Electronics industry brief

Electronics Industry Brief

September 2002

© 2002 IBM Corporation Electronics Industry Brief

Executive Summary

Definition

There are subsegments of electrical and electronic manufacturing companies that provide a variety ofproducts and services:

w Microelectronics

w Technology Systems

w Telecommunication Systems

w Hi-Tech Equipment

w Electrical

w Consumer Electronics

w Home Appliances

w Industrial Equipment

w Energy Equipment and Machinery

w Contract Electronic Manufacturing

Industry Description

The electric and electronics manufacturing industries have several business drivers that need to beconsidered:

w Customer demand for choices is increasing. Electronics manufacturers must shift to aconsumer-driven model.

w Mergers and acquisitions are increasing to address diverse markets and reduce costs.

w Divestitures are on the rise. Many companies are selling portions of their business to focus oncore competencies.

w Global supply chains are commonplace in the industry. This has increased the scope ofcompetition and emphasized focus on reducing production costs and increase efficiencies.

w Time to market is imperative to electronics manufacturers. The commercialization of researchand outsourcing of pieces of the production are increasing manufacturing efficiencies for electricand electronic industries.

Industry Trends

The electronics industry has seen similar trends in the Americas, Europe/Middle East/Africa and AsiaPacific :

w The largest growth region in the world is the Americas region. The industry in North America is $11.9billion in 1998, growing to $16.3 billion in 2001 (11.1% CGR). Deregulation is complete. $21.5B is the ITopportunity for 2002.

w Europe is a diverse market with diverse issues causing variation in pricing, warranty, and languageissues. The industry in Europe is $8.7 billion in 1998, growing to $10.9 billion in 2001 (7.8% CGR).There has also been market consolidation around large players. Deregulation has been completed inEurope, increasing competition.


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w Similar to Europe, Asia Pacific is composed of a diverse market causing pricing, warranty, andlanguage issues. The industry is $7.8 billion in 1998, growing to $9.4 billion in 2001 (6.4% CGR). Asiahas also seen market consolidation around large players.

Solutions

Electronics manufacturers need to leverage technology to provide better service to their customers.

w e-business solutions integrate knowledge across the supply chain. Easy access to informationon customers, products and trends can be a competitive advantage by offering better customerservice, accurate product data and up to date forecasts.

w e-Procurement solutions provide electronics companies with access to parts catalogs and toplace orders at anytime with contracted distributors. With the information collected from thesesystems, companies can provide the value-added services of manufacturer negotiation, rebatemanagement, inventory planning and reporting. Purchasing volume can be leveraged and moreemphasis can be placed on product negotiation and selection.

w Product Lifecycle Management (PLM): end to end services from strategy to integration whichenables manufacturers to consider the entire lifecycle of product during design phase, and allowsfor planning of post sale maintenance and telematics enabled problem diagnosis all of whichincrease after sales revenue.

w Warehouse Management Systems are software packages that help distributors optimize theiruse of warehouse space and warehouse labor. In addition, warehouse systems dramaticallyreduce mispicks.

w Wireless computing is evolving in the electric and electronics industry. Radio Frequency (RF)systems and UPC barcoding allow for non-contact reading and are effective in manufacturing.

w Contract Outsourcing is slated to grow from 23% today to 40% by 2004 in the electronicsindustry according to IBM. Companies are interested in creating efficiencies in their processes,and outsourcing processes where they lack expertise.


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Key Themes in Electronics and Electrical Manufacturing

w Customer service is evolving to a new level of responsiveness. Manufacturers need to reactquickly to customers’ wants and needs. A sales force in the field needs to have quick and easyaccess to ordering data and inventory levels via wireless hand-helds. At the warehouse, thesedevices can be used to supplement Warehouse Management Systems’ inventory functions andpicking capabilities.

w Time to market is extremely important to electronics manufacturers. Better management of the

engineering and supply chains assure less time for product development and reduced costs.

w A global supply chain is necessary to remain competitive. Through mergers and acquisitions,competition has no borders. Creating efficiencies in the supply chain is critical to an electronic orelectronics manufacturer’s success.

w Use of design resources to effectively minimize redundancy and maximize productivity andcollaboration with business partners to resolve design issues quickly improves the product lifecycle.

w In order to reduce operation costs, electronic and electrical manufacturers are looking tooptimize warehouse operations. Installing a Warehouse Management System (WMS) wouldreduce mispicks and improve warehouse operations through space and labor efficiencies.

w Outsourcing pieces of the manufacturing process increases efficiencies and reduces costs.


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TABLE OF CONTENTS

6912.0 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6811.0 Associations and Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6710.0 White Papers for Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

569.0 Vendors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

518.0 Recent Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.0 IT Spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

366.0 e-business in Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

275.0 Business Drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

264.0 Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

253.0 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

202.0 Electronics Manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61.0 An Introduction to Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4Key Themes in Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


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1.0 An Introduction to Electronics Manufacturing

1.1 Value Statement for Electronics Manufacturing

Bringing the right products to market at the right time and price requires the enterprise to have an intimaterelationship with its customers, supplies, and partners. Electronics manufacturing companies are respond-ing to the business drivers with the following strategies:

� Better understand customers and their wants and needs � Offer more configurable product platforms to increase design and manufacturing commonality� Execute end-to-end supply chain management to effectively manage supply and demand � Drive component parts reuse in product design � Use design resources effectively to minimize redundancy and maximize productivity � Collaborate with business partners to resolve design issues quickly� Evaluate manufacturing outsourcing options to reduce costs � Resolve manufacturability issues quickly

Electronics manufacturing companies deal with many issues. Business problems that CEOs and seniormanagement are concerned with include:

� Speed to market � Market share � Product innovation � Cost and quality � Competitive position and industry leadership� Emerging technologies that may render obsolete significant parts of existing product portfolios� Services which complement products to provide total solutions Shareholder value � Customer satisfaction, customer service, and customer loyalty � Internet influences on current business model � New and emerging competitors

The functional executives and managers of electronics manufacturers are concerned with:

� Providing competitive products continuously� Integrating hardware and software product components � Reducing complexity in product design and manufacturing� Controlling yields and costs� Understanding customer wants and needs, and consumer wants and needs� Keeping pace with technological changes� Coping with business model complexity and change


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1.2 Types of Electronics Manufacturing Companies

There are sub segments of electrical and electronic manufacturing companies that provide a variety ofproducts and services.

Companies that perform manufacturing or assembly of electronics products forother electronic companies

Contract ElectronicManufacturing

Power generation and distribution, high- and low-voltage equipment, andtransportation

Energy Equipment andMachinery

Detection, navigation, measurement, and medical systemsIndustrial Equipment

“White products” such as refrigerators, washing machines and other homeappliances

Home Appliances

"Brown products:" home entertainment components and gadgetsConsumer Electronics

Lamps, circuit breakers, etc.Electrical

PCs, semiconductors, disk drives, etc.Hi-Tech Equipment

PABX, mobiles, and switchesTelecommunicationSystems

CPU, DASD, and peripheralsTechnology Systems

Chips, microprocessors, electronic, and optical componentsMicroelectronics

Major ProductsSegments

The subcategories can be further divided according to the established SIC codes. IBM uses industry codesLA for electrical manufacturing companies and LB for electronic manufacturing companies. Somecompanies in this industry may be code MC (Fabrication and Assembly) based on other products andservices provided by the company. Some examples are:

Electronic computers 3571LBResidential lighting fixtures 3645LAElectric lamps 3641LAHousehold appliances 3630LAMotors and generators 3621LAOffice, computing and accounting 3500

IBMIndustryCode

DescriptionSIC Code

The growth rate in this industry is not consistent from one segment to the next, and, even within a segment,there can be variations in growth rates across different types of products. These market segments do notexist in isolation from one another. The price of semiconductors obviously has a significant effect across all


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segments. Moreover, companies have more than one kind of relationship to each other. One technologysystems company can be both a competitor and a business partner with another company, while both arecustomers of a company producing microprocessors. IBM is one of the best examples of this kind of dual ortriple role within the industry.

MicroelectronicsThe microelectronics segment is divided into semiconductors (chips and microprocessors), passive devices(capacitors, resistors, and inductors), electromechanical devices (electronic and optical components), andpackaging (laminates and wire boards). Typically, customers of microelectronics companies are othermanufacturers.

Included in the microelectronics segment is the semiconductor industry, which is composed of the manufac-turers of a variety of semiconductors including microprocessors; programmable logic devices (PLDs);application-specific integrated circuits (ASIC); memory products such as static random access memory(SRAM), dynamic random access memory (DRAM), and flash memory; digital signal processors (DSP);chip sets; and semiconductor equipment manufacturers.

Companies in the microelectronics segment are asset intensive, which requires expensive capacity tomanufacture their products. Typically, they manufacture value-added products that have long productioncycle times, requiring complex manufacturing.

Industry compositionThe following table from IBM illustrates the major application areas that use semiconductors and theirpercentage of the segment.

3%Aerospace

5%Transportation

9%Industrial

17%Communications

18%Consumer electronics

48%Data processing

PercentageIndustry Composition

Key PlayersTypical players and accounts in the microelectronics segment are:

• NA: Motorola, Intel, IBM, AMD, Micron, National Semiconductor, and TI

• EMEA: Siemens, SGS Thomson, and Philips

• AP: Fujitsu, Hitachi, Matsushita, Mitsubishi, NEC, Sharp, Toshiba, Sony, Hyundai & LG, andSamsung

Moore's LawThe microelectronics industry is driven by what is now known as Moore's Law. Intel's founder and chairman,Gordon Moore, made a prediction that the number of transistors on a chip would double every 18 months.This prediction has held true since 1965, and according to IBM Research, should continue to hold true forthe next five years. .


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In a related prediction in 1997, Andy Grove, Intel's CEO, predicted that by the year 2011 clock speedswould increase by 50 fold from the current 200 Mhz to 10,000 MHz. Already in 2002, 2,000 MHz (2 Ghz)microprocessor chips are common in new desktops.

As a result, the product life cycle is becoming shorter due to newer and better technology available.Consumers want the best available product at the beginning of a life cycle.

FablessCompanies in the fabless segment, which is composed of companies that do not fabricate their ownproducts, have a high growth rate. It is more cost-effective for these companies to rely on outside foundriesto fabricate their products so that they can concentrate on developing new ideas and new products. Thefabless semiconductor industry had sales of $11 billion in 1998 and is expected to grow to $80 billion in2003, an average annual growth rate of 30%. The average fabless company's gross margin is 50%. It isexpected that 150 new fabless companies will open for business in the next five years. In the fablesssegment, the primary competency is R&D. Some fabless companies spend 20% of revenue on R&D.

Although the fabless companies have a high growth rate, there are drawbacks to being a fabless company.A fabless company can have a difficult time getting capacity because there are so many other fablesscompanies trying to get their products manufactured. Because fabless companies do not control themanufacturing process, they run the risk of marketing inferior products.

The microprocessor industry operates within a predictable process cycle that follows these steps:

�Microprocessor manufacturers anticipate these new requirements, and they develop faster and more power-ful chips. �Using state-of-the-art processing facilities, chip makers that are first to the market can earn huge profits.These profits are then used to build new manufacturing plants (fabs), which can cost in excess of $2 billioneach.

In today's semiconductor manufacturing environment, manufacturers must perform under intense competitivepressures, while achieving higher productivity levels, better quality, lower cost, faster response to marketdynamics, and better integration of advanced technologies for the plant floor.

The microelectronics industry has been experiencing continuous price decreases. The consumer isdemanding cheaper prices, smaller products, and lighter products. Supporting these demands is importantor the industry loses business.

Challenges require more sophisticated tools, processes, and standards for the design and manufacture ofelectronic products. Business challenges and opportunities in the microelectronics segment include thefollowing points:

• Integrated Product Development (IPD), Enterprise Resource Planning (ERP) and Supply ChainManagement (SCM) solutions are common.

• Fabless companies are primarily concerned with time to market issues and foundries are concernedwith cost issues. For fabless companies, the primary e-business opportunities are IPDe-collaboration, hosted systems, and data storage and mining while for foundries the primary oppor-tunities are establishing trading communities, e-procurement, and manufacturing equipmentintegration.

• Challenges include satisfying new business management processes, such as foundry businessoperations, intercompany operations, fabless business operations, and manufacturing relationsaround the world.


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• There has been a need to upgrade fabrication facilities and equipment to new technologies faster,such as submicron technology, 300 mm wafer fabrication, and automated material handlingsystems.

• It is more challenging to sell supply chain solutions to an engineering-oriented firm. The seniormanagement of a microelectronics company is engineering oriented because of their product devel-opment background. Their major concern is to develop advanced technology, such as being the firstto market with a 2.5 micron DRAM chip that supports 500 MB.

• The need for higher performance, lower power, pocket-sized designs is being driven primarily by thePC and communications industries.

• The semiconductor manufacturing community is focusing on the ability to manufacture newproducts more cost-effectively and with higher degrees of product mix. Manufacturers that leveragenew, higher revenue process technologies (SOC, SOI, SiGe, copper interconnect, and deep submi-cron) to maximize production profits must be willing to improve levels of automation and yieldmanagement techniques to ensure rapid yield and production ramp up.

“Time to market has been a big issue throughout the electronics industry. One of the challenges that theindustry has is deciding which products should be manufactured on a continuous basis and which on adiscrete scheduled basis to handle market changes and shortened product life cycles. The ability to tiecustomer point of sale data, via a company's advanced planning and scheduling system and ERP system tothe plant floor, is providing significant competitive advantage to leading-edge companies.”

Don Ponge, Solutions Manager, IBM Electronics Competency Center

Technology SegmentCompanies in the technology systems segment manufacture CPUs, DASD, and peripherals. Their custom-ers are both businesses and consumers. These companies deal with complex supply channels, includingsuppliers, manufacturers, distributors, and retailers, as well as direct channels, such as consumers.Decreasing the time for receiving parts from other manufacturers becomes a challenging issue in responseto time to market.

Technology systems companies use two manufacturing processes: assemble-to-order and assemble-to-stock. Assemble-to-order is a manufacturing approach that emphasizes final assembly of products only forimmediate delivery. Inventory consists of parts, not products. Assemble-to-stock is a manufacturingapproach that completes the assembly of products and holds them as inventory until they are needed tofulfill orders. The components, or parts, are assembled in fairly simple manufacturing processes. Rawmaterials, component parts, and even subassemblies are often outsourced to contract equipmentmanufacturers.

