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Opportunities for optimization in the high-tech manufacturing industry
Author: Levent Özkan
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.
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.
High-tech manufacturing companies, however, 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 take into account 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 like ICRON.
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 take into account 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 take into account 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.
These are just a few of the many opportunities for planning and operational optimization that algorithmic supply chain planning and optimization solutions, like ICRON, can provide for high-tech manufacturers.