JDA Software highlights strategies for semiconductor demand planning during economic recovery

SCOTTSDALE, USA: Semiconductor manufacturers are in a quandary as the economy recovers and customer demand changes. The recession fueled an intense round of cost cutting and capacity reduction.

Despite today’s increasing upturn in demand, many semiconductor companies are still uncertain if or how they should make new investments in labor and production in order to meet market demand. As a result, they are facing a growing list of supply chain challenges such as product supply shortage, longer lead time and delayed deliveries to customers.

“With order backlog and book-to-bill ratios beginning to show signs of stability and growth, many semiconductor companies are rapidly shifting gears, trying to capitalize on the global economic recovery,” said Puneet Saxena, senior director, industry strategies, JDA Software. “But meeting panic demand in the aftermath of aggressive supply-side adjustments is much easier said than done.”

JDA offers the following recommendations to help semiconductor manufacturers address supply shortages and capture growth opportunities:

Create forecast confidence bands to attend to higher priority forecasts first. To proactively plan for demand surges, semiconductor companies should adjust to operating in a capacity-allocation mode by segregating forecasts into a range of high- and low-confidence forecasts.

Instead of trying to produce based on forecasts for all customers, they need to focus on high-confidence forecasts first, and then address the lower confidence forecasts as capacity becomes available. The end result will be an ability to provide supply across a wider set of customers.

Establish business rules to prioritize enterprise-wide demand for different customers and products. Once forecasts are segregated into high and low confidence bands, the question turns to which high-confidence forecasts should be prioritized first.

Difficult as it may be, semiconductor manufacturers must learn to be strategic about their customers and separate the more critical orders from the lesser ones. Establishing rules to prioritize demands in order to attend to the more significant customers and larger orders, semiconductor manufacturers will better serve all customers.

Implement rapid sales and operations planning (S&OP). When dealing with supply shortages and low demand visibility, semiconductor companies must recognize the need for cross-functional synchronization to keep the entire organization in tune with the most current view of demand. Many semiconductor companies are investing increased resources in creating a stronger S&OP process to better synchronize allocations.

An important aspect of this improved process is that the planning is conducted on a much more frequent basis. While it may have been conducted once a quarter in the past, companies are now leveraging monthly and even weekly planning to gain the most accurate picture of demand across their main business functions.

With a growing customer roster of world-class semiconductor companies including Fairchild Semiconductor, ON Semiconductor, Marvell Semiconductor, Silicon Image and Texas Instruments, JDA continues to build on the rich heritage of supply chain management success established by i2 Technologies in the discrete manufacturing sector.

These customers are part of a premier group of companies in the semiconductor industry that are improving end-to-end processes, enhancing supply chain responsiveness and improving operational efficiencies with the help of JDA Software.