Key PlayersTypical players and accounts in the technology systems segment are:

• NA: HP, Dell, Compaq, and IBM

• EMEA: Siemens, Bull, and Olivetti

• AP: Sony and Samsung

Challenges and OpportunitiesMany companies in the technology systems segment are facing a transition to mass customization. Theterm mass customization was first coined by Stan Davis in his book Future Perfect. It is the production,marketing, and delivery of goods and services according to customer specifications. Consumers' require-ments will increase, as will the available options and functions to satisfy those requirements. Yet the prices


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of computers and peripherals will likely continue to decrease while the product life cycle is getting shorterbecause of Moore’s Law, rapid technological change and rising customer demands. Challenges and oppor-tunities in the technology systems segment include:

• Use of market-based innovations (platform, portfolio, pipeline, project management) is common. IPDsolutions are driven by market-based innovations. The primary business drivers in technologysystems companies are to minimize inventory on the one hand, while maintaining sufficient inven-tory of the "right" product to maximize market share.

• Anticipating levels of inventory is challenging because of the difficulty of balancing inventory withunpredictable product life cycle and distributor demand.

Telecommunications Systems Segment

Companies in the telecommunication systems segment manufacture telecommunication equipment; mobileequipment, including cell phones; new media equipment, including broadcasting equipment, CATV, radiowave, scale, and measure equipment; telecommunication switching units; and telecommunication wiring.Their customers are both businesses and consumers.

The industry is segmented into infrastructure and hand-held devices. Proprietary equipment has allowedtelecommunication infrastructure manufacturers to have high market power over the carriers. Carriers havehistorically exerted market power over the hand-held manufacturers by controlling access to the market.

The telecommunication systems industry is driven by deregulation. The telecommunication industry in theU.S. has been fully deregulated for years, but other countries are only beginning to deregulate their national-ized monopolies. For example, in 1999, French telecommunications users became able to buy from othercarriers as well as from Alcatel, previously the only legal source. This allowed companies to participate inthe domestic market and increased the power of consumers. The wireless industry in Europe and Asia ismore advanced than in the United States. Markets such as Japan and Finland are leaders in the wirelessindustry.

Key PlayersTypical players and accounts are:

• NA: Motorola

• EMEA: Nokia, Philips, Alcatel, Ericsson and Bosch

• AP: Sony and Samsung

Challenges and OpportunitiesThe telecommunication systems segment is in a dramatic transition, facing major challenges: deregulation,technology advances, increased user demand for mobile telephony, and new services mainly based on theInternet. As of 2001-2002, the segment is in a major slump due to overcapacity, lower consumer demand,corporate malfeasance, and uncertain technology directions. Companies are also facing cost pressures andfierce competition in home markets as well as in emerging markets. Challenges and opportunities in thetelecommunication systems segment include:

• Primary market entry through e-business uses of CRM, ERP, and SCM solutions.

• The business issue for telecommunication infrastructure manufacturers is the ability to producewhat the market demands at the right time and at the right cost. Typically, they don't fully under-stand their cost of production.


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• Hand-held wireless device manufacturers are making e-commerce moves to capture more contol ofthe market.

• Both infrastructure and handheld device businesses are candidates for consulting services oncontinuous flow manufacturing.

• Carriers who provide services are now experiencing a significant shift in strategy, evolving fromhandling a physical network to delivering a wide range of technically and financially attractiveservices to build new revenue streams.

• This shift from network issues to business issues has a significant impact on the role of telecom-munication equipment manufacturers (TEM) suppliers such as Lucent, Nortel, Alcatel, Ericsson,Nokia, and others. Operators and their customers are increasingly requesting advanced technologysystems, of which software is now the most significant element, as part of cost-effective end-to-endbusiness solutions.

• TEMs must increase their technology leadership, but also they must focus attention on theirbusiness processes. Information technology must be considered not only as support but also asstrategic leverage for business transformation and competitive advantage. The mobile phonedivisions are key for their growth in a global market (including emerging countries) and are sensitiveto time to market and to the supply chain performance issues.

• Demand for mobile and wireless solutions and communications with Internet access is growing at50% per year.

• TEMs have to move from traditional technologies and offerings to Internet and high-speed wirelesstechnologies mostly by developing their own solutions or by working with the new Internet SolutionProviders (ISPs).

Hi-Tech Equipment Segment

The Electronics Hi Tech Industry includes manufacturers of products such as PCs, disk drives and routers.Hi Tech is the fastest growth sub segment industry within the industrial sector with worldwide IT spendingprojected to grow from $22.1B in 2000 to $34.6B by 2004 representing a compound annual growth rate of12%.

Electronics Hi Tech Industry IT Spending

12.5%11.7%11.7%% Growth

27.8B24.8B22.1BIndustry

20022001 2000Year

Stock Price Decline - According to IBM experts, most Electronics Hi Tech companies have seen a signifi-cant erosion in stock prices over the past 9 months. This has been driven by weakened forward earningsoutlooks, adjustments of industry PE ratios, and slowing economic forecasts. Capital spending within theindustry is down >25%. All key electronics segments growth forecasts have trended significantly down forthe past 6 months. IBM estimates 2001 growth ranges for Semiconductors +7-9%, Communications +7-9%,Consumer +6-8%, Manufacturing services +20-25%. Most companies are forecasting their IT budgets flat toslightly down but increasing e-business/solutions specific spending.


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Semiconductors are growing at a constant rate. In 1999, there was $149 B revenue for the segment. In2004, revenue is predicted to be $355 B. That is a growth rate of 20%.

The High-Tech segment is focused on cost savings, increasing productivity and efficiency and improvingforecasting, inventory levels and reducing lead times.

Electrical SegmentThe electrical segment includes companies that manufacture such electrical equipment as electric relaysand control devices, generators, commercial and specialty batteries, power supplies, and other electricalproducts. Customers are typically other companies, who utilize these components in their products.

Key PlayersKey players in this area include:� Square D� Emerson Electric� GE� AMP� Exide� Schneider Electric� Siemens� Hitachi� Sanyo

Challenges and OpportunitiesThis segment is dominated by companies and products which have been in the market for long periods oftime. However, product innovation is a constant challenge for these companies to enable their products tobe more efficient, smaller, less expensive and more profitable. IT support for order management, customerservice and product development are typical requirements.

Consumer Electronics SegmentCompanies in the consumer electronics segment manufacture audio-visual equipment and game and hobbyequipment. Customers of the companies in the consumer electronics segment are retailers and consumers.These companies also deal with complex supply channels, including suppliers, manufacturers, distributors,and retailers, as well as direct channels, such as consumers. Distribution and transportation are alsochallenging issues. Brand management becomes an issue too, because these companies sell directly toretailers and consumers.

As consumers have more choices available to them, they demand better quality and more features andfunctions. They also demand fast delivery of low-cost products. Companies in the segment are faced withhigh volumes, low profit margins, seasonal demand, and changing buying patterns.

Consumers are looking for ways to purchase products from a wider set of choices at more competitivepricing. The consumer is more educated and is more astute about available choices. Balanced withdecreasing time to shop, consumers still have a desire for a certain level of entertainment and hands-oninteraction. Consumers demand shorter time frames and differentiated identity as they shop. They don'twant to be considered as part of the masses, but as individuals.

Technology is used by younger generations to both educate and entertain. The Internet tools are not foreignto the young, and e-commerce is a perceived requirement of many stores to keep up with the changingtimes. They expect gratification to be convenient and immediate. Convenience is a key. Consumers arelooking for anytime and anywhere shopping.


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Another key element for consumer electronics is the evolution of standards. Video casettes are becomingoutdated as more and more consumers use DVDs for their main media. The market needs to be aware ofthese changing trends and keep up with them. The industry also needs to be aware of standards andchanges to these standards. According to Joe Wilcox of c/Net news, this is a similar battle to VHS versusBeta. The players are even similar. Philips and Sony support the DVD+RW and Hitachi, Panasonic andToshiba support DVD-RAM. “DVD+RW writes disks that most DVD drives and players can read. DVD-RAMstores optical disks in caddies that won't work in older DVD devices. Neither standard has achieved thatcapacity, stuck in the 3GB range. Both camps pledge support for 4.7GB by next year. “ according to theweb site. Only time will tell how this battle will be settled.

Key PlayersKey players in this segment are:

• NA: Bose, GE,and Kodak

• EMEA: Thomson and Philips

• AP: Sony, Sharp, Toshiba, Matsushita, Panasonic, Canon and Samsung

Major issues for Consumer Electronics:

� Sales and distribution sub-optimization is causing retailer compliance chargebacks and inventorymisallocations

� Communication/information flows, both intra-and inter-enterprise, need improvement to keep pace withrapid shifts in the Consumer Electronics landscape

Challenges and OpportunitiesThe consumer electronics industry is facing a dramatic evolution: After several years of flat growth, themarket is now moving again as a consequence of the advent of digital technologies. The consumer electron-ics industry is gaining ground in emerging countries, such as those in Asia. Challenges and opportunities inthe consumer electronics segment include:

• This industry is further along the adoption path for e-business. They are familiar with CRM, ERP andSCM solutions.

• Although Integrated Product Development (IPD) has not typically been an effective entry point forthis segment, industry players in this segment are considering adopting IPD solutions as a way toinnovate their product development processes and introduce new products faster.

• Channel conflict is a major issue slowing e-business deployment.

• Only Sony is ready to make a direct e-commerce move because of its strong brand identity;however, others are expected to follow.

• Solutions strategy needs to move from point solutions to life cycle management. For example, theAsian market would like to develop remote diagnostics capability to support products, such ascopiers and printers, after they are installed.

• This industry has to deal with large volumes and low margins; therefore, it focuses on drastic costreductions. Significant business process reengineering efforts are engaged to improve the fabrica-tion and assembly processes, especially for supply chain optimization.


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• Electronics systems, such as monitors, set-top boxes, and tuners, and the Application SpecificIntegrated Circuits (ASICs) that are at the heart of many of these devices are key to maintaining andconsolidating leadership, and they have a fundamental influence on time-to-market performance.

• The growth area with high added value is in multimedia applications with Internet access and relatedservices (for example, pay TV, program navigators, Internet applications, and satellite TV). This newbusiness is a strategy area for this segment.

• Major players are investing significantly in research and development and are seeking technologicaland industrial alliances. One example is Thomson Multimedia, which is developing the new genera-tion of interactive Internet TV though alliances with Microsoft, NEC (ASICs and flat panels), DirectTV (satellites), and Alcatel (TEM).

Home Appliances SegmentCompanies in the home electronics segment manufacture home appliances and related equipment. Theynot only have electrical components, but have mechanical components as well. These products are alsoknown as “white products”. Similar to the consumer electronics segment, customers of the companies inthe consumer electronics segment are retailers and consumers. These companies also deal with complexsupply channels, including suppliers, manufacturers, distributors, and retailers, as well as direct channels,such as consumers. Distribution and transportation are also challenging issues. Brand managementbecomes an issue too, because these companies sell directly to retailers and consumers.

As consumers have more choices available to them, they demand a better ratio of quality. They alsodemand fast delivery of high-quality and low-cost products. Companies in the segment are faced with highvolumes, low profit margins, seasonal demand, and changing buying patterns.


• NA: Whirlpool and GE

• EMEA: Thomson and Philips

• AP: Toshiba and Samsung

Major issues for Home Electronics:

� Sales and Distribution sub-optimization is causing retailer compliance charge backs and inventorymisallocations

� Communication/information flows, both intra and inter enterprise, need improvement to keep pace withrapid shifts in the marketplace

Challenges and OpportunitiesChallenges and opportunities are similar in home electronics, as in consumer electronics:

• Solutions strategy needs to move from point solutions to life cycle management. For example, theAsian market would like to develop remote diagnostics capability to support products, such ascopiers and printers, after they are installed.

• This industry has to deal with large volumes and low margins; therefore, it focuses on drastic costreductions. Significant business process reengineering efforts are engaged to improve the fabrica-tion and assembly processes, especially for supply chain optimization.


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Industrial Equipment Segment

Companies in the industrial equipment segment manufacture electrical office equipment (copy and fax);communication equipment; medical equipment; and related electrical equipment; and electrical parts,including amps, condensers, coils, switch heads, and connectors. They also manufacture micro andregular-sized motors, magnetic media (such as tapes and disks), electrical tubes, and dry cell batteries.Their customers are businesses and other manufacturers.

This segment is significantly material intensive and requires high mix, low to medium volumes. Theymanufacture highly customized products that requires a complex network of machinery and routings.

Companies in this industry have to determine quickly the building capacities that they can apply and thespecifications that they can change to meet the customer's requirements. For example, if a customer wantsto buy a particular type of motor that must be customized to meet specifications (engineering to order), thecompany must provide the customer with a rough estimate of cost, schedule the engineering, and estimatethe recurring cost of manufacturing for the particular component.


• NA: Xerox, Black & Decker, and GE

• EMEA: Thomson, Philips, Matra, Sagem, Cie des Signaux, and Dassault Electronique

Challenges and OpportunitiesChallenges and opportunities in the industrial equipment segment are in the following areas:

• Reducing costs

• Managing supply chain

• Enabling e-business

• Reengineering business processes

Energy Equipment and MachineryCompanies in the energy equipment and machinery segment manufacture heavy industrial electric equip-ment, elevators and escalators, nuclear energy and power systems, transportation equipment, andsatellites. It also includes power plants' low-voltage equipment, lighting, cables, and wires. Customers of thecompanies in the energy equipment and machinery industry are businesses.

This segment is significantly capital intensive and requires longer lead times. Privatization of utility compa-nies is driving competition in the segment.


• NA: GE

• EMEA: ABB, Schneider Electronic, Siemens, and Legrand

• AP: Mitsubishi and Zenith


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Challenges and OpportunitiesChallenges and opportunities in the energy equipment and machinery segment are in the following areas:

• Reducing costs


• Enabling e-business

• Reengineering business processes

Contract Electronic ManufacturersMany electronic companies have outsourced elements of their manufacturing in order to cut costs. Thesemanufacturers are an extension of the electric manufacturer supply chains. Companies are looking foreconomies of scale and sharing R&D efforts across product lines. This enables electronics companies tofocus on its core competencies, and allows the contractor to keep up with engineering challenges andmaintain skilled workforce. For example, IBM has outsourced part of its manufacturing to Selectron andSanmina-SCI. IBM was able to cut costs by having fewer employees and reducing manufacturing space.


