Optimise Service parts Logistics

Market situation

With significant process technology transitions underway and the advent of systems-on-a-chip (SoC) designs, chips are becoming increasingly complex and chipmakers face unprecedented challenges in managing manufacturing costs including those related to supporting semiconductor manufacturing tools. Approximately 25[1] percent of fab operation costs are support related. In order to maintain a competitive edge, semiconductor companies continue to outsource non-core activities to companies who have developed scale and domain expertise in a particular area. With dramatically rising manufacturing costs, this trend is gaining momentum, and logistics, including service parts logistics, has taken center stage as the next big area for outsourcing (see Figure 1).

Figure 1. Semiconductor industry outsourcing trends.

Service parts logistics is a critical part of after-sales support. It enables rapid service recovery and ultimately customer retention. All too often, semiconductor equipment suppliers ensure service recovery by holding a large buffer stock of service parts inventory. This is expensive and only the largest suppliers can afford it. With fewer resources and less installed base density, service parts support becomes an even bigger challenge for small-to-medium sized equipment suppliers. In any case, keeping large buffer service parts inventory is either very expensive or difficult.

There is no better time to address this challenge than now. Those players who use the downturn as an opportunity to improve after sales support by rethinking their supply chains and outsourcing where it makes sense, will position themselves for success in the next upturn.

Best Practices from Related Industries

In fact, many semiconductor equipment players are using the downturn to optimise their after sales support programs. However, while the goals are clear, the path to success is uncertain. The attempt to leap-frog from a semiconductor manufacturer driven services business to a SLA based service oriented and OEM-owned system requires changes in the structure and mind-set of the companies involved. Companies appear to be taking numerous approaches when related high-tech industries have been down this path before.

The service parts logistics solutions of leading IT companies like IBM, Compaq, or Siemens are exemplary as they employ the latest supply chain models and technologies. Leading IT companies have accelerated parts distribution and parts return and repair because they recognised that extended transit times to and from the field can inflate inventory by up to 15%[2]. Such companies have set up global logistics networks comprising both strong third party logistics providers for the physical storage and movement of parts combined with information systems which allow them to plan, control and optimise global services business. Service parts performance indicators throughout high tech industries seem to be far ahead of what is standard in the semiconductor industry (see Figure 2).

Figure 2.

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