Why Siemens Bought a Supply Chain Company

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Where does a supply chain firm fit into Siemens AG’s portfolio? Supplyframe, which Siemens acquired in May, will be integrated into Siemens’ Digital Industries unit and become part of its software-as-a-service (SaaS) offering.

In its 18 years in business, Supplyframe has evolved from a components aggregator to a “design-to-source” intelligence (DSI) firm. Its DSI platform collects billions of continuous signals of design intent, demand, supply, and risk factors to inform design and purchasing decisions.

Although Siemens and Supplyframe both engage in the digital marketplace, e-commerce isn’t part of the plan, said Richard Barnett, chief marketing officer for Supplyframe. The DSI engages engineers, sourcing, and supply chain professionals with information and content. It analyzes, in real time, data from those sources to identify design and purchasing trends.

Richard Barnett

“Engagement will lead to business opportunities,” said Barnett, “but our model is more about helping engineers make informed decisions.”

Siemens has made more than 40 acquisitions, including Mentor Graphics, to streamline engineers' design process, reduce costs and increase supply agility. The SaaS business provides software for design, simulation, verification, testing and manufacturing.

Supplyframe has made four acquisitions: Buymanager, Hackaday, EEFocus and SamacSys, and its SaaS offerings have been growing by about 40 percent over the last few years.

Siemens describes its Digital Industries business as an innovation and technology leader in industrial automation and digitalization.

Supply chain visibility has become a priority for OEMs as Covid-19, factory closures and fires and logistics bottlenecks have upended electronics supply networks. A sudden rebound in vehicle demand has contributed to a serious global shortage of semiconductors. The electronics supply chain relies on design, as well as procurement, trends to anticipate demand.

Although roughly a third of new product designs actually reach production, design wins are a good indicator of the markets, components and end-products engineers are interested in.

“There’s a big opportunity in demand sensing,” explained Barnett. “The form it takes is not consumer interest around a brand or product, it’s the engineering of the products. That translates into demand, but connecting the dots – design through production – is the challenge. Whether it is a chip company or a distributor, the sense of when a design cycle is taking place can drive greater efficiencies and accelerate time to market.”

Procurement is not always able to source components selected by an engineer. This can drastically alter demand signals.

Supplyframe’s analysis also identifies risk – the consequences of having too much or too little inventory.  Automotive companies have cut back on vehicle production due to the semiconductor shortage which chipmakers warn could last years. Supplyframe provides cost vs. risk analysis;  identifies alternative sources; enables cross-functional component reviews and provides a full audit trail for parts.

For Siemens, the acquisition holds three areas of synergy, Barnett explains. It expands the industrial conglomerate’s reach and engagement with the electronics value chain. It provides a template and design model for intellectual capital -- along with its existing CAD and design for manufacturing (DFM) offerings -- and it provides insight into new business opportunities.

“Supplyframe will be the nucleus to accelerate our overall digital marketplace strategy,” said Cedrik Neike, managing board member for Siemens, in a statement. "Supplyframe’s ecosystem and marketplace intelligence complements our industrial software portfolio perfectly and strengthens our capabilities for the growing market of small- and mid-size customers.”

Supplyframe will retain its brand after the acquisition; CEO Steve Flagg will continue as CEO and join the Siemens Digital Industries Software senior leadership team. Siemens has agreed to buy the company for $700 million and expects to close the deal by the end of the year.