Lean tales from distribution and component manufacturing

Technology Forecasters’ recent survey of Lean practices in the electronics industry found that OEMs and EMS companies are the leading adopters. Distributors lag most and component manufacturers fall in between.

Some of us were a bit surprised because we know a few distributors have taken Lean to heart. Arrow Electronics and Avnet, for example, work with their large customers to install in-plant stores and implement just in time (JIT) inventory practices.

Among component makers, many semiconductor companies collaborate with customers, competitors and foundries to speed technological innovation, especially in manufacturing processes, eliminating wasteful duplication of effort. Few chip companies could afford to continue to meet Moore’s Law at each smaller process node if they didn’t collaborate. We might not typically think of these efforts as Lean, but they certainly are in spirit.

Some chip companies are making efforts to improve inventory lead times, which are typically 12 weeks or longer. Last year, Qualcomm, the largest fabless semiconductor company, launched a new approach to inventory management to cut lead times to four weeks or less. It established a die bank, where partially completed wafers from its foundries sit until pulled by Qualcomm’s contract assemblers, who finish the wafers into multi-chip packages with feature sets determined relatively late in the design cycle by cell phone OEMs. This might be the closest chip manufacturing will get to JIT.

The good news: Three-fourths of the 250 respondents from all segments of the industry say their companies are already involved in some kind of Lean practice. Distributors and component makers may lag, but these examples suggest they’re capable of going Lean.

There are likely other Lean examples we should all know about in distribution and component manufacturing. Please comment below and tell us about them.

Posted by Bill Roberts, May 4th, 2007

Filed to Logistics, Outsourcing, Supply chain management
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2 Responses to “Lean tales from distribution and component manufacturing”

  1. From: Dory Meynert
      on May 4th, 2007

    For non-Tier 1 OEM and EMS companies, one of the largest challenges in implementing lean relates to component packaging. As the execution size of builds becomes smaller (build only what you sell), the reel sizes and MPQs need to scale accordingly. I think this could be an area where distribution and component manufacturers are perceived to be lagging behind on implementing Lean thinking.

  2. From: Bill Roberts
      on May 4th, 2007

    Dory–Interesting insight. Sounds like a business opportunity for someone…
    bill

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