About a year ago, Gerry Dundon, director of order fulfillment at Analog Devices Inc., faced a consumer confidence problem: How to assure the company's linear-IC customers that they would receive their orders on time, every time?
It's an issue that OEMs and their suppliers have been battling for years. But now, the emergence of a software tool called advanced planning and scheduling (APS) from vendors such as Baan, Oracle, and PeopleSoft is enabling companies like Analog to finally get a handle on the problem.
Analog's Dundon began looking for a new system to replace the company's materials resource planning (MRP) system when his customers began complaining about uneven service levels and losing confidence that Analog could deliver what it promised.
The MRP system that Analog had used previously could not adjust available capacity to incoming orders. So when customers demanded more supply than the system had scheduled for production, Analog did not have the needed inventory to deliver by the dates it promised, causing some customers to seek other suppliers, Dundon said.
The solution Dundon found was an APS system from software vendor PeopleSoft Inc., which helps Analog schedule all orders on a real-time basis, not according to a planned forecast; and once scheduled, execute the orders against remaining unused wafer ca-pacity to give customers a firm delivery date.
"With an APS system," Dundon said, "you can prioritize different types of requirements: build safety stock inventory for demand type A, build to demand only for demand type B."
Using inputs such as work-in-process data, cycle times, yields, and capacity models, an APS always schedules actual orders before forecast orders: The system plans for the committed demand first.
"[The APS] will help us make our fabs more efficient by not starting wafer fabrication for products we don't need," said Robert Esdale, director of logistics for Analog's standard linear products group, Norwood, Mass. "Without the APS, we don't use resources as well, and we get more inventory than we need. We could be using that extra capacity for new products."
Eventually, the APS will be connected to all of Analog's manufacturing systems and those of its subcontractors, he said.
APS systems are part of a larger supply-chain-planning market which had 1997 revenue of $829 million, and is expected to grow to about $8 billion by 2002, according to AMR Research Inc., Boston.
Hewlett Packard Co. has also begun implementing APS systems to improve time-to-market in its Home Products Division (HPD) and its Test and Measurement Organization (TMO).
This year, HPD's buyers are beginning to keep track of all component material requirements across HP's factories in North America, with demand information from Asia and Europe to be added soon, according to Thomas Davis, the division's project manager for supply-chain planning.
And the TMO, which consists of 36 divisions, is installing PeopleSoft's APS in 10 sites, according to Boyd Runyon, a strategic-alliance manager for TMO.
Tools like the APS system are critical, because, as HP's Davis noted, "our ability to intelligently manage our supply chain is fundamental to winning in our marketplace."