Chipmaker cuts back on automation and gives local managers more control over system.

Elena Malykhina, Technology Journalist

September 13, 2007

3 Min Read

LOCAL KNOW-HOW
To change this, National launched its Factory Starts Dispatch system at its largest facility, in Melaka, where 2,500 of the company's 7,600 employees work. Now customer orders are sent to the local system, which determines what production needs to be started and dispatches those "starts" to the shop floor four times a day--hence the name, Starts Dispatch.

The close coupling of decision-making and execution improves factory utilization and puts decisions back into the hands of the people who are most knowledgeable about assembly and test processes in the factories, Tan says.

A major deciding factor for developing the system in-house was cost. Factory planning systems--such as shop floor control software--range from $500,000 to $1 million, not including customization work and implementation. The software is typically designed for general use in an industry and doesn't address a specific company's needs, so customization is often needed, says Ricky Mah, VP of central plan- ning. National developed its system for $200,000, Mah says.

Customized features in the system let National trigger manufacturing cycles more frequently and let its planning group make decisions about what parts of the system should be automated and what should be left up to managers. With the new setup, "we honor the human decision throughout the whole system," Seif says, meaning there's no longer a need for manually generated orders.

The old process also wasn't responsive enough to customer demand, taking as long as three days to get orders entered into the system. As a result, National averaged 90% to 95% on-time delivery to customers. "That wasn't sufficient for us," says Choon-Beng Ng, National's worldwide capacity planner. "We wanted to be able to react to urgent customer orders quicker."

Since implementing the new system, National's on-time customer delivery has increased to more than 99%, and the response time when a customer requests a change has been reduced from 48 hours to four hours. The system also has improved efficiency of equipment use at its factories by 3%, so a factory that had output of 10 million units a day can now produce an additional 2.1 million units a week.

Telecommunications equipment supplier Ericsson is a National customer that has benefited from these improvements. Ericsson, which uses National's Signal Path and Power chips in its radio base stations and multimedia devices, has found National to be one of the most innovative semiconductor companies in terms of efficiency improvements, says Lars Lindberg, VP of materials management at Ericsson's business unit networks. Ericsson chose National as one of three companies it's working with on a pilot project to improve efficiency in Ericsson's manufacturing supply chain.

REPEAT PERFORMANCE
The success of the factory planning system has National looking at localizing other business applications. It's currently redoing a manufacturing system that's been running on a mainframe for 20 years, in order to move centralized functionality to local systems in the factories. The new systems will give local managers more control over factory processes. National is taking advantage of experienced staff in its factories who know how to design and develop these kinds of systems. "We can give them more opportunities to localize the systems and get greater benefits," says Klaus Preussner, director of IS infrastructure.

In a hypercompetitive industry where aggressive product introduction and fast response to customers are what count, National believes that the people working most closely with products and production, and the customers, know what's needed in IT systems and business applications. And those are the people it's turning to to craft the company's tech future.

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About the Author(s)

Elena Malykhina

Technology Journalist

Elena Malykhina began her career at The Wall Street Journal, and her writing has appeared in various news media outlets, including Scientific American, Newsday, and the Associated Press. For several years, she was the online editor at Brandweek and later Adweek, where she followed the world of advertising. Having earned the nickname of "gadget girl," she is excited to be writing about technology again for InformationWeek, where she worked in the past as an associate editor covering the mobile and wireless space. She now writes about the federal government and NASA’s space missions on occasion.

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