• NA: Solectron, Celestica, Flextronics, Jabil Circuits and Sanmina-SCI

Challenges and OpportunitiesChallenges and opportunities in the contract electronic segment are in the following areas:

• Reducing costs


• Maintaining a skilled workforce.

1.3 Roles in the Electronics Manufacturing Industry

The electronics industry has a variety of roles. These roles vary across the supply chain starting withmaterial suppliers and ending with the customer. Roles for the consumer electronics sub-industry are verydistinct because of the interaction with retailers. Most consumer electronics manufacturing companies goto market through large retailers; the retailers then sell directly to consumers. These retailers have tremen-dous influence on manufacturers, and retailers use it to improve their own bottom line. Look at the followingroles and perspectives of the participants involved in the electronics business:

The consumer: This is the ultimate customer for all consumer electronics products.

Retailers: These are the businesses that sell to consumers. Retailers want inventory levels to be as low aspossible but still be able to guarantee product availability on the shelves.

Retail distribution network: This network is the heart of the retailer's ability to keep supplied withproducts. In the future, the pressure will be on manufacturers to deliver small numbers of items directly tothe stores.


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Wholesale distributors: These businesses are between the retailer and the manufacturer. They providesales and merchandising services to the large number of small retailers.

Manufacturer distribution network: This network can be as simple as a single shipping warehouse or ascomplex as a multilevel international network.

Manufacturing final assembly: A manufacturer's final assembly operation must become highly flexible tosupport distribution challenges. Many manufacturers purchase products from the Far East that require onlyminor assembly and packaging. Manufacturers also purchase major subassemblies from the Far East, suchas compressor units for refrigerators.

Manufacturer subassembly: Flexibility is the key to managing the inventory costs while replenishing finalassembly requirements.

Manufacturer fabrication (foundry): Foundries specialize in manufacture and assembly; their focus is onproducing a component or product as quickly and as cheaply as possible. Fabrication processes are totallydependent on product design to minimize the expense of flexible tooling. It is possible to tightly tie fabrica-tion processes to subassembly and final assembly processes when the products are properly designed.

Material suppliers (tier 1, tier 2, . . .): Material suppliers provide raw materials to other suppliers (tier 2) orto manufacturers. The relationship between the manufacturer and its suppliers, and between the supplierand its suppliers, must be properly functioning for the total supply chain to properly function.

Fabless: Fabless companies do not fabricate their products; their focus is on component or product design.They outsource the manufacture and assembly to a foundry.

Transportation providers (carriers): Viewed by mode of transportation, goods transported between eachof the players in the supply chain are moved by one of these carriers: motor freight, rail, air, and maritime. Inrecent years, these companies have additional responsibility in the supply chain by providing other logistics,distribution, and some product assembly functions on an outsourced basis.


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1.4 Types of Manufacturing

Discrete Manufacturing is used by electrical and electronics companies. This manufacturing has thefollowing characteristics:

• Manufacturing processes are repetitive or job shop (built-to-order per customer specifications, configura-tions or requirements)

• Products are fabricated and assembled and may have many intermediate subassemblies

• Products are defined by bills of material

• Product differentiation is typically by function and features, name (brand) recognition, packaging or price- sometimes by quality

• There are three types of discrete manufacturing: Job Shop, Batch and Flow. All of these types are usedin electronics manufacturing.


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Characteristic Job Shop Batch/Repetitive Flow

Example Special Purpose Motors

MotherboardsMajor Appliances

Semiconductor Manufacture

Customer Order Make to Order Assemble to Order Make to Stock

Product Low VolumeHigh Variety Mass Customization High Volume

Low Variety

PlantLayout Functional Mixture Product Layout

Cycle Time Long Demand for shorter Very Short

Unique Functions

Project CostingEstimating & Quoting Available to Promise Rate Scheduling

2.0 Electronics Manufacturers

Top 20 IBM Customers - Electronics Industry

$17,580Sharp$37,580 Motorola

$54,493Toshiba$71,118Matsushita/Panasonic

$13,532Electrolux$22,967ABB

$14,400Ricoh$31,748Philips

$30,275Nortel Networks$63,082 Sony

$16,724 3M$78,396Siemens

$24,185Canon$33,726Intel

$5,657Omron$129,953GE

$28,369Ericsson $13,994Eastman Kodak

$28,304Nokia$33,813Lucent

2000 CompanyRevenue ($M)

Company Name2000 CompanyRevenue ($M)

Company Name

Source: Fortune, IBM Market Intelligence. Red-highlighted accounts have integrated coverage

Motorola

Motorola's cell phone line of business is a main competitor to Nokia. Motorola is the #2 global manufacturerof mobile handsets and it gets about a third of sales from personal communications products such as cellphones, pagers, two-way radios, as well as network products like servers and software. The company is aleading supplier of communications infrastructure equipment including cellular transmission base stations,amplifiers, and switching equipment. Motorola is also a top maker of embedded microprocessors. Motorolagenerates 16% of sales through its semiconductor operations. Their largest customers include NextelCommunications and Japan-based KDDI. The company continues to expand its broadband and cableproduct lines. For additional information, please review: http://www.motorola.com

Nokia

Nokia is the world's #1 maker of mobile phones. It is also aiming for the top of the mobile Internet market.Nokia's products are divided mainly between two divisions: mobile phones, which makes up about three-quarters of sales and networks (wireless and Internet protocol infrastructure equipment); other productsinclude set-top boxes, software, and mobile displays. Nokia is one of Europe's largest companies by marketcapitalization, Nokia is focusing on high-speed data networks through 3G wireless, DSL, and interactive TV.For more information, please visit http://www.nokia.com


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Siemens

Siemens has operations worldwide in the automation and control, information and communications, lighting,medical, power, and transportation sectors. It is also active in the semiconductor sector through a minoritystake in chip maker Infineon Technologies. Siemens is Europe's largest electronics and electrical engineer-ing firm and one of the world's leading mobile phone handset makers. For more information, please visit: http://www.siemens.de

Matsushita

Matsushita Electric Industrial is the world's #1 consumer electronics maker and sells under brand namessuch as Panasonic, Quasar, Technics and JVC. Matsushita sells consumer products (which account for40% of sales) such as VCRs, CD and DVD players, TVs, and home appliances. It also sells computers,telephones, industrial equipment (welding and vending machines, medical equipment, car navigation equip-ment), and components such as batteries, semiconductors, and electric motors. The Matsushita groupincludes about 320 operating units in more than 45 countries. Its products are sold worldwide; Asiaaccounts for more than 70% of sales. For more information, please review: http://www.mei.co.jp

LG Electronics

LG Electronics (LGE) owns 70-plus subsidiaries that design and manufacture display products (TVs,monitors), home appliances (refrigerators, microwaves, air conditioners), and multimedia devices (VCRs,DVD players, CD-ROM drives, MP3 players). LGE also owns Zenith Electronics and has a flat-panel displayjoint venture with Philips Electronics (LG.Philips LCD). LGE has been increasing its sales to North Americaand Europe; Asia provides 38% of sales. For additional information, please review: http://www.lge.co.kr

Lucent

Lucent Technologies, a global leader in telecom equipment, provides products used to build communica-tions network infrastructure. Its core transmission and switching, wireless, and optical gear is used world-wide. The company also makes software and provides a wide range of services; many of its products aredeveloped by Bell Laboratories. Most of Lucent's customers are telecom service carriers such as AT&T andthe local telephone companies, such as the “Baby Bells”. The company, itself a spin-off from AT&T, hasspun off non-core businesses to raise funds. Please review: http://www.lucent.com

Alcatel

Alcatel is one of France's largest industrial companies and a leading global supplier of high-tech equipmentfor telecommunications. Core network switching and transmission systems for wireline and wirelessnetworks for carriers and enterprises account for most of its sales. The company also manufactures cellphones, communications cable, and satellite equipment and provides network services including consulting,integration, design, planning, operation, and maintenance. Clients include Orange and Deutsche Telekom.Half of Alcatel's sales are made in Europe; the company continues to seek a larger share of the equipmentmarkets in North America and China. For more additional information, please visit: http://www.alcatel.com

General Electric

General Electric (GE) is positioned as #1 or #2 in a variety of industries. The company produces aircraftengines, locomotives and other transportation equipment, appliances (kitchen and laundry equipment), light-ing, electric distribution and control equipment, generators and turbines, nuclear reactors, medical imagingequipment, and plastics. Its financial arm, GE Capital Services, accounts for nearly half of the company's


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sales and is one of the largest financial services companies in the US. Other operations include the NBCtelevision network. For more information, visit: http://www.ge.com

Xerox

Xerox is known for its copiers, but it also makes printers, scanners, fax machines, software, and supplies,and provides consulting and outsourcing services. The company designs its products for home users,businesses, and high-volume publishers such as newspapers. Customers include Kinko’s and SouthernCompany. The company generates most of its revenue from black-and-white products, although it iscontinuing to develop its color products. Customers outside the US account for 40% of sales. Please checkhttp://www.xerox.com for more information.

Philips

Philips is the US arm of Dutch Koninklijke ("Royal") Philips Electronics, the company oversees Philipsoperations in the US, Canada, and Mexico. Its products include TVs, CD/DVD/MP3 players/recorders,VCRs, shavers, broadcast television systems, broadband network systems, medical imaging equipment,and semiconductors. Its brands include Philips, Philips Magnavox, Norelco, and Marantz. Philips alsomakes lighting products -- its parent is the world's largest lightbulb maker. For more information, visit

http://www.philips.com

Whirlpool

Whirlpool is the #1 US home appliance maker. It makes washers, dryers, dishwashers, microwave ovens,ranges, refrigerators, and air conditioners and other appliances. In addition to Whirlpool, the company sellsits products under brand names such as Sears' Kenmore label, KitchenAid, Roper, Inglis, and SpeedQueen. Sears accounts for about 20% of the firm's sales. Whirlpool makes products in 13 countries andsells them in more than 170. It gets nearly 65% of sales from North America. Please review http://www.whirlpool.com for more information.

Sony

Sony, the world's #2 consumer electronics firm, also makes semiconductors, DVD players, batteries,cameras, MiniDisc and Walkman stereo systems, computer monitors, and flat-screen TVs. Video gamessystems account for 10% of sales. The company's TVs, VCRs, stereos, and other consumer electronicsaccount for about 70% of sales. Sony's entertainment assets include Columbia TriStar (movies and TVshows) and record labels Columbia and Epic. The company also operates insurance and financebusinesses. Please visit http://www.sony.com for more information.

Ericsson

Ericsson has a way without wires. The company is the world's leading maker of wireless telecom infrastruc-ture equipment. Network operators and service providers use Ericsson's antennas, transmitters, and otherwireless and optical infrastructure gear (nearly three-quarters of sales) to build and expand networks. Thecompany, which trails rivals Nokia, Motorola, and Siemens in mobile handset sales, has teamed up withSony in a cell phone joint venture. Ericsson's other products include corporate networking gear, cable,defense electronics, and software for mobile messaging and commerce. The Wallenberg family and holdingcompany Industrivarden each control about 42% of Ericsson's voting power. http://www.ericsson.com


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Fujitsu

Don't judge Fujitsu Limited by its name -- with operations worldwide and products ranging from air condition-ers to telephony, its reach seems almost limitless. Its computer products include PCs (it competes withNEC for #1 in Japan), servers, peripherals, and software. Computer operations and information technologyservices (consulting, systems integration, and support) account for more than 70% of sales. The company'sother lines include telecommunications network equipment, consumer electronics such as televisions andcar audio components, and semiconductors. Fujitsu also owns Japan's top Internet services provider, Nifty.http://www.fujitsu.com

IBM

International Business Machines (IBM) is the world's top provider of computer hardware. The companymakes a broad range of computers and peripherals, including desktop and notebook PCs, servers,mainframes, printing systems, and storage devices. Accounting for about 40% of IBM's sales, thecompany's service arm is the largest in the world. IBM is also one of the largest providers of both software(ranking #2, behind Microsoft) and semiconductors. The company continues to use acquisitions to augmentits software and service businesses, while streamlining its hardware operations with divestitures and organ-izational shifts. About 60% of IBM's sales are to customers outside the US. http://www.ibm.com

HP

Hewlett-Packard, meet Compaq. Compaq, this is Hewlett-Packard. Now rivaling longtime market ruler IBMin size, Hewlett-Packard (HP) provides computers, imaging and printing peripherals, software, andcomputer-related services. The company has seen extensive restructuring under the leadership of CEOCarly Fiorina, who spearheaded the largest deal in tech sector history: the acquisition of Compaq Computerin a stock transaction valued at approximately $19 billion. The combined company boasts greatly improvedmarket share across a number of hardware lines, including UNIX and Windows-based servers, enterprisestorage, and personal computers. Its services unit, which has doubled in size, may help it weather aflagging computer hardware market. http://www.hp.com

Lucent

It's tough at the top. Lucent Technologies, a global leader in telecom equipment, provides products used tobuild communications network infrastructure. Its core transmission and switching, wireless, and optical gearis used worldwide. The company also makes software and provides a wide range of services; many of itsproducts are developed by its Bell Laboratories unit. Most of Lucent's customers are telecom service carri-ers such as AT&T. The company, itself a spinoff from AT&T, has spun off noncore businesses to raisefunds. Lucent has also cut costs through massive layoffs and restructured its sprawling organization aroundtwo main segments, wireline and wireless, to focus on serving the largest service providers.http://www.lucent.com

Bosch

Cooking and cleaning can be a big chore, but BSH Bosch und Siemens Hausgeräte is there to help. The50-50 joint venture is one of Europe's largest appliance manufacturers. BSH's major appliances includedishwashers, ovens, microwaves, washing machines, air conditioners, refrigerators, and vacuum cleaners. Italso makes small appliances such as coffee makers and hair dryers. The company's primary brands areBosch and Siemens, but it also produces a dozen regional brands, including Balay, Constructa, Gaggenau,Neff, Thermador, and Coldex. BSH's appliances are sold in more than 30 countries; Germany accounts foralmost a third of sales. BSH has about 40 factories throughout Europe, North and South America, and Asia.


