Outsourcing Semiconductor Operations? 4 Questions to Ask Your 3PL

semiconductor, chip, supply chain, outsourcing, operations

Jesse Laver, vice president, DHL Supply Chain

The semiconductor is a vital component of our technology-driven world. It is used in a multitude of products throughout industries, from advanced electronics and communication devices such as smart phones and computers to increasing complex wearables, automobiles and throughout the home. The success and profitability of this multi-billion-dollar industry is heavily dependent upon a dynamic, responsive and increasingly predictive supply chain.

The semiconductor supply chain is one of the most challenging and complex supply chains of any industry, featuring a complicated sequence of production and distribution processes. It contains multiple interconnected and involved supply chain steps, from global materials sourcing to silicon wafer fabrication, and then from chip and processor assembly and testing to worldwide transportation. The average chip makes three or four trips around the world in its life, from manufacturing to installation and, ultimately, to the hands of the customer.

Companies in this industry operate in a fast-paced, high service level market environment driven by digitalization, IoT and the constant evolution of technology. Typically this requires a substantial R&D budget and high capital expenditure. Semiconductor companies must be prepared for highly volatile and cyclical demand, including shifts in customer segments. Market slumps or growth cycles can last anywhere from 18 to 24 months, and are heavily dependent on often unpredictable global geopolitics, regulations, and environmental impacts.

It is within this context that many semiconductors companies must make a very important decision: which 3PL (third-party logistics provider) is right for their supply chain? Below are four factors semiconductor companies should consider when choosing a 3PL.

Expertise and breadth of service

It is not enough for providers to have logistics and supply chain expertise. They must also possess a deep understanding of the different requirements for inbound to manufacturing, finished goods, and spare parts/reverse logistics, all with their own challenges. 3PLs need to operate in a zero defect culture in which they adhere to a strict set of KPIs with extremely tight tolerances. A 3PL should be able to integrate services that can address your unique needs, including specialized transportation, compliant packaging, hazardous inbound materials management, and high-value sensitive goods handling.

Global footprint and global knowledge

Given the global nature of the semiconductor supply chain, qualified 3PLs need to offer capabilities that span every continent, from inaccessible and remote locations to major population centers. They need to understand the intricacies of each market where you are located and your product travels, including international regulations and tariffs. The ability to leverage and operate Foreign Trade Zones is crucial. They need to consistently and efficiently provide local market insight and collaborate on cross-regional scale in a global market, touching every aspect of your business.

Agility and flexibility

The right 3PL provider for your supply chain must have the capabilities and reliable infrastructure to react to the volatile, fast-paced semiconductor market. This means offering proven logistics solutions and dependable systems and processes that are compatible with shrinking innovation cycles, sudden shifts in demand, faster time-to-market, dynamic mode transportation, proactive risk mitigation and end-to-end supply chain visibility. You need to be able to adapt your supply chain to achieve the required levels of speed, flexibility and cost when business objectives, market conditions and customer demands change. Operating in a campus environment enables the flexibility and rapid deployment of the expertise and resources needed to cope with the cyclical nature of the industry.

Technology investment

In today’s environment where disruption is occurring at an accelerated pace across all industries, the pressure is on supply chains to continually innovate to maintain competitive advantage. You need a logistics provider that not only has the commitment, but also the financing to raise capital to keep pace with innovations and technology advances. It needs to be a 3PL that is constantly introducing and integrating new technologies that can address your needs and fit with your unique business profile. For instance, have they successfully deployed robotics or fully- or semi-automated technologies?

A supply chain as complex as the semiconductor industry requires specialized and tightly integrated global logistics services to support each element of the semiconductor value chain. Adding these four factors to your consideration set when picking your 3PL will help ensure you have the partner that aligns with and supports your supply chain strategy.