towards conflict, approaches to completing tasks, decision-making styles, attitudes towards disclosure
b. thinking that the potential for a culture clash is not an issue breaks down the ability to accomplish objectives
12/16/2009
Can Outsourcing the Management of Your Asian Manufacturing Operations Really Work?
Is it feasible? Let’s first start by looking at the options available for managing a Semiconductor subcontractor. Companies outsourcing the assembly, test, and finish processes in Asia can choose (1) to employ an ex-patriot at the supplier’s site, (2) build and manage their own factory in Asia, (3) rely on the subcontractor to provide the management service or, (4) choose an outsource management company.
The function of management, in and of itself, is to provide the Company a means to effectively and efficiently build, test and delivery product to their end customer. The specific roles of this management position are to insure their product is given the appropriate attention at the subcontractor’s site in getting it loaded in a timely fashion, insure die and raw materials are available, and insuring manufacturing executes to given specifications. When these tasks encounter problems, management steps in to resolve the issues. Additional responsibilities might also include the negotiation for lower pricing, overseeing new processes, monitoring the performance of product and package qualifications, the introduction of new subcontractors to handle capacity and or package mix, to name a few.
From above, the first option is to employ an ex-patriot at the supplier’s site, and many Companies follow this strategy. This benefits the Company by having their own employee on-site in Asia and has worked well for a lot of Companies over the years. However, there are downsides to this approach. Perhaps the most apparent is the associated costs in keeping an ex-patriot in Asia. Along with the employee’s basic salary and benefits package there are additional costs in travel, work permits, car and driver, housing, international schooling for youngsters, moving expenses, etc.
The second scenario entails the Company building and managing their own facility in Asia. This approach has been the standard for larger Semiconductor manufacturers since the 1960’s and to date, newer Companies have followed suit. It should be noted; most recent surveys conducted in the Semiconductor industry show a decline in this direction. The driving force for this swing in thinking is based on unutilized capacity when there is a downturn in the economy. Thus, today, most companies favor using subcontract manufacturers.
Third, there is the option of working directly with the subcontractor without the Company’s on-site management support. This puts the onus of burden on the subcontractor. If this situation suits the Company, and performance levels are being achieved by the subcontractor, there is no reason to change.
This brings us to outsourcing the management of the Company’s subcontractor to a third party. An experienced and cost effective outsource management company is capable of managing the Company’s subcontractor as well as the Company’s ex-pat employee and will be able to do so at much less the cost, and in many cases more efficiently than the ex-pat. The most predominate reasons for making this statement are familiarity with the assembly and test processes, the experience of living in Asia and in understanding the various cultures and language barriers, and in the knowledge and relationships with the subcontractors operating in Asia.
If due diligence is applied in the selection process of an outsource management company the results can be outstanding. That is to say, take the same steps as you would in hiring a company employee. Will the outsource management company meet the Company’s needs, do they have experience in dealing in Asia, dealing with subcontractors, can they effectively represent the Company, are they reputable, are they a lower cost solution? If the outsource management company is carefully screened in advance, this can become an extremely valuable asset to a Company – it is certainly a feasible cost effective solution.
For additional information on outsourcing manufacturing in Asia, visit our website at www.semiconoutsourcemgmtco.com.
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