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http://www.bsh-group.com

NEC

NEC has three arms and plenty of muscle. The company's NEC Solutions group makes high-end computers(servers and supercomputers) and peripherals (monitors and projectors), and it wrestles with Fujitsu for thetop spot among Japanese PC makers. Its NEC Electron Devices division makes electronics ranging fromtransistors to display modules, and competes with Toshiba for the second spot among semiconductormakers (both companies trail Intel). The company also sells broadband and wireless networking equipmentthrough its NEC Networks group. NEC, which has made the Internet the focus of each of its groups, runsone of Japan's largest Internet service providers (BIGLOBE). The company generates about 15% of its salesoutside Japan. http://www.nec.com

Marconi

Marconi is a faint image of its former self. Once a military industrial conglomerate, the company nowprovides telecom equipment. Its communications products (67% of sales) include wireless and broadbandtransmission, network infrastructure, and enterprise networking equipment. It also makes network testingproducts and industrial power equipment and provides application hosting and managed network services.The company sells to communications service providers worldwide. Faced with mounting losses, Marconisold non-core businesses to focus on the telecom market. As part of a restructuring plan intended to relievemassive debts, the company will liquidate its assets and reincorporate as Marconi Corp. by early 2003.http://www.marconi.com

Growth Trends in the IndustryAmericas Consumer TrendsThe largest growth region in the world is the Americas region. The industry in North America is $11.9 billionin 1998, growing to $16.3 billion in 2001 (11.1% CGR). There has been market consolidation around largeplayers. The electrical industry is completely deregulated.

European Consumer TrendsEurope is a diverse market with diverse issues causing variation in pricing, warranty, and language issues.The industry in Europe is $8.7 billion in 1998, growing to $10.9 billion in 2001 (7.8% CGR). There has alsobeen market consolidation around large players. Deregulation has been completed in Europe, increasingcompetition. The industry is more driven by technology than the bottom line. Sales tend to be driven byproduct value rather than vendor relationship.

Asia Pacific Consumer TrendsSimilar to Europe, Asia Pacific is composed of a diverse market causing pricing, warranty, and languageissues. The industry is $7.8 billion in 1998, growing to $9.4 billion in 2001 (6.4% CGR). Asia has also seenmarket consolidation around large players. Asian electronic companies have felt the negative impact of aslow economy. The industry has built long-term and close relationships between suppliers and companies.There are stiffer requirements for channel support compared to Europe and the Americas.


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3.0 CustomersCustomers vary across a wide variety of formats. Typical customers of electronics companies include:

w PC Manufacturers

w Appliance Manufacturers

w Warehouse stores - A store with more than 1,500 items, primarily dry grocery, with someperishables. Characteristics include, small gross margin and workforce, limited service, mosthave scanner checkouts, and tend to eliminate frills and concentrate on price appeal.

w Retail chains - An operator of 11 or more retail stores.

w Independent - An operator of up to 10 retail stores.

w Wholesalers - Acts as an agent between the manufacturer and the retailers.


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4.0 Suppliers

Suppliers to electronics equipment manufacturers range from very small to very large companies, providingbasic raw materials to a variety of components to sub-assemblies to complete products. Many supplierparts are seen as commodities by their customers. Electrical manufacturers use a small number ofspecialty suppliers that build parts directly for customer specifications. Many of the second and third tierelectronics industry suppliers are midsize manufacturers whose margins are more critical than volume.Many suppliers have begun to use portals for placing orders. Many of these products can be reviewed on http://www.globalspec.com


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5.0 Business DriversElectronics companies face changing consumer demands, retailer consolidation, increased alternativechannel competition and geographic expansion, in addition to the always present cost cutting pressures.

5.1 Meeting New Customer Demands

Changes in consumer demographics and lifestyles are driving an ongoing evolution in the electronicsindustry. A retailer’s survival depends on meeting the needs of its customers. As a result, manufacturershave increased their product offerings to meet retailers’ needs and will have to continue to do so.

It is becoming a matter of survival that electronics companies shift to a consumer-driven model. Consumersare smarter and more demanding than ever. They spend less than 1% of their time shopping and plan tospend even less in the future. They express frustration because retailers do not provide the products orservices desired.

Globalization and the proliferation of multiple supply channels have created an economy without borders andhave altered the way companies do business. Retailers recognize that they could no longer rely only onprice and merchandising to retain market share but that they must adopt a customer focus to succeed inthe next millennium.

Electronics companies must follow a consumer-driven model to retain their market share. In a recent marketperception survey of the global electronics industries conducted by IBM, raising customer satisfaction wasthe most important business issue among managers in the electronics industry.

As a result, electronics companies are transforming from the merchandise-centric model of the 1980s and1990s to a consumer-centric model where customers buy products anytime and anywhere they desire.Value will migrate to high-performance business designs that enable intimate customer knowledge,supported by flexible high-velocity supply chains.

Companies in the electronics industry are trying to use the Internet to better understand customerrequirements. In some cases, these requirements are filtered through retail channels. Whether or not acompany's customers are end-user consumers, becoming faster in customer response time is critical tomaintaining market share.

A Demand for More ChoicesThe movement from analog to digital technology in the electronics industry is substantially complete, result-ing in less differentiation between products and brands. At the same time, the needs of consumers arebecoming more diverse. Customers want to individualize what they buy, without a difference in price. Theycan select from a greater range of choices than ever before. Whether they are considering a VCR, acomputer, or a personal digital assistant (PDA), consumers are primarily interested in what value a productcan deliver and how well it meets their preferences. As a result, electronics companies are under pressureto reduce time to market and increase options to meet their customers' requirements.

Demand from New Markets or GroupsThe electronics industry must also find ways to respond to market demand from new markets and newcustomer groups. New potential customers emerge as underdeveloped or economically depressed countriesor regions recover their prosperity or build up their economies. China and former Soviet-controlled countries,such as Hungary, are good examples. Within existing markets, new subgroups also become potentialcustomers, as the Hispanic community in the United States has shown. To benefit from these new markets,companies must manufacture the kinds of products these customers want and distribute the productsefficiently.


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A new challenge for product development is that electronics customers are changing their requirementsmuch faster than the normal life cycle for electronics products. This increased rate of customer change, inturn, is driving electronics companies to form partnerships and alliances with their customers and with theirsuppliers, so that rarely is one company responsible for designing and manufacturing all components of aproduct. Concurrent design and manufacturing reduces product life cycles by extending the supply chain.

5.2 Mergers and Acquisitions

As in other industries, electronics companies are complementing their strengths and reducing theirweaknesses by acquiring other companies or by merging with other companies. Strategically, the consoli-dated company is stronger. It can use its increased strength to:

• Address several diverse markets, often using technologies previously not available to it or availableonly by paying royalties

• Extend its existing markets

• Increase public awareness and mind share

• Achieve cost reductions by reducing redundant facilities and staff.

Acquisition of new businesses can also help regulate economic fluctuations tied to single markets andprovide new sources of income. Acquiring new manufacturing or distribution facilities is not usually a priorityin mergers and acquisitions. When two companies combine their processes, they frequently find redundantapplications and systems. They must decide not only which applications, products, and projects will survive,but also whether new systems and applications will be needed to meet the combined demands of the largercompany.

An example of a recent merger that increased mindshare and could offer economies of scale is the joining ofHyundai Electronics and LG Semiconductor. The combined sales of DRAM chips at Hyundai and LGoutstripped sales at Samsung Electronics, making the new company the world's largest DRAM maker.

Recent acquisitions for entry into new markets include:

• Ericsson's purchase of U.S. firms Torrent Networking Technologies and TouchWave. TorrentNetworking Technologies specializes in high-capacity routing solutions for operators and service-provider networks; Touchwave specializes in IP-based telephony. Together, they prepare Ericssonto begin competing in data networking.

• Alcatel's purchase of Xylon Corporation and Internet Devices, Incorporated. Xylon Corporation addsLAN network switching technology to Alcatel's networking portfolio, especially for voice products.Internet Devices, Incorporated brings IP-based virtual private network (VPN) solutions that willstrengthen Alcatel's ability to offer a full range of secure network solutions to service providers andenterprises.

5.3 Divestitures


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Competition has forced many electronics companies, such as Westinghouse, to sell off major portions oftheir enterprises. Companies are seeking a more vertically integrated structure aligned with their corecompetence areas and are spinning off secondary businesses to improve financial performance.

A significant recent divestiture is Motorola's sale of its chip unit to an investment group led by Texas PacificGroup. This sale of a group that employs about 10,000 people and represents 25% of the company'ssemiconductor revenues is one of the largest divestitures to date in the electronics industry. Motorola hasalready eliminated a number of other operations related to electronics, including the production of DRAMchips, optoelectronics, hybrid power modules, and smart card microcontrollers. This divestiture allowsMotorola to concentrate on increasing its sales in areas of strong demand, such as parts for cellular phonehandsets.

5.4 Global Expansion

The globalization of the electronics industry increases the level and scope of competition for electronicsmanufacturers. More companies are going global to reduce production costs, especially by shifting productmanufacturing to developing nations. This trend can be intensified by currency fluctuations, which can makeremote manufacturing attractive in spite of increased delivery costs. As a result, companies potentiallyincrease their competitiveness by offering lower prices and by making their products available in emergingmarkets that are stimulated in part by the presence of the new production facilities.

In addition, ongoing business consolidations promote global competition by creating corporations with facili-ties around the world. As a result, manufacturers can take advantage of their worldwide presence to designand manufacture around the clock, using design and production centers in different time zones.

Local companies can quickly become global competitors. A company in Southeast Asia that would notseem to be a competitor when operating only in its own country can now use the Internet or a businesspartnership to compete with more established companies. Each company tries to find a different way ofgoing to market that emphasizes its expertise and increases its apparent value to prospective customers.

Global Supply ChainsWith the goal of reducing cost, most electronics companies are establishing their manufacturing facilities inAsia to take advantage of lower labor rates, lower import and export taxes, and lower duties. This trendcreates for the electronics companies the challenge of procuring materials from geographically dispersedsuppliers and delivering their assembled products as quickly as possible to their customers, mainlyretailers. These customers might also be widely dispersed.

The need to lower inventory costs is also causing many companies to rethink their logistics pipelines, evalu-ate their supply chains, and use demographic data to better understand their target customer segments.Frequently, one-third of total product sales can be trapped in the logistics pipeline instead of being readilyavailable for purchase. With product life cycles as short as three to nine months in the electronics industry,the cost burden for obsolete products can become quite high.

The power of retailers in relation to manufacturers is rising. Today, there are fewer and fewer retailers in themarketplace; as a result, each retail customer is more important to a manufacturer. Further, some retailershave also been able to block manufacturers from going directly to the consumer through the Internet bythreatening to change to other suppliers if the manufacturer uses the competing channel. At the same time,manufacturers risk losing the business of these powerful customers unless they become faster and moreflexible in meeting the retailers' demands.

Accordingly, the manufacturers must shorten their product delivery cycle times to better manage their inven-tory system while becoming more efficient in terms of forecasting demands and replenishing orders. These


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changes require attention to supply chains on a global scale, in addition to developing a relationship withtheir business customers to maintain their loyalty.

Impact of GlobalizationGlobalization affects every aspect of an electronics company's ability to compete in the marketplace. Fromproduct development, to supply chain, to operations, to sales and support, the enterprise now extendsbeyond its physical boundaries.

Traditional, vertically integrated enterprises that do all of their own manufacturing and assembly are rare asoutsourcing to geographic areas with lower cost structures has become prevalent, particularly in theelectronics industry. A typical PC manufacturer, for example, might design the product in the U.S., obtainmotherboards and enclosures from Taiwan, develop value-added software applications in India, and integratethe final system in Scotland. A wireless handset manufacturer will develop the product in Europe, sourcehandsets from Korea, develop localized software in China, and then partner with the Chinese government togain access to the Chinese market.

The successful electronics enterprise must adapt to the global model to turn these challenges into opportu-nities by transforming its business model in ways that optimize the supply chain and integrate all elementsof the enterprise. The successful company must also take advantage of global labor and production costs,which can vary widely because of varying regulatory enforcement policies for environmental and workersafety standards.

Small companies that are the tier 1 and tier 2 suppliers to big companies are also facing globalization andcompetition. They are part of the supply chain. As big companies go global, small supplier companies areobliged to become global to retain their customers.

Exports to Mexican and Latin American markets

With the inception of the North American Free Trade Agreement, exports from the United States to Mexicoand Latin America have increased. According to U.S. Customs, the North American Free Trade Agreement(NAFTA) is a comprehensive agreement that came into effect on January 1, 1994, creating the world'slargest free trade area. Among its main objectives is the liberalization of trade between Canada, Mexico andthe United States to stimulate economic growth and give the NAFTA countries equal access to each other’smarkets. For additional information on this agreement, please refer to: www.iafis.org

5.5 Time to Market

In the electronics industry, market value is awarded to those companies that continually offer the rightproduct, at the right time, and at the right price. Technological innovation puts increasing pressure on the lifecycle of products. As the life cycle of a product shortens, the need to respond quickly to market demandsincreases. A company's agility and speed in getting to market are critical success factors in the electronicsindustry, regardless of segment. Time to market as an industry measurement involves each of the threebusiness processes in the industry: design, build, and sell and support.

In the design phase, time to market pressure focuses on how efficiently a company creates its products.Does the company have the technical skills in place to respond to market demands? Is it using the mostefficient processes in managing design? Can the company meet new challenges to its engineeringcapabilities quickly?

In the build phase, time to market pressure focuses on how efficiently a company develops its products. Fora company whose core business is design, the most efficient solution might be to outsource some or all ofthe product assembly to a foundry. Management of the enterprise's resources and supply chain becomes amajor focus.


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In the sell and support phase, time to market pressure focuses on how efficiently a company fostersdemand for its products. This includes how the company markets to and services its customers and how itmanages the distribution of its products.

Rapid Commercialization of New TechnologiesThe commercialization of research has become a high-leverage area for many companies. The newtechnologies from laboratories offer the benefits of high-margin new products, differentiation fromcompetitors, and possible growth in market share. To achieve those benefits, electronics companies mustevolve to a market-driven research and development (R&D) structure, with an aggressive focus on time tomarket.

