Digital Supply Chain
By Mark Lawton, Supply Chain World Magazine
Every week, more than 1 million electronic components arrive at Sonic Manufacturing Technologies. Of those, over 500,000 are delivered to Sonic without human touch and within three days of ordering.
Sonic is a contract electronics manufacturer located in the Silicon Valley. The company partners with more than 100 original equipment manufacturers (OEMs), about 80 percent of which are located in the San Francisco Bay Area. Sonic’s 85,000-square-foot solar-powered facility manufactures electronic products for multiple markets including medical, military, automotive, industrial, IOT and consumer.
“It comes in waves,” Vice President of Supply Chain David Ginsberg says. “As drones were catching on, we had a lot of drones running through the factory. We had to build a drone flight testing room. Lots of volunteers for functional tests.”
The competition in electronics manufacturing services (EMS) is both global and local with “perhaps 100 EMS within the Bay Area itself,” Ginsberg says. “There are probably six to eight we see regularly on competitive bids. Customers will also explore prices in Asia and Europe, so we must compete globally.”
Low Cost, High Payback
To manage cost and complexity, Sonic keeps about 3,000 of the most commonly used resistors and capacitors in inventory at all times. Customers participating in the program have immediate availably to exact quantities needed without liability on excess. “Without even seeing a new design, half of the customer’s parts are already in the building,” Ginsberg says. “And even during the recent capacitor shortage, not one customer on the program experienced shortages or delays.”
A majority of Sonic’s customers regularly launch rapid prototypes and new product introductions, with many products continuing at Sonic through volume production on its nine automated surface mount lines. “Our executive team is engineers that love hardware and all the new tech in this industry,” Ginsberg says. “We frequently work with labs and founders, including those coming into the hardware space for their first time.”
Sonic’s business model is different than the competition. “We decided early on that every process, prototype or production, would be optimized for speed.” Ginsberg says. “We could then accept our customers’ timelines and avoid quoting longer deliveries. Our customers see more responsiveness than perhaps anywhere else they could go.”
Supply Chain Automation
“In order to move quickly and cost-effectively, a digital supply chain is the best solution,” Ginsberg says. “Moving ones and zeros around the globe is faster and cheaper than moving parts. Being in the hardware industry, we use digital to move and query the supply chain without human touch and then convert it to hardware at the last possible moment. The digital supply chain can be thought of as data plus dollars equals parts; and commitment to pay is simply another piece of data.”
Here’s how a digital supply chain works:
- The engineering data of the customer is uploaded to Sonic’s business system (ERP).
- An MRP (material requirement planning) engine does the calculations, and a data quality engine auto- corrects bad and missing records. “It is simply impossible to keyboard your way to accuracy,” Ginsberg says. “Modern databases are huge.”
- With the data quality established, Sonic’s application programming interface (API) takes the customer’s material requirements and compares it to supplier availability– computer to computer – and auto-picks the best match on source, price, quantity and delivery. “API is a bit like electronic data interchange [EDI], but more accurate, lower in cost and better able to choreograph the process,” Ginsberg says. “It’s a conversation between computers.” Sonic’s API system then automatically places the purchase orders. “Within three minutes I can have 50 percent of my parts on order and on the dock in one to three days,” Ginsberg says.
- What doesn’t get API ordered is auto-sent to a program called CalcuQuote. CalcuQuote sends out the part requirements to suppliers for quotation by actual salespeople. Supplier responses are returned by CalcuQuote to the Sonic API procurement system which then attempts to buy from the new data. This brings Sonic’s automation up to about 65 percent.
- The final 35 percent gets turned over to the Sonic purchasing team. “While automation works beautifully for most parts, the last few percent takes an increasing amount of experienced sourcing, hand holding and collaboration with suppliers,” Ginsberg says.
While speed is obviously important on prototyping and new product introduction, it is also highly advantageous in volume production. “Our median delivery for turnkey electronics – buy, build, test, ship – is under 30 days after receipt of order, while the competition is typically at two to four months,”
Ginsberg says. “Shorter lead time means our customers can continuously adapt to actual market demand while holding less inventory. The best improvement to forecast accuracy you can make is lead time reduction; customers know demand for next month far better than the following quarter.” Ginsberg says a digital supply chain is easier to implement than most people think. Sonic’s digital supply chain does not require artificial intelligence, big data, robots or data scientists. As a mid-tier business Sonic contracts with Orbweaver for data transport and CalcuQuote to integrate human quotes with the API process.
“It’s very low cost and very high payback,” Ginsberg says. “We are always developing new API capabilities, and as our entire industry goes digital, our mutual call for new APIs will bring them to market faster. Digital is an industry- wide solution and collaboration is to our own advantage.”
Sonic certainly is better off for going digital. The company has been able achieve these results without the typical overhead costs of production scheduling, material planning and cost accounting. Shortage meetings are also a thing of the past. “All factory data and supply status are available from the desktop as immediately known,” Ginsberg says. “Why meet? Managers drop by throughout the day if they need an exception escalated.”
He adds, “Nothing is faster, more cost-competitive and higher in customer satisfaction than digital, so this is where the market is going. The quality and automation of transactional data are the keys to success.”