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Electronics Industry Collaboration

The US electronics industry is estimated at over $550 billion in annual sales and is made up of more than 2500 companies. The industry ranges from computer manufacturers to government electronics to consumer products and telecommunication equipment manufacturers and their suppliers. The industry is pervasive, af- fecting our lives wherever we are. There are more that 400 million Internet users worldwide and over 500 million cellular subscribers. It is difficult to imagine how the world economy would function without computers and communication systems that we now take for granted. It is obvious this is not a monolithic industry where everybody is doing the same thing, but there are some business issues that do appear to be consistent or at least

widespread.

This is a global industry with manufacturers on every continent with supply chains and design teams that are operating 24 hours each day seven days per week. A major trend in this industry is the greater emphasis being placed on volume manufacturing plants in regions such as Central Europe and Asia, particularly China. This brings the requirement for product and process portability across continents as volume manufacturing is moved from new product introduction facilities to volume plants in these regions. This portability requires ad- ditional collaboration with respect to product and process data between plants.

Product lifecycles can be very short. Time to market for a new product is a critical measurement of nearly every company. Products that once had a lifecycle of 18 months now have an average profit lifecycle of 6 months.

As innovations reach the marketplace, consumer prices are slashed and profits almost eliminated. Accord- ing to one study, improving time to market by one month can improve profits by 11.9%. Tools that can shorten the time for design and manufacturing ramping are in strong demand.

Design and engineering changes are especially important in the electronics industry. The importance of design collaboration in electronics is realized by the emerging RosettaNet standards for high technology design and manufacturing. The RosettaNet cluster 2C for “Product Design Information” contains the following six definitions of Partner Interface Processes or PIPs:

2C1 2C2 2C3 2C4 2C5 2C6

Distribute Engineering Change Status Request Engineering Change Distribute Engineering Change Response Request Engineering Change Approval Notification of Engineering Change Order Notification of Engineering Change Implementation

Many companies are outsourcing manufacturing to reduce capital investment and focus on core competen- cies of design and marketing. One example is the estimate that over 50% of all semiconductor products will be outsourced to third party packaging and foundry houses by 2010. Doing so will require product content infor- mation to be shared, modified, and managed across a global value chain network. This also requires third party manufacturers to provide close collaboration networks with customers to maintain confidence that production is in line with expectations.

The inventory pipeline, which is estimated at one year of sales, can have multiple versions of a product in process between initial vision and customer delivery, all of which are very susceptible to engineering change and market demand variables.

The bullwhip phenomenon can have a devastating effect that contributes to false shortages of material and erratic ordering patterns. Demand information collaboration for supply chain synchronization is becoming an integral part of the industry relationships. In early 2001, collaborative manufacturing was brought into focus when Alan Greenspan remarked, “the same forces that have been boosting growth in structural productivity seem also to have accelerated the process of cyclical adjustment. Extraordinary improvements in business-to- business communication have held unit costs in check, in part by greatly speeding up the flow of information. New technologies for supply-chain management and flexible manufacturing imply that businesses can perceive imbalances in inventories at a very early stage--virtually in real time--and can cut production promptly in re- sponse to the developing signs of unintended inventory building.”

Collaboration Synergies Inc.

Electronics Industry Collaboration 3

360.833.8400 • www.cosyninc.com

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