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The high-tech manufacturing industry – which produces cutting-edge technology products from computers to jet engines, the component parts of these products such as semiconductors and circuit boards, and the sophisticated machinery used to manufacture all these products and parts – is characterized by high complexity, competition, and costs.
Even though there are certain characteristics of high-tech manufacturing, it is not always so easy to define it. The complexity of defining high-tech manufacturing arises from the fact that technology develops throughout time, and occasionally quite quickly. In other words, certain once-revolutionary technologies have lost some of their novelty and are now considered to be low-tech by some analysts. High-tech manufacturing industries include, for instance: pharmaceuticals; automobile production; defense, space, and aerospace manufacturing; computing and automation.
Operating in a volatile, demand-driven business landscape, high-tech manufacturers must have supply chain efficiency and agility to be able to deliver on-time, in-full (OTIF) for customers while keeping costs and inventory levels down. However, efficiency and agility can be hard to maintain. High-tech manufacturing companies are facing numerous significant supply chain challenges including:
- Unpredictable demand dynamics: In the high-tech manufacturing industry, demand typically centers around abstract products – rather than SKUs – that each require extensive customization and expensive component parts. Most high-tech manufacturers attempt to manually create demand forecasts and detailed production schedules based on historical data – but this method of planning fails to consider the complex demand dynamics of their industry.
- Long lead times for critical component parts: High-tech products consist of costly and complex component parts, each of which are produced by specialist companies and have long manufacturing lead times. In many instances, the lead time to deliver the finished product the customer is shorter than the lead time of the component to the manufacturer – and this makes capacity and production planning tremendously challenging.
- Deep and dynamic Bill of Materials (BoM): In the high-tech manufacturing industry, the BoM – the list of the raw materials, sub-assemblies, intermediate assemblies, sub-components, and other parts required to manufacture a product – is deep (often more than 15 levels) and complicated due to frequent component unavailability and long component manufacturing lead times.
- Production process complexity: The high-tech manufacturing process is dizzyingly complex. A precision engineering process, for example, can comprise over 200,000 operations – each with around 70 steps. Sophisticated machinery and specialized workers are required as well.
To overcome these and other challenges and achieve the highest levels of customer satisfaction and profitability, high-tech manufacturing companies need algorithm-based supply chain planning and optimized decision-making solutions.
With such solutions, there are many opportunities for supply chain optimization by enabling:
- Global pegging: High-tech manufacturing companies need to be able to plan their production operations dynamically based on the availability of BoM items. With a global pegging functionality, planners can automatically generate master production plans that peg the components to specific orders at even the deepest BoM level, and will be instantly alerted if there are any component shortages. Algorithmic planning will instantly relink suitable stocks and production with the new plan and planner will be instantly alerted if there is any component shortage.
- Synchronization of master production plans and procurement plans: Synchronizing material procurement plans with master production plans is particularly challenging in high-tech manufacturing due to demand volatility and the vast number of components and constraints. With an algorithmic planning solution, high-tech manufacturers can synchronize and optimize their production and procurement planning and operations.
- Demand planning: With an intelligent planning system, high-tech manufacturers can create optimal SKU-based demand plans and forecasts that consider historical data, market intelligence, real-time information on customer orders and material availability, and other factors.
- Scenario analysis: With an optimization solution, high-tech manufacturing firms can conduct “what-if” analysis to compare various scenarios against a base scenario to determine their impact on their company’s KPIs – so they that can make the best business decisions.
- Sales & operations planning (S&OP): An algorithmic planning solution enables high-tech manufacturers to automatically generate integrated, optimal tactical plans that consider machine and workforce capacity, material requirements, and other constraints.
- Detailed scheduling: An algorithm-based solution gives high-tech manufacturers the capability to instantly produce detailed weekly production schedules (months in advance) that optimize their utilization of their sophisticated machinery, specialized workforce, and costly components and orchestrate the hundreds of thousands of operations involved in the high-tech manufacturing process.
How ICRON can help high-tech manufacturers
Manufacturers will continue to significantly rely on the digitalization of manual, human-based procedures as well as seamless data collecting across their entire operations as they try to leverage new and emerging technology to increase the efficiency of their production processes.
ICRON can help high-tech manufacturers to identify areas of inefficiency or quality concerns and highlight actionable insights that allow management to take corrective action and stop these issues from happening again. Moreover, with ICRON, high-tech companies can stay competitive with the agility and efficiency that they have gained.
If you would like to see ICRON in action, please contact us. If you have enjoyed this blog, you can find more content that you might enjoy here.
