In May, I attended the Kinaxis Kinexions event in San Diego, CA. At the conference, I was fortunate to see a presentation from Brent Wilson, Senior Vice President of Global Supply Chain at Qualcomm. I was also able to interview Brent after his session to get a little more insight on how Qualcomm dealt with the Covid-19 pandemic, what it means for the semiconductor chip shortage, and where the company is going with its digital transformation strategy.
As Brent mentioned in his introduction, it has been a challenging few years for semiconductor manufacturers. COVID-19 has fundamentally changed the way the world connects, computes, and communicates. For companies like Qualcomm, that’s fueled unprecedented demand for the semiconductor chips they provide to power the technology we’ve all come to rely on. Concurrent supply chain planning is required for the company to navigate uncertainty and expand into new markets of automotive, computing, and connective intelligent edge.
Qualcomm’s background is rooted in smart phones and cell phone communication. The company creates semiconductors, software, and services related to wireless technology. The company has been rapidly expanding to new markets, such as IoT. The question Brent asked for the future of semiconductors is how do you connect everything and give everything the intelligence it needs to make local decisions? That’s not exactly an easy question to answer. For Qualcomm, it is all about innovation.
Qualcomm uses the Kinaxis Rapid Response solution for concurrent supply chain planning. The solution was implemented in 2012 in order to deliver a comprehensive sales and operations planning (S&OP) solution that was able to move into execution with high integrity. Within the semiconductor industry, especially as the Covid-19 pandemic hit, execution is key.
Brent pointed out that Covid created small interruptions for many companies in terms of sourcing semiconductor chip materials. There are different policies in place at different companies, which carries over into granting companies licenses to be able to operate. The larger impacts have been more around shifts in demand from Covid; demand unexpectedly shifted into a different direction and consumed all resources above the forecast.
One of the biggest issues was the labor shortage during Covid. As Covid spread, so too did factory closures. Qualcomm turned to more automation in its semiconductor manufacturing. The ratio of labor to output is more towards output, so the company did not need as much labor. The key was to determine which product to focus on. This ended up being high end products. Qualcomm had to rethink its position in the mid and low space since they could not service all markets with a chip shortage.
Qualcomm also faced a raw material shortage. Some resins and epoxies were not available, so the company had to look at alternative components or different methods of sourcing. By running what-if scenarios in their concurrent planning solution, Qualcomm was better equipped to handle these disruptions.
Another disruption facing the company, and the industry, was the face mask shortage. Face masks and PPE were already worn in semiconductor manufacturing plants to ensure a dust-free environment. Suddenly, face masks were in short supply as demand skyrocketed. Qualcomm had to look at alternatives to sourcing masks as well as using less physical labor to continue with its output.
I asked Brent how long he saw the chip shortage lasting. He told me that there is generally 6 to 7 percent growth in chip production year-over-year. The supply side is relatively fixed, and there is no big source coming on board to flood the market with more chips. On the demand side, there are some pockets that are showing weaker signals; some are based on the correction of work from home, and demand is starting to abate. The unwinding of tariff wars is also helping. Since I interviewed Brent, semiconductor manufacturers have seen a shift in the chip shortage crisis, and are facing a glut of computer chips as smartphone and PC demand declines.
I asked Brent how Qualcomm prepares for the next big disruption. First and foremost, he recommended that companies choose their battles for where they want flexibility. Companies need to analyze total supply and demand and have the discipline to follow through, even if it takes money and resources. In normal times there is no benefit, but companies need to stay the course even when demand and supply are equal. Dealing with disruption also takes agreements from customers. Customers need to understand that distribution could change, depending on material supplies.
Brent said that Qualcomm is right in the middle of its digital transformation journey. Qualcomm is looking at how artificial intelligence can turn a physical environment and into 1s and 0s for better efficiencies. Qualcomm understands it needs the hardware that supports AI, and it can make the product AI ready as a result. For now, Qualcomm is looking at how it can continue to make efficient decisions on sourcing, as well as how it can make the fastest decisions for its manufacturing needs. As the speed of manufacturing moves forward, so too does the speed of decision making.
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