In the past, U.S. firms have often failed to benefit from their own innovations. Although U.S. firms arefrequently first to introduce new product concepts, Japan and other countries have become proficient at refin-ing processes and manufacturing large quantities of products at low cost. Decreasing the time to marketand to full production of new products is a continuing challenge for every company.

Reducing time to market is critical for electronics companies; and for most companies, the most importantbusiness area affecting time to market is the product development cycle. This cycle includes not onlydesigning and manufacturing the product but also getting legal approvals and testing, packaging, and distrib-uting the new offering. Key decisions, such as whether to build or to buy components, must be made earlyin the cycle and communicated to all participants as quickly as possible.

The pace of technology innovation in the electronics industry is forcing the electronics industry to shortenthe life cycles of its products. Companies must introduce new products faster to survive in the competitivemarketplace. They must achieve that speed while still delivering their products on time and improvingproduct and price performance.

New customer demands for products that are tailored to each customer's preferences are creating newchallenges for production processes. In addition to reduced production time, the supply chain, designsystem, and manufacturing procedures for electronics manufacturers must support more variations, deliv-ered in smaller and smaller quantities. Integrated product development is essential in achieving these goalsbecause it brings efficient product improvement into daily business processes, closely linking business andengineering processes.

5.6 Innovation

Given the compressed product life cycles for present and future electronics products, an enterprise needs toconstantly refresh its product lines in a cost-effective manner to remain competitive in the marketplace.Innovation requires a combination of real-time supply chain collaboration, efficient product development, andvirtual product development management (VPDM) techniques, including such features as digital mockup,product synthesis, and supply chain management.

The increased turns in new products is leading to increased R&D outlays. The constant flow of new productsand new product options forces electronics companies to find manufacturing processes that can be changedfrequently and quickly. The shorter life cycles create pressure from two directions:

• Introducing new products as previous products become outmoded

• Avoiding the accumulation of inventory that has become unsellable because of the new products.

Competition is heightened in the market right now because of the innovations. Time available to recovertheir investments in new products before the products become outmoded has been decreased dramatically.Also stimulated by globalization, this trend emphasizes each company's need to reduce the time required to


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get new products into production, to use the shortest possible time for production, and to avoid accumulat-ing inventory in the supply chain or in warehouses.

5.7 Cost Reduction

To respond to a dynamic business environment, leading electronics companies are driving toward majorstructural and process changes to reduce cost. Information technology (IT) is an instrumental part of thatstrategy, but the real focus has been on the business problems of streamlining production, reducingadministrative overhead, and removing inefficiencies. The structural changes occurring in the electronicsindustry have taken a variety of forms. These include outsourcing, mergers and acquisitions, alliances,downsizing, and divestitures.

These structural changes have several goals. Companies are focusing in on their core businesses and tryingto enhance their key competencies. This could involve a shift from product production to providing systemsand value-added services. Companies are looking for economies of scale, sometimes by sharing R&D effortsacross a product line. In some cases, a company restructures to broaden its product range or expand itsmarket reach.

The process changes occurring in the electronics industry are designed to improve efficiency andeffectiveness of specific processes and linkages within the firm. Examples stated are concurrentengineering, optimization of supply chain, quality management, and product portfolio rationalization (modelreuse or the use of standard parts). The goals are to increase internal efficiencies, reduce errors and rework,and become more adaptive to the volatile marketplace.

5.8 Outsourcing and Partnering - Microelectronics Segment

Microelectronics companies are moving toward contract manufacturing and becoming design and assemblycompanies. According to the IBM web site, “ten years ago, there were probably 25 to 30 semiconductorgiants that constituted 99% of the semiconductor production in the world. Today, many of those dominantcompanies have disappeared; probably 10 to 15 companies dominate the market, constituting approxi-mately 70% of the world market.” Therefore, a significant amount of the market is now being supported bysmall, fast, flexible, technology-oriented companies.

These companies, in general, do not do their own manufacturing. Instead, they outsource some or all of theirmanufacturing. This arrangement, called contract manufacturing or foundry manufacturing, gives them flexi-bility to move production wherever they need it, such as to locations that can give them the lowest costs orlocations that can give them faster delivery of parts. The contract manufacturers or foundries are almost allin Asia, and most of them are based in Taiwan. However, the labor costs in Taiwan, Malaysia, and otherprevious foundry countries in Asia have been increasing. As a result, more and more foundry businesses arebased in China.

The benefits of contract manufacturing include lowered manufacturing costs and greater focus on design andproduct innovation in the parent company. For example, for IBM ThinkPads, IBM sets the specifications foreach model and sends them to Mexico. There the new ThinkPads are assembled according to the specifica-tions, packaged, and distributed to customers throughout the Western hemisphere.

Many electronics companies are also using contract manufacturing to reduce overall manufacturing time bymethods such as assigning components to a variety of specialized manufacturers for concurrent production.Thus, the time to actually perform the manufacturing becomes very competitive because the shorter themanufacturing time, the more responsive the company can be to customers' needs, the less subject theyare to market fluctuations, and the better competitive position they are in for increasing their market share.


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Joint ventures, such as contracting and outsourcing, are another common way to improve financial stabilityand focus efforts. This transition is prompting strategic alliances with companies within and outside of theindustry. Benchmarking based on companies beyond the boundaries of traditional competitors has alsobecome commonplace as new companies set standards for customer expectations and satisfaction andcompanies suddenly enter new markets as new competitors. For example, Kodak, HP, and Canon allcurrently sell digital cameras and must compare themselves to each other, although Kodak's core businesspreviously seemed to have little overlap with HP and Canon.

Recent consolidations through joint ventures include Kodak and Intel®, which are collaborating on newprocessors for advanced digital cameras.

5.9 Regulatory Issues

Deregulation is another factor that increases competition in the electronics industry, especially within thetelecommunications systems segment. The telecommunication market in the U.S. has been fully deregu-lated for years, but other countries are only beginning to deregulate their nationalized monopolies.

For example, in 1999, French telecommunications users became able to buy from other carriers as well asfrom Alcatel, previously the only legal source. This freedom enables other companies to enter the Frenchdomestic market to win market share, providing competition to Alcatel and giving new power to Frenchconsumers.

Similar developments are occurring in the Asia Pacific area. In Hong Kong, the telecommunications industryis changing from one that used to be tightly regulated to one where competition is, as far as possible,encouraged in all aspects of the market. For example, the local monopoly of Hong Kong Telephone (HKT)ended in 1995, when three more fixed-line telecom network service (FTNS) operators were licensed andbegan operating. Then, early in 1998, the Hong Kong government reached an agreement with HKT's interna-tional subsidiary, Hong Kong Telecom International (HKTI), to end its exclusive franchise for internationalservices on 31 December 1998 and for international facilities on 31 December 1999. Both franchises origi-nally extended until 2005. With the expiration of HKTI's exclusive facilities franchise in 1999, all segments ofHong Kong's telecom industry will be open to some form of competition.

The electronics industry is regulated by different groups in the United States and Europe. Severalorganizations establish and monitor the rules and regulations across the industry:

w OSHA

w U.S. Department of Transportation

w U.S. Customs Service

w U.S. International Trade Commission

w European Comisssion

w Asia Pacific Occupational Safety and Health Administration

w US - AEP Partnership

w Copyright Law

Occupational Safety and Health Administration (OSHA)OSHA’s main mission is to ensure safe and healthful workplaces in America. According to their internetsite, since the agency was created in 1971, workplace fatalities have been cut in half and occupationalinjury and illness rates have declined 40 percent. At the same time, U.S. employment has doubled from 56million workers at 3.5 million work sites to 111 million workers at 7 million sites.


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United States Department of Transportation (DOT)The DOT states in its mission that it is to “Serve the United States by ensuring a fast, safe, efficient,accessible and convenient transportation system that meets our vital national interests and enhances thequality of life of the American people, today and into the future.” The Office of the Secretary (OST) overseesthe creation of national transportation policy and promotes intermodal transportation. Other responsibilitiesrange from negotiation and implementation of international transportation agreements, assuring the fitness oftransportation systems, issuing regulations to prevent alcohol and illegal drug use in transportation systemsand preparing transportation legislation.

United States Customs ServiceU.S. Customs is the primary enforcement agency patrolling the nation’s borders. To the importer, theCustoms Service provides advice, protection and control of products entering the United States. Their labscontinually check imports to ensure they comply with the laws involving public safety, health and intellectualcapital.

United States International Trade Commission (USITC)The USITC regulates tariffs on imports by SIC code. The USITC is also responsible for maintaining normaltrade relations with foreign countries.

European CommissionThe European Commission operates at the very heart of the European Union. The Commission proposesnew laws, represents the EU members and acts as the EU guardian of Treaties. Its main concern is todefend the interests of Europe's citizens. The 20 members of the Commission are drawn from the 15 EUcountries, but they each swear an oath of independence, distancing themselves from partisan influence fromany source.

The Commission's job is to ensure that the European Union can attain its goal of an ever-closer union of itsmembers. One of its main goals is to secure the free movement of goods, services, capital and personsthroughout the territory of the Union. The Commission also regulates that the benefits of integration arebalanced between countries and regions, between business and consumers and betweendifferent categories of citizens.

Asia Pacific Occupational Safety and Health Organization (APOSHO)The objective of APOSHO is to promote mutual understanding and cooperation among the communities inthe Asia-Pacific region as well as to contribute to the enhancement of occupational safety and health inthese communities through the exchange of information and views. For a full list of its members and theirpolicies, please review:

http://www.aposho.org/about/about03.htm

United States - Asia Environmental PartnershipThe U.S. has partnered with Asian organizations and agencies to identify areas for improved policies, lawsand enforcement through collaboration of ideas regarding the environment through reviewing policies andorganizing teleconferences.


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For additional information regarding Asian countries and their financial regulations, please review: http://www.financewise.com/public/edit/asia/links/as-govt.htm

Copyright Laws

A growing concern in the electronics industry is copyright laws. According the the United States CopyrightOffice, “Copyright is a form of protection provided by the laws of the United States (title 17, U.S. Code) tothe authors of “original works of authorship,” including literary, dramatic, musical, artistic, and certain otherintellectual works. This protection is available to both published and unpublished works. Section 106 of the1976 Copyright Act generally gives the owner of copyright the exclusive right to do and to authorize others todo the following:

• To reproduce the work in copies or phonorecords;

• To prepare derivative works based upon the work;

• To distribute copies or phonorecords of the work to the public by sale or other transfer ofownership, or by rental, lease, or lending;

• To perform the work publicly, in the case of literary, musical, dramatic, and choreographic works,pantomimes, and motion pictures and other audiovisual works;

• To display the copyrighted work publicly, in the case of literary, musical, dramatic, and choreo-graphic works, pantomimes, and pictorial, graphic, or sculptural works, including the individualimages of a motion picture or other audiovisual work; and

• In the case of sound recordings, to perform the work publicly by means of a digital audiotransmission.

Intellectual property owners have lobbied for laws requiring manufacturers to incorporate anti copying protec-tion in their products. For more information, please visit: http://www.loc.gov/copyright/


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6.0 e-business in Electronics Manufacturing

For many electronics companies the pressure for reengineering is also an opportunity to transformthemselves into e-businesses. This change from a traditional business to an e-business can impact multiplekey business processes within the company.

Electronic business is the secure and timely communication of business transactions and documents suchas purchase orders, invoices, advanced shipping notices and acknowledgments across trading partnerrelationships. Most manufacturers equate electronic business applications with Electronic Data Interchange(EDI), a standards-based mechanism for trading partners to electronically communicate with each otherdespite disparate systems, software and architectures installed. In the past, EDI was considered expensiveand difficult to implement. Much of the expense was attributed directly to transaction fees charged by valueadded networks (VANs). Today, EDI is growing in popularity because transaction fees can be avoided byleveraging the Internet as the communications transport mechanism.

Additionally, the growth of the Internet has spawned a number of new application software solutions that aredesigned to reduce transaction costs and increase communications efficiency. These new solutions canconnect trading partners through the Internet so companies can collaborate on design issues, providecustomer service in innovative ways, and communicate more effectively both up and down the supply chain.Many of these new solutions simplify and insulate most, if not all, of the technical implementationrequirements from users.

Business to Business sites have been developed for the Electronics industry. Among them, e2Open hasbeen quite successful. It is an electronics component exchange made up of 10 founders and 300 buyersTheir first live auction was in September 2000. The solution is composed of i2, Ariba, Partminer andMatrixOne. It offers: Open Markets - Auctions, Design Collaboration, Supply Chain and B2B Integration andInfrastructure.

Three Logical Transaction Types of Electronic CommerceRegardless of whether an organization elects to use EDI or XML, a VAN or the Internet, electroniccommerce has three logical aspects:

� Database Synchronization - the pre-sale transmission of item, price and promotion information,i.e. from a manufacturer to a distributor or from a distributor to a customer. The goal of databasesynchronization is to develop a common understanding about a given product. For example, theproduct item number, item description and pack size can be electronically transmitted across thesupply chain to facilitate communications and downstream revenue cycle transactions. Withoutdatabase synchronization, most e-business and supply chain efforts will be significantlyhindered.

� Revenue Cycle Transactions - a set of transactions that take place during the sale or fulfillmentprocess. These transactions leverage standardized data from the database synchronizationtransactions. Revenue cycle transactions usually include the transmission of purchase orders,invoices, statements, advanced shipment notices and other transmission types.

� Electronic Funds Transfer (EFT) – the electronic acceptance of and payment of an electronicinvoice. This payment takes place via an EFT wire transfer, instead of paper-based checks.

Simple Questions, Complex ProcessesA familiar e-commerce transaction suggests the potential impact of operating an e-business. For acustomer to buy a computer over the Internet, the transaction includes some simple questions that resultsin complex business processes:


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• Configuration question: "What are the features that I can get and combine in the same computer?"The answer requires a business process called configuration.

• Price question: "What is the price of the set of features?" The business process to determine theprice must include considerations like corporate agreements and special combinations of features,in addition to per-feature pricing.

• Manufacturing and supply chain question: "Where can I get this configuration, and when can I getit?" The business process for this question requires real-time access to up-to-date information frommanufacturing and supply chain activities.

