CASE STUDY: IMPLEMENTING SUPPLY CHAIN MANAGEMENT AT FUJITSU MICROELECTRONICS EUROPE

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1 e-business European Commission, DG Enterprise & Industry This document is based on sector studies, special reports or other publications and resources prepared by e-business The European Commission, Enterprise & Industry Directorate General, launched e-business in late 2001 to monitor the growing maturity of electronic business across different sectors of the economy in the enlarged European Union, EEA and Accession countries. All publications are available in full length on the internet at the e-business website ( CASE STUDY: IMPLEMENTING SUPPLY CHAIN MANAGEMENT AT FUJITSU MICROELECTRONICS EUROPE Abstract Fujitsu Microelectronics Europe (FME) a supplier of electronics components for further use in the consumer electronics, automotive and telecommunications industries implemented a RosettaNet-based solution in The software and service provider Seeburger is a specialist that advises and supports companies in the CE sector to optimise their supply chain by implementing and integrating such solutions. Based on interviews with managers of FME and Seeburger, this case study outlines the relevance, as well as opportunities and challenges arising from the implementation of RosettaNet in CE companies. Case study fact sheet Full name of the company: Fujitsu Microelectronics Fujitsu Microelectronics Europe GmbH Seeburger AG Seeburger AG Location: Langen, Germany Bretten, Germany Main business activity: Electronic components manufacturing Year of foundation: Number of employees: Not disclosed 460 Turnover in last financial year: Not disclosed 36 million Primary customers: Most significant geographic market: Main e-business applications studied: Keywords: Electronics OEMs, component distributors Europe, Middle East, Africa (EMEA) EDI standards (RosettaNet, Edifact) Software and service provider Industrial / high-tech manufacturers, service providers, retailers EMEA, Americas, Asia-Pacific Seeburger Business Integration Server / RosettaNet e-business standards, interoperability, SCM. Supply chain automation, integration 1

2 Background and objectives The case study illustrates opportunities and challenges arising from a recent implementation of RosettaNet by Fujitsu Microelectronics Europe (FME). The basis for the case study were interviews conducted with two FME managers, Thomas Riegelhof and Hartmut Noack, who are responsible for IT-based supply chain automation at FME. Seeburger, a software and service provider and, also, a member of the RosettaNet consortium, was the solution partner that accompanied the integration. Martin Walmsley, Vice President Sales Industry & Utilities at Seeburger, was also interviewed to illustrate his experiences in providing such solutions and services for the high-tech industry. FME designs and distributes a wide variety of microchips. The products are mainly used as integral parts in automotive electronics or for multimedia devices such as set-top boxes for digital TV and in communication technologies. While FME mainly targets customers in Europe, a significant share of its supplies comes from Asia. Implementation Motivation and drivers To support data exchange with supply chain partners, FME mainly uses Edifact, says Mr. Noack and adds: Edifact is a well-established standard for many industries, and is also very reliable and useful. However, several processes crucial to the exchange of data between business partners are either not specified by Edifact or only insufficiently. From his side, Mr. Walmsley identifies process support as a strength of RosettaNet: In specifying an order-to-cash process, for example, RosettaNet is laid out broader and more flexible than Edifact. And adds: For this reason, in Asian countries, where legacy Edifact systems are less important, most high-tech companies already operate on RosettaNet. This also explains the relevance of this industry-based solution for the CE sector, where Asian manufacturers have a significant market position. In fact, according to Mr. Noack, it was an important European customer with a presence in Singapore who demanded the implementation of a RosettaNet-based solution from FME in Given that electronics giants seem to be driving developments and for some, RosettaNet is even a knock-out criterion when choosing their suppliers, Mr Noack expects that this industry-based solution will prevail in the future. The solution Based on its customer s specification, FME set out to identify solution providers. An offer from a major European software house had more functionality than was actually required, and was also too expensive. Mr. Riegelhof stresses: What we needed wasn t a one-sizefits-all solution. In contrast, Seeburger offered one that specifically addressed our requirements. It also had a track record with the implementation of RosettaNet-based solutions. FME has introduced a process, classified as PIP 7B1, which has already been operational for one year (see also the graph below). PIP is short for Partner Interface Process as defined by the RosettaNet consortium. The term 7B1 specifies the protocol ("Distribute Work in Process") in this specific case. Mr. Riegelhof explains: PIP supports the process used by a product manufacturer or assembler to inform a party of the product configuration status. The recipient of the product status information could either be an end customer or another party acting on behalf of the end customer. For example, a manufacturing subcontractor could use this implementation to inform a product supplier about the production status. 2

