Study On Raw Material Supply Management Improvement For Jilin NXP Semiconductors

In Jun 2000, China issued famous No.18 document, aim to promote China software and semiconductors business development. From then on, more and more multinational semiconductor companies migrated their manufacture sites to China. As a foreign capital semiconductor company located in China, the challenge is, they must make sure the same quality and cycle time as their mother site, further more they must keep cost reduction to increase competition. On the other hand logistics service performance in China is poor, and many semiconductors related raw materials can't procure from China mainland. How to keeping the material supply service level is one of popular problems.Jilin NXP Semiconductors Ltd founded in 2004, a typical case of multinational semiconductor companies manufacturing migration. Those different kinds of problems they met during migration and after localization, the lesson learn they got are all valuable reference, for other manufacturing migrations projects including on-going and planning to. Semiconductor manufacture is a complicated process and capital-intensive business, comparing with other manufacturing business, more the product types and more complicated processes, higher request for equipment availability, it's very cautious for raw materials change. Further more semiconductor Fabs need many kinds of raw materials, such as raw silicon, photo masks, high purity special gas and chemicals, metals etc. now most of them can't procured from China. considering poor logistics service level in China, how to make use of advanced supply chain theory into production planning, and improve equipment utilization, shorten purchasing lead-time, better supply service level and inventory turnover rate, all of above formed key study topics in China supply chain area.The paper use NXP as an example, introduce how Jilin NXP Semiconductors produce wafers based on forecast plan of power management semiconductor business, after review the semiconductor supply chain and inventory management, and the actual problems they met, writer try to solve the inventory cost and supply service level problems from both internal and external sides.From internal side, it focuses on how to improve raw materials supply. The semiconductor business is periodic fluctuation and becoming more and more competitive, how to make raw material supply keeping flexibility is a big challenge. the demand forecast is the core of the whole material planning, it must reflect the market trend, and on the other hand make adjustment quickly based on actual situation for both front-end and back-end factories. Using long/middle/short term plan and weekly production orders placement is a good solution to make it. An accurate BOM is a key to convert market demand into raw material request plan. To work out a good BOM list, we formed a team which the members from Production, Process, Purchasing, Planning departments. After two years improvement and confirmation, a final BOM was ready. Now forecast and BOM list are in place, we can do MRP for raw material supply. We choose STP (Short Term Plan) as our MPS (Master Production Schedule) which included coming 6 months forecast data, then using BOM list to convert it into monthly material request plan, based on current stock and on-way stock. Considering chemicals and special gas are batch type product, and shipping method is container by sea, so the fright cost is fixed, to reduce the cost, we use ROP (Reorder Point Planning) as our planning tools. Now the planning system runs very well.From external side, we focus on two parts: to shorten raw material supply distance and control suppliers and forwarders service quality.To shorten the material supply lead-time and shipping distance will result in a lower inventory level, and lower shortage probability. The challenge is the risks of raw material change, considering the high quality request in semiconductor manufacture, it's a very discreet action for material sourcing change, this may impact product quality. But on the other side long purchasing lead-time will increase the supply shortage probability in case sale orders sudden increased, to avoid shortage risk and no material change, we have no choice but higher inventory level. The semiconductor material price is high, so higher inventory level means higher operation cost. If demand drop down sharply (like 2008 economic crisis), the high inventory will become slow moving or dead stock, most of them have to be scraped. One more issue is the fright cost, the chemicals and special gas are dangerous goods, and they have flammable, explosive and corrosive characters, the strict request for shipping condition, shipping tools( for example special truck for dangerous goods ),storage condition etc, so all those make freight cost expensive. We did risks analysis for raw materials localization, based on risk and benefit level, we set priorities as following: low risk high benefit, low risk low benefit, high risk high benefit, high risk low benefit, and finally worked out an implement plan. The methods are: sourcing and developing China local suppliers, VMI (vendor management inventory), foreign suppliers shorten supply distance. After 3 years project implement, now 90% of chemicals are purchased from China, 80% raw silicon are procure from China or multi-source.After we got qualified suppliers, NXP also aims to promote continuous improvement in the performance of NXP Semiconductors'base. The SRS (Supplier Rating System) is a tool to reflect how NXP rates the performance of our suppliers on a broad range of measurements. Its aim is to present to our suppliers the facts related to how they manage the value proposition they make to NXP. NXP's expectations need to be clear and prioritized, and hence, SRS is the ideal way to share with our suppliers what we need and how important is to NXP. When there is a shortfall, NXP expect his suppliers to work with its purchasing management to close any gaps that might exist. As such, the SRS becomes a tool to drive operational excellence across NXP and their suppliers. The paper give a detail introduction about SRS-Materials and SRS-Forwarder. After 5 years selection and exercise, both NXP and its suppliers grow together, now we have stable supply sources and shipping lines, which ensure our supply chain health and keeping improvement.Based on internal and external efforts we keep the raw materials supply service level as usual and reduced inventory level, the results are fruitful.