The role of reengineering is to enable companies to work effectively in a new environment. Typically,business processes have not been oriented toward the rapid pace of the sales processes that can occur onthe Internet. Reengineering one or more processes will probably be necessary for companies to compete inthe e-business environment.

e-business in MicroelectronicsThe microelectronics sub-segment has very specific considerations for e-business:

• Engineering to order

• Build to order

• Sell the stock

These three capabilities exist simultaneously. To be responsive to its customer, an electronics companymust determine quickly the building capacities that it can apply and the specifications that it can change tomeet the customer's requirements.

For example, if a customer wants to buy a particular type of chip that must be customized to meet specifi-cations (engineering to order), the company must provide the customer with rough estimates both for thecost and schedule for initial engineering and for the recurring cost of manufacturing the particular semicon-ductor component. Therefore, reengineering those estimating processes is central for reducing the cycletime or response time to meet the customer requirements. The ability of a company to respond morequickly and to be more precise about the cost and the schedule when responding to a potential customercan make the difference between a win and a loss in the competitive electronics marketplace.


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IBM has created this e-business roadmap for the Electronics segment. There are many potentialopportunities for Electronics companies to use in their organization. IBM’s goal is to help our customersbecome e-businesses by implementing solutions that span across multiple business processes (Design,Manufacturing, Marketing/Sales, and Customer Support). Our value proposition is to position IBM and IBMBusiness Partners as the preferred partner for companies seeking to transform themselves into ane-business, benefiting from IBM's e-business thought leadership, industry skills and expertise, and solutionofferings.

IBM and IBM Business Partners have a unique opportunity to establish leadership in this marketplacebecause:

1. IBM has repositioned itself as a R&D and technology leader

2. The Internet is transforming this industry and creates opportunities for new partnerships.

3. IBM is a Global Electronics company which has successfully transformed itself and can be used as areference.

Major areas of e-business are: Product Design Management, Global Production, Supply Chain Management

and Customer Value Management. Many of these items are discussed in Section 8.0 Recent Initiatives.


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The Electronics e-Business The Electronics e-Business

Design Manufacturing Customer SupportMarketing/Sales

Customer Value Management

Market AnalysisChannel ManagementSales Force AutomationCustomer CareCall CenterSpareparts MangementWarranty Management

Product Design Management

Intellectual Property MgmtPC Board DesignIntegrated Curcuit DesignApplication Specific DesignInnovationEngineering Document MgntDesign CollabolationAnalysis and SimulationProduct Design Management

Global Production & Supply Chain Mangement

Production PlanningManufacturing ExecutionPlant OperationsProcurement managementSupply Chain OptimizationOrder- to - Delivery ManagementEnterprise Resource PlanningYield Management

Business Mangement & Support Finance and AccountingHuman Resource

LegalDecision Support

IT Infrastructure Web Technology & Common Desktope-business framework

Security & Access ControlSystem Outsourcing

IGS consulting & SIservices, e-businessframework, RSD,PSG,middleware(MQSeries),Notes, Domino,DB2.

e-business,e-commerce,SCM,CRM

IBM can provide theentire IT infrastructurefor our solutions fromServers, Storage,Network Management,Database and Middle-ware to help ourcustomers develop andrun their e-business in ascalable, available, andsafe environment.

e-business enablement

- e-businessassessments

- SurfAid( Web stats)

RSD, BT Consulting,services, Catia, Enovia

PDM, BISolutions, Consultingand Services to improveproduct design, innova-tion and time to market.

Product DesignManagement

Net.Commerce, IGSservices and consulting,RSD,PSG,middleware(MQSeries)

ERP, e-business appli-cation framework,e-commerce

ERP is now beingextended by webenabling of the ERPenvironment. Businesstransformation servicesweb enables theseprocesses.

ERP Bolt On’s

Own and run by IBM.Use IBM e-businessinfrastructure. IGShosting support,consulting and SIservices.

CRM, BIVCMS is an e-businessplatform for VirtualCommunities which willenable trusted businessto businesstransactions .

Community Enablement

E-business portfolio;RSD, PSG, middleware(Tivoli, MQ Series), DB2and Siebel SW.

CRM, BISolutions, Consultingand Services. IBM’s keyoffering provides CRMfunctionality via hosting.

Move towards Siebel asofferings emerge.

CRM- CRM Assessment- e-Care

RSD, PSG, i2, IGS,Aspect

SCM, ERP,e-commerce

Consulting designed tostreamline the supplychain. IBM’s softwarepartners include i2, IMI& Aspect. IBM willprovide implementationservices andtechnology.

SCM Enablement- Planning- Scheduling- Parts Management- Warehousing- Plan Automation

IBM ProductConent

Multi-IndustryLinkages

Solution FocusSolution


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IGS consulting andSystems Integrationservices

BI,CRM,PDM,ERP,e-business,SCM

Consulting and servicesoffering to managecustomers informationprocessing require-ments.

Strategic Outsourcing

S/390,RSD,PSG,

middleware(MQSeries),DB2, Datalink, BTconsulting and SIservices

BI,CRM,PDM,ERP,e-business,SCM

Intelligent Miner familyhelps customers identifyand extract high-valuebusiness intelligencefrom a company's dataassets. Customer,Yields, IP, SCM..

Business Intelligence

- IP mgmt

- Yield Mgmt

- Customer Intelligence

- Market Data

- SCM performance

IBM ProductConent

Multi-IndustryLinkages

Solution FocusSolution


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Copyright 1999 TJ Watson Research Center

This chart shows that the electronics industry uses e-business Yes not only internally, but with suppliers andcustomers as well.


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Midmarket e-business Success Stories

For more information on these Midmarket success stories, review their respective Web sites:

AGFA Gevaert Argentina - Latin America

AGFA Gevaert is based in Argentina and is the Argentinian branch of Agfa Germany. The company is aleader in cameras, film and electronic and medical imaging hardware and software. They own amanufacturing plant for photo film, X-ray film and hardware accessories in Argentina. The sales force wasunable to get connected to the main sales and account system which runs on AS/400 servers. Thecustomer looked for a cheap and easy solution to connect its sales force (and their Thinkpads) to the coreAS/400 systems, regardless of location of the sales person. The long-term goals were to develop a fulle-business, to achieve a pervasive sales force and to improve supply chain management. Agfa needed toachieve this to stay competitive, as competitors had already equipped their sales people with pervasivecomputing technologies. They implemented a Host On-Demand solution to allow sales representatives foran electronics company to access information and place orders in real time from the field. It allows thesales representatives to access everything they would be able to access in the office from the field.

This improved sales force productivity, as well as, customer service. The sales process cycle has beendramatically reduced. Previously, all orders were processed via fax or phone or the sales people typed theminto desktop PCs when arriving at the Agfa offices. The whole process consumed between one and twodays. Now, orders are processed immediately. The sales person can get real time information about prices,stocks, delivery time, anything pertinent to the sale. The customer is pleased with the solution and isplanning to buy more Host On-Demand licenses to increase the number of remote workers with this access.

AU Optronics Corporation - Asia Pacific

AU Optronics is the world's number three producer of TFT LCD modules, and aims to double its revenueand become world's number one within three years. TFT LCDs are flat panel displays used in notebookPCs, computer monitors and video applications. The Company has several factories in Taiwan and thePeople's Republic of China. Prior to this engagement, the customer had not developed a business processfor Order Fulfillment and did not have a Supply Chain Management strategy. Most planning and collaborationfunctions were performed manually via phone, fax and e-mail. This was limiting the company's ability toincrease market share and maintain good customer service.

AU Optronics asked IBM to develop a blueprint for implementing the supply chain systems it needed tomeet its objectives of very rapid growth. IBM Global Services - Business Innovation Services provided ateam of three Consultants from the Buy & Supply practice working part time over a period of 6 weeks. TheConsultants used the IBM proprietary Supply Chain Opportunity Assessment tool to interview key functionalleaders and quickly assess the main issues for order fulfillment. The Consultants then applied the IBMValue Chain Framework to analyze the issues and define a business model that would resolve them. TheValue Chain Framework also provided a high level IT architecture to support the business model. A fit/gapanalysis between the customer's "as-is" and "to-be" architectures formed the basis for the definition ofimplementation initiatives and an overall Order Fulfillment implementation program. The final deliverable forthe project was a report and presentation delivered to the General Manager and CIO, defining the "to-be" ITblueprint and implementation road map.

As a result of the engagement, the business functional leaders at AU Optronics understand the frameworkfor Supply Chain Management and how it can support their business goals for order fulfillment. Thecompany has a clear understanding of the priorities and time frames for implementing the necessarytechnologies. The Customer is planning to nominate a Process Owner for Order Fulfillment and implementnine IT initiatives including Site Planning, Master Planning, Supply Chain Data Management and


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Customer/Supplier/Internal collaboration. IBM has been invited to act as System Integrator for the Initiativesand participate in the Program Management Office for Order Fulfillment.

Siemens AG - Europe

Siemens AG, a world leader in electronics and electro-technology, operates in more than 190 countries andemploys more than 440,000 workers. The ICN EN division of Siemens AG offers customized telecommuni-cation and cable-supported communication solutions. Providing international support is a critical task forSiemens ICN EN. More than 1000 employees process approximately 20,000 problem messages annually,which pass through up to three different support levels. The company's more than 7000 technicians requireinformation for solutions to customer problems. Over 30 servers were migrated to a central web architecturefor ICN EN. An intranet-based application was developed to manage the support and reporting process. Allmessages are passed on to workers through a continuous workflow. The new system and process offersquality control of problem processing regarding costs, frequency and operating time. Siemens can nowcontrol daily business and complete the escalation process with efficiency. The centrally-located reportingtool results in lowering controlling cost. The ease of use associated with the application has lead to useracceptance.

BC Components - Asia Pacific

BC Components (BCC) is a manufacturer of passive electronic components. BCC became an independentorganization in 1999 with annual sales amounting to US$500 million. The company has production facilitiesand sales organizations located all over the world and employs over 4,000 people.

BCC developed its order processing and accounting application with Microsoft Visual Basic and SQLdatabase on a Windows NT server. The system was a streamlined and highly tailored design, covering BCCoperations in Asia. Having grown steadily over the past few years, BCC was in need of a full-suite enterpriseresource planning (ERP) solution. The company needed to manage distributed sales offices throughout theAsia Pacific region. More and larger production plants have been built to cope with the booming market. Assuch, BCC required more accurate forecasting and inventory control in order to keep costs low. BCC wasalso looking for a higher service level than with its previous solution. BCC's goals were to implement anenterprise-wide ERP solution to improve management efficiency and consolidate its IT infrastructure. ThisERP system would also serve as the starting point for a Supply Chain Management (SCM) solution for thecompany.

BCC elected to use JDEdwards as its ERP solution. The IBM Brand and ERP Solutions Team worked withthe customer to decide on an AS/400e Model 720 as the platform for the OneWorld implementation. BCCimplemented the Distribution and Financial modules of JDE OneWorld as the first phase for its Hong Kong,Singapore and China offices. This implementation will serve as a template for other locations, such as thecompany's Taiwan offices. The JDE OneWorld Manufacturing module will be deployed in the last phase ofthe project, after successful integration of the Distribution and Financial modules in all locations.

The JDE OneWorld modules were installed on an AS/400e Model 720 with DB2 UDB to provide the totalintegrated solution. The choice of AS/400e is due to its incomparable stability and manageability. JDE onAS/400 also has the more successful references in the Asia Pacific region than other available platforms.The AS/400 provides BCC with a robust platform capable of supporting future enterprise growth and devel-opment of Supply Chain Management opportunities. The JDE OneWorld-AS/400 solution has streamlinedthe BCC enterprise by providing the capability to integrate its multi-geography plants in the Asia Pacificregion.


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This IBM ERP solution has helped BCC consolidate all resource critical operations in one single system.Sales and production locations can now share information in real-time. Facilitating smoother and morestreamlined operations, the solution will improve cost efficiency and performance for the customer.

Winters Instruments - Canada

As an international industrial instrumentation manufacturer, Winters Instruments builds on its strength tosatisfy the diverse needs of the industrial marketplace. Since 1953, Winters Instruments has providedpressure and temperature instruments utilizing its worldwide distribution network. Today, Winters is proud tobe distributing its products in over 60 countries throughout the world. The Winters Corporation consists offour distinct divisions; Winters Canada, Winters USA, Winters International and Versa Gauge (formerlyCrosby Gauge). Winters prides itself in serving all industries that require pressure and temperaturemeasurement

Winters was looking to streamline operations in the areas of sales, new business development and produc-tion. It had just implemented an enterprise resource planning (ERP) solution (Microsoft Great Plains) butneeded to create a solution for its sales people so they could gather real-time information on their custom-ers, be able to access a centralized database and manage the sales pipeline. The company's goal was toreduce the amount of process and paper that was needed to get access to information or perform a simpletask.

Winters Instruments turned to The Kenna Group, an IBM Business Partner, in order to implement a newLotus Notes based customer relationship management (CRM) application. The Kenna Group was able todeliver sales force automation, contact management, production scheduling and order entry, all in one appli-cation. Additionally, The Kenna Group was able to integrate it with the customer's Web site.

Users enter through Lotus Notes into three applications; order entry, quote management and contactmanagement. Winters used to use ACT!, which only had limited function and did not provide the multi-tieredapplications that Kenna provided. The Kenna Group connected to Microsoft Great Plains ERP systemsthrough either LEI or flat file transfers. Currently, there are 60 users of the application.

Although it is too early to quantify the results, Winters expects increased customer retention andprofitability, improved decision making and responsiveness to customer needs and cost savings throughstreamlined processes. Lotus Notes provides rich functionality, and Winters' sales people traveling abroadlike the ability to work in disconnect mode, since many places do not have strong telecommunications.

Whirlpool - United States

A $10.5 billion corporation, Whirlpool has its home base in Benton Harbor, Michigan. Competing in a $70billion global industry for major home appliances, the 61,000-employee company considers its distributorsand partners to be critical players in its continual quest to maintain industry leadership. This being the case,it is in Whirlpool's best interests to operate with utmost efficiency while providing top-notch service tomembers of its selling chain.