3 Exhibit 1: Automated information exchange between FME and the trading partner Source: Berlecon Research (2006) based on information provided by RosettaNet. Outcome General impacts The most important outcome of the implementation was that FME retained the trading partner as a customer, Mr. Riegelhof stresses. He also points out that the data quality is really superior to other processes that are not run on RosettaNet. Finally, he expects cost savings owing to the automation of processes and seamless integration of further business partners in the future. He admits, however, that in this specific case it is nearly impossible to quantify the outcome in terms of cost savings or error reduction. First, it is still too early to make a final evaluation, since the solution has been operational for just one year. Second, the process supported by the new solution did not exist before it was demanded by the customer. Therefore, comparing process costs before and after this implementation is impossible. Mr. Walmsley points out two main technical advantages of the new solution: Real-time process support and the use of XML as the basis. With regard to process support, RosettaNet helps to integrate businesses internally and externally. In this way, companies can support typical supply chain processes such as forecasting-to-cash or, as in the case of FME, to share information about work in progress. In terms of process support, RosettaNet also shows superior qualities compared to Edifact as a rivalling e- business standard. On the basis of Mr Walmsley s experiences at Seeburger, optimal process support requires extensive work on specifications: We hold meetings on a regular basis to discuss status-quo and future tasks. This is then delegated to work groups, which collaborate via phone or face-to-face. After final approval, the specifications are announced as standards by the respective Council, e.g. Logistics. Mr. Walmsley stresses that the use of XML is another RosettaNet advantage because this is a dominant standard language for data exchange. Although Mr Riegelhof largely agrees, he remains sceptical about the interoperability promises of XML: XML is not a guaranty that the implementation will happen effortlessly. The systems needed to be parameterised and further calibrated. In fact, according to Mr. Noack, resolving these issues and establishing a stable RNIFbased communication link over the internet took significant efforts. Mr. Walmsley explains: When automating and synchronising business processes between two enterprises, it is important to not forget the main tasks in setting up the connections, RosettaNet being a point-to-point connection. Setting up involves the business on one side negotiating and fixing the data meaning and on the other side technically setting up of the communication and translating the data content into the appropriate format. Especially for 3

4 companies with little or no RosettaNet know-how it is important to a have a partner to accompany and avoid as many problematic issues as possible. By making use of these technical advantages, RosettaNet can support electronics manufacturers in overcoming some of their main challenges, argues Mr. Walmsley. He sees a major challenge of companies from this sector in a general trend towards outsourcing of production, design and logistics services. By using RosettaNet, a company that wants to outsource services and the external service provider can share production data. Information can be exchanged in batches, which is sufficient for service providers to assure high quality standards. Another major challenge of CE manufacturers is the necessity of long-range planning and forecasting within volatile markets and lead times. In this regard, RosettaNet can support processes related to pricing and forecasting. Particularly if long-term planning and forecasting are important, RosettaNet shows superior qualities compared to e-business standards like Edifact, says Mr Walmsley. Mr. Noack generally confirms the relevance of these challenges for electronics manufacturers and the usability of RosettaNet to overcome them. However, he admits, the migration from Edifact to RosettaNet is a gradual process. This is due to the fact that many companies have well-defined processes based on Edifact and have invested in their infrastructure accordingly. Therefore, FME prefers a step-by-step transformation: There are single processes that are superior to Edifact. In that case, migration to RosettaNet is likely, but will be focused on the specific process. In fact, survey results by the e-business W@tch in 2006 confirm that EDI standards are still widespread among larger companies in the European CE industry. About 20% of medium-sized CE companies, for example, are using EDI. Overall, migration from EDI to XML-based standards seemingly needs some time, and not all CE companies are yet ready to migrate. In fact, according to the survey results only about one quarter of EDI users reported that a migration from EDI to XML-based standards is planned. Lessons learned Based on the example of FME s implementation of RosettaNet, the case study discussed opportunities of implementing this industry-based solution. FME already used Edifact, which is a more conventional e-business standard. In comparison, RosettaNet turned out to be an enabling technology. It supports production outsourcing and applications that have been developed or optimised specifically for the CE industry, for example forecasting tools that have to deal with uncertain demand patterns. It appears to be superior to Edifact in terms of process support and the use of XML. In addition, driven by major IT manufacturers, RosettaNet is more widespread than e-business standards, like Edifact, among high-tech companies primarily in Asia. Because of historical developments, however, Edifact still plays an important role. As pointed out by Mr. Noack, companies will only gradually migrate to RosettaNet, provided there is a strong business case and proven technical superiority. 4

5 References Research for this case study was conducted by Philipp Bohn (Berlecon Research) on behalf of e-business Sources and references used: Interview with Martin Walmsley, Vice President Sales Industry & Utilities, Seeburger AG. April 7, Interview with Thomas Riegelhof (Manager Business Applications) and Hartmut Noack (Project Manager EDI and ecommerce), Fujitsu Microelectronics Europe, April 20, Websites: Seeburger AG, Fujitsu Microelectronics Europe, 5