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Written by: Alan Porter, Vice President, Electronics & Semiconductor Industry at Siemens Digital Industries Software
Most people take the virtual shopping cart for granted and never stop to think about the complex supply chain that delivers a product into their hands. But that all changed at the onset of the COVID-19 pandemic when there wasn't a square to spare in the toilet paper aisle. Next, we saw everyday staples such as rice and flour disappear from the shelves. These problems weren’t just a result of panic buying, because as the pandemic deepened, the IC (Integrated Circuit) supply chain also started faltering.
Consumer electronics and automotive vendors had to adjust their product output, which in turn limited the supply of their products into the market. Large companies like those that produce industry-leading personal electronics and mobile phones have deep pockets, and they paid to reserve future fab (front-end fabrication) time for their ICs. At the same time, more agile companies could afford to swap out ICs and rewrite software to circumvent their production delays. However, most companies that rely on a free flow of ICs are still suffering.
What can we learn from this, and what steps should companies take to prevent these issues from happening again?
It has been many years since our last pandemic, so it is understandable that most companies have never gone through one, nor had plans in place for dealing with one. In hindsight, quick access to real-time analysis of buying trends based on the public's reaction would have helped companies react faster to the changes. This takes understanding pandemic behavior, connecting that to associated technology trends and determining where companies would source their supply of the chips.
When the pandemic ramped up, remote work became the norm, so there was significant demand for technologies that supported working from home, such as monitors, cameras, phones and laptops. That demand drove increased chip consumption in those areas, so fabs focused on fulfilling those orders. In the meantime, automobile vendors predicted that the need for new cars would fall drastically due to fewer people commuting to work, travel restrictions and lockdowns. That was correct; during the depths of the first pandemic peak in the spring of 2020, sales of new vehicles fell as auto plants shuttered and many dealers closed showrooms. But retail sales to consumers rebounded far faster than anyone forecasted, since many people preferred driving instead of taking public transportation or flying.
Interestingly, since employees could work from almost anywhere, the demand for recreational vehicles also rose dramatically, overwhelming manufacturers with orders and causing further backlogs and exacerbating IC shortages. These factors drove and continue to drive that increased demand for the fabs.
The U.S. and significant OEMs are now putting money into ramping up fabs, but this is a reactive move instead of a proactive plan. Fabs take a long time to build out and cost billions. Furthermore, there has always been a delicate financial balance between predicting full fab operation in contrast to having expensive shutdowns due to lack of IC demand.
Because of the IC shortages, companies are urgently looking for alternative suppliers. But they must understand the supply chain, and from a resiliency standpoint, determine first and second sources to mitigate risks by switching vendors quickly.
If a company is desperate to get their product out the door, it might be tempting to skip these concerns. But being smart about which vendors to trust is critical for companies because of security issues. Companies that use intellectual property (IP) in their IC designs must also consider IP security and be wary of counterfeit components. This is one of the many reasons the genealogy of the component, the IP and the chip must all be traceable.
At Siemens, we believe that companies can solve IC supply chain problems with the data gleaned from smart manufacturing, which can be analyzed and leveraged throughout the product lifecycle. If companies can focus on automation and factories can run remotely, they can maintain production even in the midst a pandemic or other major disaster or disruption.
Automation software within the smart factory can collaborate with the supply chain ecosystem to get more real-time insights so that companies can quickly react to adverse events as they happen. An IoT operating system keeps everybody connected to any machine, system or database in the factory. Then a low or no-code tool provides the user interface to get insights and understand them, as opposed to having to learn all the different technologies underpinning them. A low or no-code tool also offers the capability to create advanced dashboards easily, as well as workflows, through an employee’s phone or tablet so they can respond to their assigned issues in real-time. Then all the players in the chain have access to what they need to know based on their role in the chain.
Smart manufacturing means that a company’s process and methodology get captured in a “golden” workflow in a low-code application. Essential steps and activities get captured in ways that should be easy to understand from a work-in-process (WIP) and event standpoint. It requires less knowledge, less training and provides more visibility to what is going on.
If one of the areas of the workflow suddenly signals a red alert, the appropriate person can act. For example, suppose there is an alert that the factory line will run out of a particular material by the end of the day, based on analytics in the dashboard. In that case, an automated call can go out to the supplier to send more material immediately. Companies can even automate the ability to query a set of suppliers for inventory and the best price.
Integrating into an intelligent digital marketplace system is a must for the workflow in terms of electronic components. The current component shortage environment has genuinely exposed the fragility of supply chains and creates a mandate for digital transformation and intelligent decision making. A strong Design-to-Source Intelligence (DSI) ecosystem with engineering and supply chain professionals worldwide can transform how businesses design, source, market and sell products in the global electronics value chain.
SupplyFrame provides these critical solutions. That is why we recently announced that Siemens was acquiring them and integrating their tools into our smart manufacturing portfolio. It allows companies to analyze, in real-time, supply chain infrastructure to forecast resiliency, ensure provenance and trust and adjust business practices and technology accordingly.
Smart manufacturing can also take on environmental sustainability, because when companies track how they are using chips and components of an electronic system, they can analyze the carbon footprint of those chips and components. Companies can also analyze the reuse potential of the materials and their recyclability, and all that data can be passed along the supply chain. When a company predicts a shortage, these sustainability factors can come into play.
The digital twin provides the backbone of the smart factory of today and the future. It captures the virtual design that feeds the digital twin of the manufacturing process to realize the design. And it can feedback information from the factory floor for design optimization. With the product physically operating out in the field, issues can occur. That data can also be input to the matching design digital twin that can either improve the design or send out a software upgrade to the product in the field. The digitalization of the factory enables companies to explore a vast array of solutions to supply chain problems, predict issues and automate resolutions.
To learn more, visit Siemens Digital Industries Software.
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