Until recently, providing outstanding service was no problem. But Whirlpool's other processing methods,particularly for its middle-tier trade partners-- which comprise 25 percent of its total partner base-- wereinefficient and costly in time and money. These are the sellers who generate 10 percent of the company'srevenue, but aren't large enough to have dedicated, system-to-system connections with Whirlpool-- so theytypically submitted orders by phone or fax.


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Wanting to infuse greater efficiency into this process, Whirlpool turned to e-business, developing abusiness-to-business (B2B) trading partner portal that enables these sellers to order online. To make theportal work, the company needed to integrate it with its SAP R/3 inventory system and Tivoli systemsmanagement tools. Whirlpool looked no further than the company with which it has collaborated on severalother projects over the years: IBM.

Following the guidelines of the IBM Application Framework for e-business, Whirlpool built its portal with IBMWeb Sphere Application Server, Advanced Edition, IBM Net.Commerce (now part of the IBM WebSphereCommerce Suite family), IBM HTTP Server, IBM VisualAge for Java and IBM Commerce Integrator with IBMMQSeries.

Working in concert, these technologies have enabled a fast, easy Web self-service ordering process thathas cut the cost per order to under $5--a saving of at least 80 percent. Whirlpool has also gained anunexpected benefit-- an extendible e-business platform that it plans to leverage for other applications.

"IBM e-business solutions run on many different platforms that scale from the very small to the very large,"says Jim Haney, vice president of architecture and planning at Whirlpool. "When you've got that level ofscalability as well as flexibility, that's pretty powerful."

Whirlpool's B2B portal is actually in its second generation. Its first-generation portal was developed withlow-level products, giving the company a chance to test the Web waters. "It took off faster than we hadexpected," Haney recalls. "In its first 3 months, the amount of revenue that flowed through the portal waswhat we thought we would generate in its first 12 months. We got a 100 percent return on our investment inonly 8 months.” The B2B portal returned 100% ROI within 8 months. The B2C site returned 100% ROI in 5months. Overall, order processing savings increased in excess of 80%.


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7.0 IT SpendingThis section will review typical IT Spending at Electronics companies. The electronics industry is historicallycommitted to large investments in technological innovation and to a high percentage of spending on IT.Electronics industry IT spending, $28 billion worldwide in 1998 and growing at 10%, represents one third oftotal manufacturing IT spending, not including an equivalent amount for embedded electronics. Coupled withthe rapid growth rate in the electronics sector, this industry commitment to IT spending represents asubstantial opportunity for IBM. The worldwide market opportunity in the electronics manufacturing hasgrown by 8.6% compounded growth rate (CGR) in the past three years.

Electronics Industry Market Opportunity (IT Spending)

8.6%$36.4$33.2$30.3$28.4 WW Total6.4%$9.4$8.5$7.8$7.8 AP7.8%$10.9$10.1$9.4$8.7EMEA

11.1%$16.3$14.7$13.2$11.9*AmericasCGR2001200019991998Opportunity

*in U.S. Billions

Source: IBM Sales Compass

IBM’s Share of the Opportunity

15%$13.5%11.9%10.6%Market Share(%)

22%$5.4$4.5$3.6$3.0*IBM Revenue(est.)

CGR2001200019991998Opportunity

*in U.S. Billions

Source: IBM Sales Compass

The Electronics industry in the United States is:� $21.5B IT opportunity for 2002� 4.3% growth rate over 2001

IT Spending by Category in U.S.

(3%)7%Servers

4%3%Technology

(5%)19%Client

7%15%Software

9%55%Services

Growth% RevCategory

Source: GMV 2002

According to the Information Warehouse, the solution spend by category is as follows:


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Enterprise Resource Planning (ERP): 51.5%e-business: 20.2%Engineering: 13.1%Supply Chain Management: 8.1%Customer Relationship Management (CRM): 4.0%Business Intelligence (BI): 3.0%

North American IT Spending TrendsAmong IT spending in the United States, continuous replenishment programs and cross-businessactivity-based-management programs are the most effective, but most difficult to implement. Theseprograms are supported by real time data sharing among business partners, from retail point-of-sale tomaterials procurement by the manufacturer. For the most progressive companies/supply chains, the resultsare significant. Leading manufacturers, distributors and retailers have integrated their operations to improveservice levels, reduce inventories and cut operating costs using bar-coding, point-of-sale data collection,electronic commerce, warehouse management systems and decision support tools.

EMEA

Discrete Manufacturing - IT Spending $MPlease note that IDC describes Discrete Manufacturing as including electrical machinery and apparatus andelectronic engineering.

10,843.16,810.316,722.09,797.620057,826.14,448.012,001.66,919.52001

UnitedKingdomItalyGermanyFrance

Source: IDC, “Western European Information Technology Vertical Markets 2000-2005 Market Trends and Forecast”,2001

Discrete Manufacturing - IT Spending Percentage Growth

9.8%13.3%11.8%10.8%200511.1%13.8%10.4%10.9%20049.0%12.4%8.9%8.8%20034.3%5.6%3.6%5.9%20023.7%5.3%3.4%5.8%2001



Discrete Manufacturing - IT Spending by Product, 2000, $M

400.3235.6678.2489.6ImplementationServices

236.9103.6419.2325.0ConsultingServices




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Discrete Manufacturing - IT Spending by Product, Percentage Growth 2000/2001

9.9%9.3%8.3%11.6%ImplementationServices

11.2%8.8%10.1%11.4%ConsultingServices



EMEA IT Spending TrendsAccording to IDC, manufacturing was one of the first sectors to feel the impact of the global economicslowdown. Overall IT spending growth reached only 4.4% in 2001. Being more exposed to exports,manufacturing was one of the first sectors to feel the contraction. IDC also states that, “the situationworsened during the course of the year as:� Higher oil and food prices pushed up inflation and squeezed real incomes� The downturn in the technology sector impacted industry, especially in Finland, Ireland, Sweden and

Germany� The slowdown in the US has been felt more and more, with two main implications: a further falloff in

exports to the US, and a slowdown in inward investment from the US, and � The rate of unemployment has stopped falling.”1

This all leads to higher inventory levels and reduced productivity. IDC also lists that in this difficult economy,there are several challenges for European manufacturers, including:� Protecting margins� Increasing sales� Improving relationships with customers and suppliers� Emphasizing short-term ROI to satisfy shareholders and market expectations.

Due to the slow business environment, many IT investments were delayed. The total IT spendgrew by only 3.7% in 2001, claims IDC. IDC also describes that, “discrete manufacturing was moreimpacted by the slowdown. Investments concentrate on:� Brick-and-mortars’ e-business projects carried out both in the back-office and front-office areas� In the back office, streamlining the relationship with suppliers is driving demand for SCM and

e-Procurement systems� In the front office attention is shifting to CRM systems in the areas of marketing automation, sales force

automation, and order tracking� Networking technologies to better manage internal processes and information� EAI to exploit the benefits of all the applications implemented inside an organization� Product management solutions� Content management.

GermanyMany German businesses are moving away from customized software to software packages. This allowsfor less cost for development and maintenance. Oftentimes, this leads to the application as part of thebusiness process. Wireless and pervasive applications are still requiring customization of applications. IDC


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1IDC, “Western European Information Technolgy Vertical Markets 2000-2005 Market Trends and Forecast”, 2001

states, “In the area of IT services, e-business, CRM and SCM-related services were the hot topics in themarket, in addition to strong growth in systems integration.”2 Another potential opportunity in Germany isapplication outsourcing. It is growing at a fast pace in Germany. Companies look to third parties to deployand manage their applications.

German manufacturing industry has come upon hard times. IDC states that the industrial output forGermany fell five times more than forecasted for July 2001. Germany also has strict labor laws which is nothelping the situation. According to IDC, “Germany has so far been spared US style job cuts in itsmanufacturing industry, the backbone of Germany’s industrial might. However, a wave of restructuringhas started to hit Germany’s blue chips, led by electronics giant Siemens AG, which cut 6,100 jobs in itsmobile handset and fixed-network business, then an additional 7,000 cuts in October, followed byannouncements from Europe’s largest manufacturer, DaimlerChrysler, to cut 35,000 jobs worldwide.”3

Overall IT spending in the market grew below average. Many projects were Internet-based includingimprovements to supply systems, CRM and eBI.

FranceFor the past three years, France’s GDP has been expanding. It was only 2% in 2001, compared to 3.4% in2000. The downturn was a result of, “the global slowdown, a reduction in corporate demand, slowingexternal demand from the US, Japan and Germany, as well as decelerated export growth. As a result ofweaker production, companies curtailed investment.”, as stated by IDC. GDP is expected to grow by only1.6% in 2002.

CRM and supply chain automation applications were recent initiatives in the software market. The extensionof B2B e-commerce created greater need within larger organizations to coordinate product and customerinformation via customer relationship management (CRM) applications. This has added importance toapplication integration. IDC says that, “France has traditionally been an early-adopter country andfront-runner in Europe when it comes to use of business intelligence (BI). This trend was underlined by thecontinuing growth in analytical applications in 2001 such as financial, CRM, operations and productionanalytical applications/tools. Web site analytics is the fastest growing analytic application softwaresegment, as companies increasingly analyze data from Web-based interactions, for understandingcustomer behavior.”4

Within IT services, IDC claims that, “the fastest growing segments were consulting and implementationservices, driven by projects centered on the Euro, e-business, supply chain management (SCM), enterpriseresource planning (ERP) and CRM. Operations management services are also showing good growth ascompanies look for outsourcing to cut internal costs.”

IDC states that, “the French production outlook decreased 12 points in September from its July 2001 level to-48, the lowest reading since July 1993. As a result, the sector in France started to postpone itsinvestments and total growth slowed to 6.1%, which is nevertheless the highest growth rate registered bymanufacturers among the top five countries.”5

ItalyThe Italian economy slowed in 2001, reaching GDP growth of 1.8%. Indicators of employment and inflationwere stable. GDP is forecasted at 1.2% in 2002. On the whole the outlook for the Italian IT market ispositive. There are new government initiatives designed to assist companies to make IT investments which


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5Ibid.

4Ibid.

3Ibid.

2IDC, “Western European Information Technology Vertical Markets 2000-2005 Market Trends and Forecast”, 2001

are helping to aid the effects of the economic slowdown. Italy’s mobile adoption is mature, however, there islow penetration for PCs and Internet access. Growth is expected in these areas.6

There is healthy growth in the software market in Italy. The key drivers in this segment were, “the adoptionof e-business, SCM and CRM software applications to maintain competitive advantage and extend marketreach. With regards to the IT services market, Italy witnessed strong growth in the outsourcing market, withmajor deals being signed by some of Italy’s largest conglomerates. Systems integration and applicationmanagement also achieved solid growth rates.”7

Italy has many small and medium-sized enterprises in the manufacturing sector. IDC explains that, “despitethe global slowdown, the relative immaturity of this market has helped a 5.6% growth, with investmentsconcentrated both on internal reorganization and on suppliers’ relationships. An emerging area of investmentis that of e-Learning, for information technology and business skills training.”8

United KingdomGDP growth in the UK is forecast to reach 2.3% in 2001. The UK economy was sustained by an increase inhousehold spending, which was itself supported by the growth in employee compensation.

The UK market was driven by sales of web-enabled software and outsourcing services. Companies stoppedstrategic spending and moved to tactical investments that would either help reduce costs or improve sales inthe short term. Unnecessary IT projects were put on hold. IDC states that, “the market continued to seestrong investment in CRM and SCM applications, as e-business continued to be a primary driving forcebehind the adoption or upgrading of enterprise applications and CRM strategies. Packaged softwareapplications are playing an increasingly important role within UK organizations. Many UK organizations areopting to outsource the management of their application environment.” Like other European countries, CRMand SCM are important to the UK.

UK manufacturing is at its worst point in a decade. IDC also describes that, “UK manufacturing industrysaw demand for its goods in August, both at home and abroad, at its lowest level since early 1999;according to the Confederation of British Industry, 41% of UK manufacturing firms said that their order bookswere below normal, and 12% were above.” Output expectations, which have been broadly stable sinceMarch 2002, also turned negative and are now at their lowest for the past two and a half years. “Formanufacturers operating in the UK the environment is particularly tough, with added pressure caused byhigh labor costs, the strength of the sterling against the Euro, lack of investment and rising costs of rawmaterials,”9 according to IDC.

Asia PacificThe solutions with the most growth potential are Supply Chain Management (SCM), Enterprise ResourcePlanning (ERP) and Customer Relationship Management (CRM).


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9Ibid.

8Ibid.

7Ibid.

6IDC, “Western European Information Technolgy Vertical Markets 2000-2005 Market Trends and Forecast”, 2001

8.0 Recent InitiativesBeyond standard enterprise planning and transaction systems requirements – financials, customer service,human resources, order management and inventory management – electronics companies require systemssupport for warehouse management, electronic commerce (EDI and internet), and supply chain decisionsupport (demand and supply planning, transportation planning, and physical distribution strategy).

The most advanced firms in the industry have implemented supply chain planning systems and developedrelationships with business partners that allow them to track and automate the flow of goods from thesupplier, through their warehouses and onto outbound trucks. Increasingly, these leaders are implementingcross-docking operations in which they coordinate inbound supplier shipments with outbound requirementsand literally move the product from one dock to another, without ever putting the inventory into stock.

Such efficient flow of goods requires both sophisticated technology and highly integrated business partnerrelationships, and has taken years for the most progressive companies to implement. As the technologybecomes less expensive and grows simpler to implement, more medium and small firms will begin toimplement these types of solutions.

In the meantime, medium and small firms with a survival and growth strategy are implementing, and willcontinue to implement, basic warehouse management systems, inventory planning systems andtransportation planning systems. These systems have in the past two years become more plentiful,simpler to implement and less expensive.

Information systems for the electronics industry need accommodate most if not all of the following handlingand distribution characteristics:

Industry Trends / Directions

UPC Barcode ScanningUPC stands for Universal Product Code. UPC bar codes were originally created to help grocery storesspeed up the checkout process and keep better track of inventory, but the system quickly spread to allother retail products because it was so successful.

