Supply Chains Aid Compute Lifecycle Assurance Advancement
by 
Alan Bird, President, Arrow Electronics Inc. Americas Electronics Components Group
In his role as president of Arrow Electronics Inc.’s Americas components business, Alan Bird is responsible for all customer and supplier relationships, sales and the management of employees. During his 25 years in the electronics industry he has seen tremendous change, including the growth of outsourcing to China and other parts of Asia; economic recessions; the rise and decline of the PC and the flush of new technologies such as mobile devices, the Internet of Things and wearables. Today he is focused on serving customers in the Americas while grappling with a changing environment that demands a nimble supply chain. He is also facing the challenge of growing markets that include industrial, auto, lighting and the Internet of Things. Consolidation in the semiconductor industry is another shift that executives like Bird are thinking about as they seek to prepare their customers for a newly revamped chip market.
Bird recently discussed these issues with EPS Contributing Editor Nicole Lewis.
EPS: Intel Corp. has announced its intention to buy Altera Corp.; Avago Technologies Ltd. recently announced a $37 billion deal to buy chipmaker Broadcom Corp.; and Infineon Technologies AG has snapped up International Rectifier Corporation. Additionally, NXP Semiconductors N.V has merged with Freescale Semiconductor Ltd. What impact do you think these mergers and acquisitions will have on the supply chain and on pricing?
AB: This is a big change that is coming full in our face. What you are starting to see now from a customer perspective is they are wondering what this means to their designs. I'm sure they're concerned about pricing, but they are also equally concerned about what this means to the continuity of supply and will a company that made an acquisition make a decision that impacts the products they are using.
We are certainly seeing a lot more interest from customers who are saying: “Hey, do we have other options out there? How do they flow into our design cycle? And should we be concerned?” It’s still early in the game, but you are seeing customers now start to get ... I don't want to say concerned because that is not the right word, but I would say at least a heightened sense of asking themselves: “How does this impact me a year from now?” I think that is where we will have to start playing a bigger role as these deals close and officially semiconductor companies start coming together and start rolling out to us what their roadmaps are.
EPS: After this round of consolidation among chip suppliers settles down what do you expect to see in the semiconductor market?
AB: Suppliers that come up with disruptive technology are going to be the ones that are going to grow their business. Five or 10 years ago if the market went up 15 percent everybody went up at least 10 percent and some went up 20 percent. What you are starting to see now is that there were some companies over the last five years that had incredible growth trajectories and some companies went backwards. What you're going to start seeing play out more and more is that the companies that wind up with disruptive technologies will get significant growth uplift and those that don't will either be directionally flat or may actually decline.
Another challenge is that it’s going to get harder and harder to be able to show growth. Some of these companies are $30 billion or $40 billion companies. It’s tough to show 50 percent growth at $40 billion; you’ve got to find $20 billion somewhere. I think that’s some of the dynamics that are in play right now. Everybody recognizes that we are a mature market with lots of consolidation and a marketplace that while still exciting and still growing is an industry that is a little longer in the tooth than we've been used to.
EPS: How are you managing improvements to your supply chain? What are the challenges you face and when you wake up in the morning what are the three big headaches you have to deal with in your supply chain?
AB: My supply chain starts with a customer who has a need to come up with a new product, and so the things that keep me awake at night right now are: How do I bring greater impact to my customers’ designs? How do I drive greater utilization of the tools that I have both online and off-line and that means leveraging all of my engineers that I have throughout the Americas as well as my centralized team in Denver [Colorado] as well as my online tools? That's one big pocket of things that we are working on and continue to improve.
The next step is the transition from that design to production which is the new product introduction. How do I ensure that I have enough parts in inventory across the broadest product portfolio possible? That's an asset utilization discussion: making sure that my SKU count continues to grow based on what my suppliers introduce as new products because they want me to have every one of those products that they introduce in stock -- so how do I ensure that? How do I make sure that I’m getting the right product and inventory?
The third piece, which I’ll call my third big headache, is to make sure that I have enough of the right product in stock as well as make sure I have the robustness of a supply chain that reaches the whole way to Asia out of the Americas. We certainly have a supply chain model in the Americas and that includes sort of the traditional consignment, in-plant stores, bonded inventory, B-to-B business etc., but it also takes into account that I have a lot of customers who want me to have product ready to ship within 24 hours into a tier one EMS in China. I have to be able to have the product there the next day, so we have models built around that.
EPS: You mentioned your efforts to make sure you’ve got all the right parts in your inventory what are the challenges for your procurement team? What are their key issues?
AB: One big challenge that certainly keeps me up at night is there’s a growing percent of business from all of our suppliers that are for all intents and purposes single customer or very limited customer end usage and so our model has had to evolve. Twenty years ago a significant part of our business as an industry was in commodity products and a part was used by hundreds of customers so the model became making sure you had plenty of those products in stock. For example, back then you had 1,000 customers who were going to use the same part and the good news was that because of such a big number even if some customers had an inaccurate forecast there were so many customers that if they added or reduced their orders the pluses and minuses sort of equaled each other out.
Today, if you have three customers and forecasting for all three says they need 10,000 units a month from now, and next week two of them decide they need 40,000 units three weeks from now you are in trouble. You better have a good asset team who can predict and use logic to sort things through. It works the other way too. If you have three customers all say they want 10,000 units and two of them decide to go to 2,000 units you may have a whole bunch of product that you don't need so again it makes it more challenging to do that job.
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