Without knowing it, you’ve probably already used several products from Infineon Technologies today. The company designs and manufactures specialized semiconductors that play a vital role in the ongoing digitalization of the world around us. Infineon is the world’s second-largest supplier of automotive integrated circuits (ICs), for example. It is a leading provider of power electronics devices, used in industrial machinery, trains and electricity infrastructure. And it makes special security chips that are embedded into passports, identity cards and access control systems.

Those may appear to be niche segments, but -Infineon’s chosen niches are big and growing fast. Revenues reached €7.6 billion in 2018, up from €4.3 billion in 2014, and the company now employs just over 40,000 people worldwide. Its roots are in Germany: Infineon came into existence in 1999 when industrial conglomerate Siemens spun out its semiconductor operations. But while its HQ is still in Neubiberg near Munich, Infineon has become a truly global operation. More of its staff are now based in Asia than in Europe, for example.

Today, the company sells around 36 billion individual components every year. It manages 1.5 million separate shipments between 100 manufacturing locations, five major regional warehouses and 1,500 customer sites in 50 different countries.

From features to solutions

Roxane Desmicht, Infineon’s Senior Director Corporate Supply Chain for the Asia Pacific region, notes that the company’s global shift has been paralleled by an equally important but subtler change in competitive dynamics over the past two decades. “We have always been an intensely IP-focused company, and like many technology companies we tended to compete on product functionality,” she says. “But sometimes, the technology reaches a limit. Then the customer won’t just be sensitive to product features, they will also be sensitive to the way the product is delivered.”

Recognizing that change, Desmicht says that Infineon “strives to create added value for the customer by not just delivering product but also a solution.” An example of this approach, she adds, is the full traceability that customers can request for many products. “If a customer wants to understand when a specific device was manufactured and in which of our factories, we can provide that information.” That level of traceability is particularly important to Infineon’s automotive customers, who operate highly sophisticated quality systems and want to be able to conduct detailed root cause analyses if issues occur.

Speed and flexibility

Another solution that offers real value to customers is flexibility. They want the confidence that the parts they need will be available when they need them. However, short lead times and variable demand are big asks for the semiconductor sector. “A key challenge in our supply chain is that the manufacturing lead times for products like ours are always very long,” says Desmicht. “A best-case scenario would be four months between the first manufacturing step and delivery to the customer, but we have some products with a manufacturing cycle of up to a year.”

Infineon combines an array of approaches to ensure it can offer customers greater flexibility than those long cycle times would suggest. It has configured its manufacturing plants so two or even three facilities are able to make the same product, for example, making it easier to balance demand and available capacity. It also operates a system of intermediate stocking points, which hold unfinished components that may be used in multiple end products. And where appropriate, it outsources elements of production to external providers.

Those levers can only operate effectively, however, if there is a robust planning process in place to ensure that the right inventory is positioned across the supply chain, and that the available manufacturing resources are allocated appropriately. That makes planning a core part of Infineon’s supply chain strategy. “We have always been a strong planning organization,” says Desmicht. “And we strive to improve our planning processes wherever possible.”

Eight years ago, for example, Infineon partnered with an external software company to co-develop a comprehensive Sales & Operations Planning (S&OP) system. At the time, says Desmicht, that approach was a first for the semiconductor sector. “That tool is now commercially available, but as the first user, we had an edge in using the tool, and we were able to enhance its functionality.”

DELICATE OPERATION: Infineon’s products operate at the boundary between the digital and physical worlds.

 

Smarter networks

The S&OP tool is just one piece in a larger jigsaw of systems that Infineon uses to manage its supply chain and manufacturing operations, and Desmicht notes that the company deliberately chooses “best-of-breed” solutions for different parts of its business. The trick, she says, lies in ensuring that the various systems and software tools work smoothly with one another.

The company’s software ecosystem is also highly dynamic. Infineon tries to upgrade its systems regularly as new functions become available, working closely with its providers to develop roadmaps for future developments. In the past, it has also developed some software in-house where specific capabilities were not available on the market, but Desmicht says that wherever possible Infineon now tries to standardize its systems and work with off-the-shelf solutions.

That policy of continual upgrades has allowed Infineon to implement innovative approaches as they become available. Its current planning tools incorporate machine learning capabilities, for example. They are used to set inventory targets automatically for clusters of components with similar demand characteristics, and to generate demand forecasts that are shared with logistics providers and other supply chain partners.

Right now, the company is involved in a pro-ject to add an entirely new layer to its supply chain -management architecture. “We recognized that there is a growing need to have not just backward-looking traceability, but also a real-time view of our manufacturing and supply networks,” explains Desmicht. “We want a view that is not as deep as a manufacturing execution system, but not as shallow as a conventional enterprise resource planning system.”  The new system, which Infineon calls its Global Production Network, will, says Desmicht, “bring us to the next level in terms of real-time supply chain capabilities.”

Into hardware

Infineon is also exploring the opportunities that Industry 4.0 can offer for its supply chain. That feels like a natural step for an organization whose products operate at the boundary between the digital and physical worlds. So far, says Desmicht, the company has made most progress in its manufacturing operations, where sensors and RFID tags are helping to improve the visibility and control of materials as they flow through production.

Automation is also coming to its logistics operations. In its finished goods warehouse in Singapore, for example, conventional shelves have been replaced by an automated storage and retrieval system. The technology has had multiple benefits, says Desmicht, including improved accuracy and a boost in productivity. It has also significantly increased the capacity of the warehouse, which helped Infineon to meet a sudden increase in demand following the 2015 purchase and subsequent integration of U.S. rival International Rectifier.

People matter most

Desmicht cautions against the idea that technology is the solution to all supply chain challenges, however. “A tool is just a tool,” she says. “For us, it’s more important to understand the problem you want to solve. Then you can decide which approach works best to achieve your goal. You don’t always have to invest in the most expensive technology when something simpler might do the job.”

Technology and the wider organization also need to evolve in tandem, she adds. Infineon places great emphasis on the people side of its supply chain. It has established a dedicated academy to train supply chain personnel and runs a cross-functional supply chain community that meets regularly to discuss performance and solve problems. In a sign of the growing importance of the function, supply chain issues are increasingly on the agenda at the very top of the organization. Fifteen years ago, says Desmicht, it would have been unusual for Infineon’s top management to discuss the supply chain. “Now we have no problem getting air time with the board.” —  Jonathan Ward

Published: April 2019

Images: Juliana Tan Studio for Delivered.; Infineon