Infineon Technologies Takes Planning to the Next Level With JDA S&OP
Infineon Technologies AG operates in an industry known for its demand volatility, long product lead times and high capital investments. It provides semiconductor and system solutions, focusing on three central needs of modern society — energy efficiency, mobility and security — to diverse customers worldwide, including auto manufacturers, industrial electronics companies, chip card and security businesses, and information and communications technology leaders.
The company's ability to sense and respond to demand changes, while balancing global production capacity across its more than 20 facilities, can be challenging. “Operating under these difficult conditions, you have to be prepared for market volatility,” said Andreas Mätzler, senior director of supply chain engineering, corporate supply chain, Infineon. “Today's perfect product will be out of the market tomorrow. You have to react fast.”
All semiconductor companies are facing increased product and supply network complexity, while contending with more variable customer demand. “We learned a lot from the economic crisis in 2009 and the fast recovery in 2010, and we were able to manage the cycle well operationally,” said Mätzler. “But it was a wake-up call for our planning performance. Our planning process was too complex, too slow and the business-related figures such as turnover and the operational topics such as utilization were hard to align.”
The company set out to re-engineer its end-to-end planning processes and tools to ensure that it could respond more quickly to market changes — across all planning levels and areas of the company. In order to achieve this objective, Infineon realized that it needed new technology to align its flexible planning processes with its actual demand and required capacities. It was a two-year journey that was jointly managed by the IT and business departments.
Infineon at a Glance
Infineon Technologies AG offers semiconductor and system solutions addressing three central challenges to modern society: energy efficiency, mobility and security. In the 2012 fiscal year, Infineon reported sales of €3.9 billion. Headquartered in Neubiberg, Germany, the company employs more than 26,000 employees at its 12 production facilities and more than 20 R&D locations worldwide. Known for its innovative technologies, Infineon has more than 17,000 patents and patent applications.
Create a single integrated, multidimensional sales and operations planning process that promotes global collaboration and enables the company to quickly respond to market changes.
“The sales and operations planning tools we were using at that time were homegrown, and the combination of homegrown tools with a growing business did not work because of limitations in scalability and integration capabilities,” explained Wolfgang Keichel, vice president, IT supply chain management, Infineon. “We chose JDA Software as our partner for this project based on a long history of working together in the planning area. JDA understands our business quite well. They also understand the specifics of the semiconductor industry well, and that gave us a good basis to work from.”
A long-time JDA customer, Infineon previously utilized JDA solutions to improve the efficiency of its supply chain operations. In 2011, Infineon tested sales and operations planning (S&OP) solutions from a number of different vendors, and selected JDA S&OP in order to create an integrated solution suite that could provide both a reliable demand forecast and realistic production plans. Out of all of the solutions Infineon evaluated, JDA S&OP was the only solution that fulfilled the functional requirements of volume planning and production maturity.
A Carefully Planned, Strategic Implementation
To ensure a rapid, results-driven installation and rollout of JDA S&OP, Infineon turned to JDA Consulting Services. “We relied on JDA Services quite heavily. The consultants started with a ‘deep dive,' where they tried to understand our processes first, and then tried to match them to the JDA solution capabilities,” said Mätzler. “For such complex situations, I think this is a good way to start — understanding our processes before you discuss what is the right tool, what is the right feature. The consultants know the JDA tools quite well; they gave us a lot of input on what would work.”
In partnership with Infineon, JDA developed an interactive rough-cut capacity planning functionality within JDA S&OP, which enables Infineon to easily synchronize demand, supply, capacity and load planning into one multidimensional “cube.” Data — such as sales forecasts, pricing and production capacity — can now be reviewed and changed in real time in one single simulation model, ensuring that Infineon has a reliable overview of its operational and financial plans, and can react promptly to changes in the market. Leveraging these capabilities, Infineon can shape the demand picture to meet production constraints or trigger additional capacity — for instance, at a subcontractor site — when needed.
This implementation represented the first time in Infineon's history that various departments and regions were collaborating in a single S&OP process and using one tool around the globe. Various legacy tools were decommissioned, simplifying processes and enabling the company to make better decisions and move at a faster pace than ever before.
Prior to moving the application inside the Infineon firewall, the company leveraged JDA's Cloud Launch as a testing environment for a few months. According to Keichel, the testing environment helped the teams speed up implementation, secure quality and solution configuration settings, as well as to proof out scalability on the real-life Infineon data model.
The straightforward, familiar interface of JDA S&OP made it easy for Infineon's planners to begin using all of the features on the tool — leading to a fast implementation. “We got very positive feedback on the user interface,” he said. “The combination of a professional planning tool with an interface that is similar to Excel is a combination that works well.”
Multidimensional Solutions, Multidimensional Results
Since completing the worldwide rollout of JDA S&OP, Infineon has achieved a broad range of results across every dimension of its business. The company has reduced its planning effort by more than 30 percent, and is able to cut the lead time for its volume rolling forecast from four weeks to two weeks. Planning errors have decreased up to 90 percent and Infineon has reduced its “churn” — what the company refers to as making minor adjustments to the plan — by a factor of 10. Forecast accuracy has also improved.
The most important result of the JDA S&OP implementation is Infineon's new collaborative planning approach, which enables the business to be much more agile and responsive. “Our new solution is a kind of revolution for Infineon because, with JDA S&OP, we link a lot of single processes into one tool,” said Mätzler. “Now we can combine our demand planning activities with capacity calculations and the capacity confirmation — and at the end we have a constrained plan.”
Mätzler emphasized the dramatic improvement he has witnessed in the robustness of Infineon's planning processes since the company added JDA S&OP to its existing solutions. “When we compare the time before using the JDA S&OP solution, we offered our internal customers a fragmented view of planning. We now have the possibility to combine all the different views of planning,” Mätzler said. “Because JDA S&OP is integrated with our other JDA software, it's a combined solution that serves the long-term forecast with short-term production programs. Demand, supply, capacity and load are always synchronized and calculated together.”
An Improved Competitive Stance
While the global semiconductor industry will always be a challenging and unpredictable environment in which to operate, Mätzler stresses that Infineon's JDA solutions have helped the business manage its everyday challenges much more effectively.
“We will always face the combination of a volatile market, long lead times and high capital investments,” noted Mätzler. “JDA S&OP helps us see how we can best fulfill every customer need, while also making the best use of our investments.”