Industrial Semi: Turnkey Services Smooth Uncharted Waters

One of the growing issues for industrial companies, whether manufacturers or not, is navigating the complex, rapidly fluctuating, global electronics supply chain.

As the gamut of products across multiple industrial market sectors increasingly carry more electronic components in their Bills of Materials (BoMs), the demand for turnkey services from experienced partners in the semiconductor and electronics industry is on the rise.

Semi penetration increases, challenging industrial customers
For those in the industrial market, the penetration of semiconductor and electronic components into devices has been notably and quickly rising. Alongside this increase in electronic components is the need to support the various devices, whether in the field for their internal customers, or in device end products for external customers. Such support entails ensuring that industry best-practices and procedures for semiconductor and electronic components are implemented and carried out in sourcing and inventory management (from receiving and traceability to handling and delivery). While the addition of semiconductor and electronic component processes and procedures may seem like simply an additional branching for experienced industrial companies, there are significant differences and challenges posed by sourcing, handling, and distributing electronic components, compared to non-electronics parts.

Among the sectors that have experienced significant semiconductor and electronics penetration into existing devices and products are automotive, medical, industrial equipment manufacturers, oil and gas (especially exploration and production [E&P]), and energy distribution (notably demand management and smart grid installations). Not only are industrial market sectors seeing their devices improve and expand in both adoption and functionality through the incorporation of onboard electronic components, but they are also seeing an increase in the use and variety of devices within the company. In turn, there is a rapid need for supporting these devices quickly and cost effectively.

For many, the costs of knowledge transfer and internal department and warehouse management far exceed the benefits of partnering with those who have long-standing, accredited, and certified experience and facilities to properly handle these new electronics support challenges.

Business as Usual

The semiconductor and electronics supply chain is a complex, global network that is rather volatile due to sometimes dramatic shifts and the threat of counterfeiters.

The semiconductor and electronics supply chain is a complex, global network that is rather volatile due to sometimes dramatic shifts and the threat of counterfeiters.

Turnkey services expand the semi supply chain
Quality and best-practices are at the core of turnkey service demands by industrial customers. Certainly it is essential that supply chain partners providing such services hold SAE and ISO accreditations and certifications, notably ISO 9001, ISO 17025, and ISO 14001. Vital to the safe and proper handling and storage of electronics is the ANSI ESD 20:20 certification. Furthermore, in sourcing and ensuring the traceability of electronic components, having industry-recognized processes and procedures in place is paramount; among those should be AS5553, AS6081, AS9100, and AS9120.

It is important that checklists of accreditations and certifications be considered only a starting point. On-site auditing and due diligence of supply chain partners are paramount to ensuring that the full suite of services for sourcing, documenting (including reporting and traceability), testing, handling, storing, repackaging (when necessary), and logistics handling of all semiconductor and electronic components is properly and consistently followed.

The semiconductor and electronics supply chain is a complex, global network that is rather volatile in nature due to sometimes dramatic shifts and the threat of counterfeiters looking to take advantage of those less seasoned. As industrial companies are seeing increases in their electronic components inventories, there is the simultaneous need to control costs and hold vendor bases to a set of best-in-class providers. Understanding what the challenges are and having a guidepost to conduct due diligence on electronics service providers is critical to ensuring quality parts and quality management processes and procedures for this sector.

For those of us who are long-standing in the semiconductor and electronics industry, proper inventory sourcing and management is certainly not news. However, as semiconductor penetration increases through commoditization and new design architectures to meet increasing demands for enhanced device capabilities, it is worthwhile to stop and recognize that not all industrial clients may have the same familiarity with electronics industry best-practices and procedures.

2 comments on “Industrial Semi: Turnkey Services Smooth Uncharted Waters

  1. _hm
    April 20, 2013

    Turnkey services are very good. But it is very interesting to know the actual cost of adding this service. Profit margins are quite thin and if supply chain turnkey service takes away significant part of this profit, it may not be worth it. It is prudent to evaluate it for each organization.

    Also, turnkey service work on words in contract and ideally may not be as dedicated as an employee, afraid of its job contribution and security. This is more true in case of exigency or sudden and very odd requirement. This haapens very often. Turnkey service may not dedicate much time because they do not get paid by hours. They may offer very facile and not so cost effective solution.

    This approach needs attention, but finding suitable partner with similar goals is chimerical.

  2. Todd Burke
    April 23, 2013

    @_hm: It is interesting that hidden costs are mentioned because the very reason industrial companies are showing an interest in turnkey sourcing and inventory management services of electronic components is because they are seeking to reduce their overall cost of acquisition and possession of a commodity which they lack the expertise to properly store and handle themselves.

    In working with turnkey service providers, companies are directly addressing a litany of hidden costs associated with sourcing (e.g., time and resources), purchasing (e.g., transactional costs, equipment, insurance, etc.), not to mention the value realized by having a secure supply chain partner when one must navigate the waters of counterfeit-rich EOL components to service expensive equipment with life-spans that far surpass the components within. Companies are turning to best-in-class providers, those with broad and deep supply chain experience, who can provide the full range of services, processes and procedures around electronic components.

    In terms of turnkey service costs, there is, nor should there be, anything hidden about them. They can simply be tied to the value of the managed inventory as a percentage of the total – charged on a per transaction basis, for example – or negated altogether by agreeing to and meeting pre-defined monthly or quarterly sales targets. In the end, turnkey services are centered around a partnership in which both parties want the other to succeed and thereby both do.

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