Charged With Change

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E L E C T R O N I C S
Charged With Change
Component makers turn to distributed computing to streamline production

By Tom Dellecave Jr.
Issue date: Sept. 18,1995

lectronics companies are in a quandary. With semiconductor production plants operating at 10 0% capacity and the life cycle of products typically lasting only 10 months, customers are lining up for products that haven't even made it out of the design labs.

One of the main tasks of chief information officers in the electronics industry is to figure out ways in which technology can improve efficiency and flexibility to meet customer demand in the face of shrinking product life cycles.

"We're in the midst of major changes [in how information technology is used]," says Jodie Ray, CIO at Texas Instruments Inc. in Dallas. "It's a transition for the entire industry, not just us."

With semiconductors turning up in everything from PCs to automobiles to watches, demand for components and other microelectronics products is at an all-time high. But the supply of silicon used to make the tiny devices is at the same level as when demand was half of what it is today.

At the same time, product life cycles are so short that by the time a component moves out of the design process, the customer's requir ements may have changed. Manufacturers have had to look beyond the shop floor and employ IT at every stage of product development and decrease development time as much as possible. As a result, electronics companies have become some of the tightest-run ships in business. In dealing with both suppliers and customers, they are looking for ways to automate processes and quickly react to ever-changing demands.

IT is being used to meet these goals in three ways: leveraging company resources by making them available across divisions, improving the efficiency and flexibility of the IT department, and putting people in contact with one another during all stages of the development cycle.

That's no small task, but across the industry, companies are making it happen. "Information technology is the enabler," says Michael Walters, director of the high-technology electronics practice at A.T. Kearney Inc., a consulting firm. "We use IT to link everybody from the supplier's suppliers to the customer's custom ers."

This is just the latest phase of technology deployment in an industry that over its short history has grown more dependent on IT, says Jim Connelly, director of electronics industry consulting at EDS Consulting Service in Santa Clara, Calif.

In the 1970s, IT was implemented primarily on the financial side of the business. IT moved into manufacturing in the 1980s. Today it's been broadened externally to include areas such as purchasing and sales force automation.

"There's been an exponential increase in enabling technologies that can improve the business process," Connelly says. Among the hottest technologies are broadband networks such as asynchronous transfer mode (ATM), client-server systems, imaging, and groupware. "The people who use these [technologies] quickly will be more successful," he adds.

Texas Instruments, for one, is following that advice. Since taking over the reins of the computer maker's IT operations in January, Ray has instituted a companywide reengineering project tha t will redefine the way TI divisions communicate and exchange information. The effort will cost another $120 million a year on top of TI's $400 million annual IT budget, but Ray says it's a small price to pay.

Here's why: a project to consolidate TI's calculator and notebook business took 15 months because the systems in place were so tightly integrated with TI's individual businesses that any changes had repercussions across the company. "We are facing market changes that happen much quicker than that," Ray says. "It's unacceptable to say that it takes 15 months to do anything."

TI Makes IT Pay Off
TI is expecting a reasonably fast return on investment for IT. With wafer fabrication alone costing the company between $500 million and $1 billion, Ray says any incremental increase in efficiency can end up saving millions of dollars.

TI has a three-year plan that involves redefining the way the organization is structured. By creating what the company calls "centers of excellence" within the IT departments, TI expects to further shave the time it takes to react to business needs and get products to market.

Each center of excellence will consist of technology professionals who share similar skills. When a job has to be completed, TI will be able to react more quickly by going directly to the team that's equipped to deal with it.

But TI's greatest weapon in its battle to improve efficiency will be a new, open distributed computing environment using Windows NT and Unix operating systems. The hope is that the company will be better-equipped to react to market changes. In a large company, individual divisions have different needs and are more prepared to meet those needs than a centralized operation. By moving rapidly to a client-server architecture and instituting broadband networks, Ray expects that TI will better meet customer demands by distributing decision-making to departments and keeping the units in contact.

The Benefits
Other companies have also seen the benefits of distributed computing. Executives at equipment maker Motorola in Schaumburg, Ill., believe IT is so important to their company's success that in 1993, they eliminated the position of companywide CIO and created equivalent positions at group and sector levels. Motorola's individual product sectors are now more flexible--a development that has contributed to the company's bottom line.

Since breaking up its IT organization, Motorola's semiconductor product sector (SPS) in Phoenix has been able to respond quickly to changing market demands with custom-built systems. One such system, Synergy, has added efficiencies by allowing engineers to make adjustments to Motorola's manufacturing process on the fly. With Synergy, data on each phase of the manufacturing process is stored on a single database. Engineers can analyze that data and adjust different parts of the process accordingly.

Because of the volume of data involved in electronics manufacturing, that type of analysis can only be handled by a custom -built application, says Pat Horrigan, corporate VP and director of IS for the semiconductor sector and corporate computing services. Horrigan refers to Synergy as a process optimization tool that's improving efficiency and increasing quality.

"In semiconductors, you live on a learning curve," he says. "You're continually finding information that allows you to improve the process. Motorola has been able to extend those improvements beyond the shop floor."

By instituting an inventory-tracking system called Promise, Motorola's semiconductor sector has been able to standardize on a common user interface across the group. That has not only helped the sector to better track assets, but to automate the process as well. By doing so, the sector has cut the number of errors in the inventory process and advanced the product development cycle by automatically making information available to employees who need it.

While computing platforms are different at various businesses, Motorola has still been able to b enefit from interoperability across the corporation. "There is still some standardization," explains Horrigan. "We do collaborate and cooperate where it's needed."

Motorola has also established a telecommunications board of trustees whose sole purpose is facilitating communications between product sectors. Having the board has enabled Motorola to ensure that rates charged to individual sectors are in line with those charged to the rest of the company.

Electronics manufacturers also are seeing the benefits of distributed computing environments outside the shop floor. By making business units more flexible, efficiency is improved--often dramatically. Designers can collaborate even when they are hundreds of miles apart. Sales people are able to quickly access technical manuals to answer customers' questions. In turn, customers can immediately get their input and requirements fed back to the shop floor by sales people equipped with PCs.

At ITT in New York, the electronics manufacturing business isn't relying only on sales force automation to get salespeople the information they need to sell more components.

Using IT, the company also has been able to leverage its diversity to gain competitive advantage. For example, an engineer in the electronics division can access the databases in ITT Sheraton's hotel division. "We're getting to the market faster, with better quality," says David Starr, ITT's CIO.

And taking advantage of ITT's wide area network, engineers across the electronics division can concurrently design products. "CAD/CAM [computer-aided design/computer-aided manufacturing] devices can work across different locations," Starr says. "We can have engineers in different places accessing the same product charts and modifying them simultaneously."

Engineers across ITT can be pulled into a project to deliver expertise as well. An engineer in the electronics division, for example, can be brought into a project helping to design components for ITT's anti-lock brakes operation. It's ITT's wide area network that makes this possible. Using frame relay and asynchronous transfer mode, the company is able to keep employees in Europe, North America, and Asia in contact with one another. "We can take the best in class from one company and apply it to the other companies," Starr says.

As the electronics industry races to keep up with demand, CIOs will be the ones who keep companies from being pulled apart at the seams.

Says Motorola's Horrigan: "What we're working on now is a more complete integration of transmitting information from one part of the business to another, seamlessly and electronically.

(To view the Electronics chart in PDF format click here)

Photo for InformationWeek By Steve McCalister

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