Manufacturing and Extended Manufacturing

Manufacturing and Extended Manufacturing

The economic turmoil in 2009 forced industries to adopt strategies for survival and growth. The semiconductor industry was no exception. In the coming days, considerable consolidation is expected in this industry. During the downturn, the industry witnessed limited Merger and Acquisition (M&A) activities but with the upswing, significant action is expected to take place. Even during the downturn, a few companies were looking for M&A opportunities where joint product development could yield results.

Today, large semiconductor companies are globally dispersed. Companies headquartered in the USA or Europe invariably have manufacturing and distribution operations spread across South East Asia and China to leverage costs. Given this scenario, M&As involve significant challenges in terms of Post Acquisition Integration (PAI). Once the M&A activity starts looking up in the semiconductor industry, companies will have to address the challenge of rapid post merger integration.

This paper presents a scenario where two large manufacturing companies merge a portion of their business and form a third company. We refer to them as Company A, Company B, and NewCo - the new entity born out of the merger of Company A and Company B.

Challenges on the business modeling and technology front are very common in M&A scenarios. To address them, PAI for a manufacturing company needs to focus on the following areas:

? Business redesign and process remodeling
? Business applications management and rationalization
? Specific and niche applications for factories and Sub-Contractors
? Infrastructure management

Focus of the Paper

The semiconductor industry has products with very short product life cycles, is globally dispersed, and has a complex supply chain of fabs and assembly and test factories.

PAI takes place across the following business domains of the industry:

• Finance
• Human Resource Management
• Sales and Marketing
• Procurement
• Planning
• Logistics
• Manufacturing
• Outsourcing
• Engineering and Product Data
• Business Intelligence
• Legal

This white paper only focuses on the PAI of manufacturing (company-owned manufacturing facilities) and outsourced manufacturing (sub-contractors who are extended arms of internal manufacturing), also called extended manufacturing. This focus is essential to bring out the peculiarities of this domain, which are covered in the subsequent sections of this paper.

PAI is discussed not only in terms of business and IT, but also the following aspects:

• People
• Processes
• Data
• IT Operations
• Organization

This approach lends completeness to the analysis and ensures that all key challenges are considered.

Integration of manufacturing processes and facilities poses one of the biggest challenges in any global scale integration. Additionally, if the supply chain includes manufacturing through sub-contractors, it is an even bigger challenge.

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