Capitalizing On CollaborationCapitalizing On Collaboration

The year has been a tough one for the electronics and semiconductor industry. With the demise of the dot-com era, the general economic slowdown, and an overabundance of supplies and materials, the semiconductor market is expected to see a decrease in sales of 14% in 2001, or as much as $175 billion less than last year, according to the Semiconductor Industry Association.

That doesn't mean electronics companies such as Analog Devices, National Semiconductor, and Raytheon, are pulling back on IT and business spending. Current projects are geared toward increasing efficiency, streamlining business communication, and cutting costs. Component makers are also placing great emphasis on automating internal and third-party collaboration and working more closely with customers.

Members of the electronics industry are accustomed to the cyclical nature of their business and intend to be ready for an expected increase in sales next year, says Molly Marr, communications director for the Semiconductor Industry Association. While the industry may not have anticipated the severity of the downturn, it's used to the ebb and flow of demand, Marr says. "We feel that the inventory overhang we're experiencing will correct itself in the fourth quarter, with growth commencing in 2002. We expect growth in 2003."

The electronics industry has always relied on communication and collaboration within the supply chain to maintain rapid development schedules, meet changing design needs, and keep products from piling up on store shelves. The lead time in the production process is measured in months, so inaccurate projections can easily result in unsold inventory.

Many electronics makers anticipated the current economic problems and reacted fairly quickly. "We decreased orders to suppliers at the first sign of the slowdown," says Ashwin Rangan, CIO of Conexant Systems Inc. in Newport Beach, Calif. "But altering such systems can take anywhere from two to three months. If you apply the breaks, it's kind of like stopping the Titanic."

A supply chain that works smoothly across all parties, from component suppliers to designers to manufacturers, helps companies save money that would have been wasted building goods that are never sold; it also helps save money that could be used in product development. An electronics company's success is based on its design engineers' ability to meet customer demand, so getting those demands directly to the engineers can be key to product innovation.

"We like to collaborate directly with customers," says Larry Loh, CIO of Analog Devices in Norwood, Mass., which designs products for companies bringing out the next PDA set-top box or wireless phone. "The collaboration quickly extends to our key customers, and we also rapidly bring suppliers into the collaboration. As cycle time gets shorter and shorter, we have to have more collaboration with all the third parties. We see that as a huge requirement."

National Semiconductor, pleased with its supply-chain collaboration experience, leveraged it to other activities. "We saw that the supply chain was working well, so we took the next step and extended that expertise to our design chain," says Ulrich Seif, CIO of the Santa Clara, Calif., company.

To foster collaboration among internal design teams working on new chipsets, sales teams, distributors, and customers, National Semiconductor earlier this year put in place a portal to provide users with access to the applications and data they need to share information.

The portal gives design teams immediate access to all of National Semiconductor's applications--including CAD systems, workflow applications, and Lotus Sametime, a collaboration tool that includes E-mail and conferencing apps--without the company needing to provide costly ISDN lines for secure high-speed links to each employee. Setting up a portal and securing access through a virtual private network allows each employee to connect through the Internet from any location to perform daily tasks.

National Semiconductor officials say that remote access has resulted in a $1 million annual productivity improvement, while reducing ISDN charges by $750,000 per year and distribution-channel equipment, support, and line costs by an additional $250,000.

In conjunction with the portal project, National Semiconductor put in place a special Web-based system for designers, called Time to Market System. All workflow activities adhere to a common methodology and all parts, documents, requests, meeting minutes, application notes, and project plans flow through one system using the same referencing language. Since installing the portal, National Semiconductor has realized a 10% productivity improvement in new-product development teams, which it estimates will save $2 million to $3 million a year. The project-management system lets engineers at locations around the world keep up to date with their co-workers' efforts.

"Everyone knows when a project is initiated and where it is in its life cycle," Seif says. Documents are standardized so designers around the world use the same language. "If a designer in the United States says, 'I'm in phase three,' a designer in Israel understands what he's talking about," he says.

Collaboration is an increasingly important way of doing business at multinational electronics companies. At Cadence Design Systems Inc. in San Jose, Calif., VP of IT Ananthan Thandri turned to a Web-based collaboration tool from Intraspect Software Inc. to facilitate communication around the world. Initially, it was deployed between IT departments and then adopted by the company's senior leadership--about 100 executives--to speed decision making.

Raytheon is another company that's capitalizing on collaboration systems to facilitate communication among its employees. Last September, the Lexington, Mass., commercial electronics company completed its Orion (One Raytheon Integrated On-demand Network) project. The high-speed network ties company design centers together. Then Raytheon tackled the problem of supporting more than 30 E-mail platforms by standardizing on Lotus Notes.

The IT department is migrating 60,000 users to the unified messaging platform, says Robert Connors, senior IT manager at Raytheon. The company intends to use the system for document routing and will provide digital authentication for secure messages. "Calendaring and messaging is impossible unless you are using a single mail platform," Connors says.

Requiring employees to use the same system to facilitate the flow of information is simple, at least compared with dealing with partners outside a company. Trying to manage information exchange among different companies can be a challenge. Conexant Systems went to suppliers Amcor, TSMC, UMC, and others and convinced them to adopt the same Extricity business-to-business relationship-management system. The software, which was later acquired by Peregrine Systems Inc., gives greater visibility into what each partner is doing.

"We link in with our suppliers and talk their language with a set of commonly defined part names and features. We have visibility into their capacity forecast, our work in process," Conexant's Rangan says. "This forms the basis of an environment that lets us do end-to-end supply planning. And that lets us respond more quickly to customer orders."

Other companies see collaboration as a way of monitoring customers' needs. American Power Conversion Corp., which makes uninterruptible power supply devices, installed a monitoring center in St. Louis that receives alerts from its business customers' UPS devices. Those alerts, along with additional company information, go into the West Kingston, R.I., company's Oracle database and newly installed Oracle 11i enterprise resource planning application.

"We can now tie together production history on a product to a customer's service history. We know exactly which product a customer has and can look at the product history all the way back to the manufacturing history," says Asa Davis, VP of information systems for American Power Conversion. "We can start to assemble the product pedigree that we were after," by gathering information on each product the company manufactures. That historical perspective should help American Power Conversion make better products going forward.

While the electronics industry has seen a significant downturn in its business, executives also know they can't afford to scale back innovative systems for meeting customer demands when an uptick eventually occurs. But they're still keeping a close eye on return on investment. The electronics industry is, after all, a fiercely competitive market that's driven by supply and demand.

"The overall economic slowdown is very painful," says Ed Mahoney, VP of IT systems for semiconductor memory provider Micron Technology Inc. in Boise, Idaho. "We sell memory, and most of our customers are high-tech companies that have their own demand problems. The only projects being funded are those that will improve revenue or reduce costs."

But while the electronics industry may be forced to take the long view on product development, most companies realize they can't let the current economic problems affect their need to continue to innovate on new technologies and collaboration tools to assist them in their efforts.

Cadence Design's Thandri says the company will still spend on the right technology. "We can't stop due to a temporary economic downturn," he says. "We're making sure that we make the right investments now to support company growth three to four years from now."