UPCs originate with a company called the Uniform Code Council (UCC). A manufacturer applies to the UCCfor permission to enter the UPC system. The manufacturer pays an annual fee for the privilege. In return, theUCC issues the manufacturer a six-digit manufacturer identification number and provides guidelines on howto use it. You can see the manufacturer identification number in any standard 12-digit UPC code. The UPCsymbol printed on a package has two parts:

w The machine-readable bar code

w The human-readable 12-digit UPC number

The manufacturer identification number is the first six digits of the UPC number. The next five digits are theitem number. A person employed by the manufacturer, called the UPC coordinator, is responsible forassigning item numbers to products, making sure the same code is not used on more than one product,retiring codes as products are removed from the product line, etc. In general, every item the manufacturersells, as well as every size package and every repackaging of the item, needs a different item code.


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Radio Frequency (RF) Systems RF systems are closely related to bar coding. Using Radio Frequency Identification (RFID), RF systemswere created using wireless technology. The RF systems allow for non-contact reading and are effective inmanufacturing and other hostile environments where bar code labels could not survive. According to theRFID.org Web site, there are key attributes and limitations to these systems that include:

w Growth area of automatic identification and data capture

w New generation, lower cost transponders offering multi-read capabilities

w Read/write electronic storage technology

w Wide range of products satisfying a range of data storage and data transfer needs

w Low to reasonably high (64Kbits) data storage capability

w Wide range of data transfer rates, depending on device and carrier frequency used. Generallyspeaking, the higher the carrier frequency the higher the data transfer rates achievable

w Close proximity (inductive systems) to tens of meters (radiating systems), without the need forline-of-sight interrogation, depending upon type of transponders and interrogation hardware

w Robust constructions available, allowing use in reasonably harsh conditions

Manufacturing Execution SystemManufacturing execution system (MES). An information and communications system that providesreal-time, action-oriented information needed to manage manufacturing activities. For more information onMES, please visit:http://houns54.clearlake.ibm.com/solutions/industrial/indpub.nsf/detailcontacts/Global_Production_and_Supply_Solution

CPFRAccording to http://www.cpfr.org, Collaborative Planning, Forecasting and Replenishment (CPFR) is aconcept that allows collaborative processes across the supply chain, using a set of process and technologymodels that are:

w Open, yet allow secure communications

w Flexible across the industry

w Extensible to all Supply Chain processes

w Support a broad set of requirements (new data types, interoperability with different DBMSs, etc.)

The mission of the Collaborative Planning, Forecasting and Replenishment initiative is closely tied withsimilar efforts that have preceded it - such as ECR, Quick Response and VMI. Its objectives are consistentwith the objectives of the Voluntary Inter-industry Commerce Standards Association (VICS), - a voluntary,nonprofit organization, which takes a global leadership role in the ongoing improvement of the flow of productand information (about the product) throughout the entire supply chain in the general merchandise retailindustry. The mission of VICS is to "improve the partnership between Retailers and Vendor Merchantsthrough shared information." The sub-committee hopes to achieve this by providing an environment fordynamic information sharing integrating both "demand" and "supply" side processes (linking manufacturers,retailers, and carriers), and effectively planning, forecasting, and replenishing customer needs through thetotal supply chain.

� Panasonic recently completed a CPFR project. Their lead time was cut from 90 days to 45 days anddelivery from the factory was increased to weekly from monthly.


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� An electronics manufacturer in the middle of the supply chain, S3, a graphics chip manufacturer, hasstarted to manage critical information flow between its customers, the largest electronic manufacturers,and its production line.

� Celestica, a fast-growing electronics contract manufacturer, has been able to accept orders andguarantee deliveries anywhere in North America within 48 hours of notice from its customers, becauseof web-based content management and collaboration project.

Electronic Data Interchange (EDI)EDI streamlines payables and receivables electronically - including invoices, purchase orders, shippingnotices, proof of delivery, payment authorizations. Its benefits include:

w 24/7 integrated document delivery, payment, and tracking,

w Full purchasing cycle support,

w Form quotation, to fulfillment, to billing and settlement,

w Reduction of costly errors,

w Elimination of printing, paper, and mailing costs,

w Reduction of administrative time,

w Accurate transaction tracking,

w And, electronic payment options.

Transportation ManagementTransportation Management Systems help control shipping processes by fully integrating logistics functionsbeyond normal features. These systems help minimize delivery costs, and in turn, increase revenues. It hasbeen a trend that third party logistic providers hosted transportation management systems (TMS) via theinternet. Symbol states that, “the transportation operation of the business is a cost frontier where newsystems are providing tremendous savings while greatly improving operational control.” TMS providesimproved fleet visibility, driver and dispatch productivity, store communications and management reportingthrough real-time data and decision making.

Engineering Chain ManagementThe engineering chain covers applications and professional services to improve product design and time tomarket. The engineering chain solutions include mechanical and plastic design, electronics and softwaredesign, technology, product data management, and engineering services. IBM offers an integrated portfolioof engineering solutions and services for manufacturers of high value electronics products. IBM engineeringsolutions use IP, knowledge, workflow and collaboration management to improve time to market, return ondevelopment investment, and effect significant cost savings. Sample solutions include: Electronic DesignAutomation (EDA) tools, Product Data Management (PDM) and Mechanical Design (CAD). For moreinformation on engineering solutions, please visit http://houns54.clearlake.ibm.com/solutions/industrial/indpub.nsf/detailcontacts/Engineering_Solutions.

Product LifeCycle Management (PLM)Product innovation solutions grew approximately 18-22% in 2001. Emerging trends are in design collabora-tion and design outsourcing areas. PLM includes cross-company design collaboration and designoutsourcing designed to capitalize on increased design effectiveness, reduced engineering infrastructure,and decreased time-to-volume production. Product Lifecycle Management solutions can streamline theIntegrated Product Design process and connect the entire value chain to facilitate real-time collaboration indesign and production, so our customers and their business partnerscan reduce the amount of parts inproducts, speed new product development, and facilitate faster access to new markets all while reducing ITbudgets.


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Product Lifecycle Management is a set of software, services, and consulting that enables integration of acompany's product content across business processes (e.g. ERP, CRM, SCM). Product Lifecycle Manage-ment manages development and support of complex physical products throughout the entire product lifecy-cle. It includes mechanical computer aided design/computer aided manufacturing (MCAD/CAM), electricaldesign & automation, virtual product innovation process design, product data management (PDM) applica-tion software as well as Software "connectors" to other applications such as SCM, ERP and CRM.

Contract OutsourcingIBM states that outsourcing will grow from 23% today to 40% by 2004 in the electronics industry. More andmore companies are looking to a third party to manage cross-enterprise functions. As part of this, the use ofApplication Software Providers (ASPs) is more and more relevant in the electronics industry.

Customer Relationship Management

CRM is acquiring and retaining customers. It is critical to the success of any business by maximizingcustomer intelligence, providing a single view of the customer, increasing the profitability of the “top”customer and improving customer service and loyalty. CRM helps build profits and market share, as wellas, expand shareholder value.

e-CRM continues to grow. IBM has seen the demand driven to merge CRM, telesales, call center and webcommerce activities to provide more of a seamless experience for the customer. CRM leads the way forcombining both telecommunications and web requirements.

Warehouse Management Systems (WMS)WMS are software packages that help distributors optimize their use of warehouse space and warehouselabor. Many distributors who implement advanced warehousing and labor management systems canquantify significant benefits above and beyond those attained through the implementation of the BusinessManagement System (BMS) / Enterprise Resource Planning (ERP) system. For example:

w Improved warehouse productivity by 10%-50%

w Reduced shrinkage/spoilage

w Reduced returns resulting from mispicks

w Improved space utilization

ERP systems only provide users with high-level inventory management. WMS provides real-time tracking ofwarehouse inventory and in-turn optimizes warehouse operations.

Supply Chain Management

A large percentage of IBM customers are planning investments in the SCM arena with focus around collabo-ration supply chain functions. Clear shift in public e-marketplace business models moving to providingprivate transactions platforms, design collaboration and supply chain collaboration. e2open and Convergeare the largest industry marketplaces.

� Eastern Europe is trailing far behind Western Europe. Businesses in the East are generally local,rather than regional or global, and still focused on improving their basic internal processes.

� France often appears at the forefront of supply chain development in Europe because of the extensivework done there in operations research.

� European businesses are watching closely how supply chain adoption is playing out in North America.In fact, multinational companies with divisions in the United States, for example, seem to serve asvectors that carry supply chain back to Europe. Supply chain vendors could accelerate their penetrationinto Europe by first making U.S.-based subsidiaries successful.


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� Europe is still largely at the level of missionary sales, and business from midsize and smaller compa-nies in other regions is even harder to win.

� In Europe, communication costs play a role, particularly for small and midsize companies. In fact, theInternet that is rapidly becoming a key enabling technology for supply chain in N.A. is still relativelyexpensive to use in Europe.

� Wireless technology is far advanced in Europe. This should factor into a company’s supply chaindecision.

e-Procurement for ElectronicsThe ability to streamline a company’s procurement process will add tremendous value to the industry.e-Procurement is acquiring direct and indirect products and services. e-Procurement uses the internet andnew technologies to facilitate a seamless end-to-end stream of strategic procurement activities byconnecting buyers with suppliers.

e-Procurement helps:� Leverage purchasing volume� Focus negotiation and selection� Facilitate common process and internal application� Control spend It provides greatest opportunity to improve processes, increase productivity and reduce cost across thesupply chain and lays the foundation for real-time collaboration with suppliers, marketplaces, financialproviders, etc. e-Procurement solutions increase management’s control over rebates and maverick buying.

Industry Product Convergence/ Pervasive ComputingThe explosion of new Internet access devices driven by movement of embedded electronics into newproducts areas such as wireless, gaming/entertainment, industrial, and consumer appliances. Strategiesvary in terms of new client device types and new services but there is clearly an opportunity for new highlyscalable intelligent infrastructure and services. Infrastructure services are also an important part of theincrease in wireless computing.

e-ProductionThe e-Production solution addresses the production management process from sourcing to fulfillmentby connecting the plant floor, enterprise and supply chains through the use of collaborative manufacturing infrastructure, MES/SCM/ERP and Product Lifecycle Management solutions and systems integration. e-Production includes elements of business process design with lean manufacturing techniques, ERP integration with Manufacturing Execution Systems (MES),e-diagnostics/equipment engineering system, e-Procurement and strategic sourcing, and collaboration.

e-Production is a solution which effectively streamlines the process from sourcing to fulfillment by connecting the plant floor, enterprise and supply chains through the use of collaborative manufacturinginfrastructure, MES/SCM/ERP and Product Lifecycle Management solutions, and systems integration byexpanding existing methodologies to include elements of business process design with lean manufacturingtechniques, ERP integration with MES, e-diagnostics/equipment engineering system e-Procurement and strategic sourcing, and collaboration e-Production reduces time to market and fasterramp-up will save millions driving immediate ROI, while greater customer-orientation and responsiveness tocustomer requirements helps to build and solidify long term relationships.


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9.0 Vendors

9.1 ISVs

There are several ISVs that have packages and services for electronics companies. A few of thesecompanies and their products are highlighted in this section. Please review: http://www-1.ibm.com/mediumbusiness/industries/electrical.jsp for more information.

Adonix

Adonix X3 is an integrated enterprise software (ERP) application that addresses companies' needs inmanufacturing, distribution, CRM, sales and accounting. It supports multiple languages, currencies, compa-nies, sites and legislations. IT manages the entire production environment, from material requirementsanalysis and production planning to shop floor control and costing. It operates in both single and multi-plantenvironments, making it the ideal solution for growth-minded mid-sized manufacturers. Adonix X3 providesfull manufacturing systems support, including MRP, MPS, Capacity Requirements Planning, Bills ofMaterial, Routings, Shop Floor Control and Costing. Finite capacity planning and interactive drag-and-dropshop floor scheduling tools are included. http://www.adonix.com

Adonix Data Collection provides for a seamless connection between automated data collection devicesused by shop floor and warehouse personnel and Adonix X3. It accepts data from any ANSI-compatibleterminal - from RF hand-held devices to hard-wired or RF fixed station devices - verifies its accuracy, andpasses the data to Adonix X3 for immediate update. It also takes care of all prompts on the collectiondevices, manages the entire network of devices, and ensures that data is saved during system downtime.Adonix Data collection supports production and labor tracking transactions on the shop floor as well as timeand attendance entry. For warehouse material movements, it supports receiving, put-away, cycle counting,location changes, picking and production material issues. http://www.adonix.com

AribaAriba pioneered the e-Procurement industry and now leads the Enterprise Spend Management (ESM)market. Enterprise Spend Management is a new class of solutions that focus on delivering closed loopcontrol and leverage of a company's spend. Most large companies already know how to reduce their spend,the challenge is to systematically control all key procurement interactions across the enterprise to deliverdeeper and more sustainable spend reductions. Ariba has several offerings: Analysis, Sourcing,Procurement and Supplier Network. http://www.ariba.com

BaanBaan is a division of Invensys. There are several offerings available:

• iBaanERP: a comprehensive suite of enterprise applications from engineering, design, throughmanufacturing, sales, procurement, warehouse management and financial reporting. Offers fullyintegrated, industry specific solutions to meet the most specialized requirements.

• BaanIV: a fully integrated solution that goes beyond ERP. Using DEM implemented via Orgwarecapabilities, BaanIV extends supply chain support beyond the organization to support tradingpartners.

• PROTEAN/Prism: modular ERP solutions that focus on chemical plant operations andmanagement.

• iBaan for Supply Chain Management: helps companies synchronize manufacturing and distributionactivities, collaborate across the enterprise, and across multiple trading partners in the value chain.


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• iBaan for CRM: combines demand chain technologies with supply chain efficiency and providescross-enterprise analytics.

• Invensys CRM: SalesPoint - a Web based solution for sales professionals

http://www.invensys.com

Clear Technologies

C2 Customer Centric Solutions: a comprehensive middle-market CRM solution designed to integrate sales,marketing and customer service into one seamless, collaborative operation; C2 consists of five solutionsthat combined provide a complete CRM system. The C2 program offers a rich graphical experience in asimple to use Web browser interface that leverages the infrastructure and security model of Lotus

• Relationship Management: contains valuable customer information in a central, secure repository forquick accessing and sharing by all customer-facing and support personnel

• Sales Management: provides seamless, efficient sales force automation to manage sales activity -quotes, proposals, opportunities and contracts

• Customer Service Management: allows you to track post sales activities, specifically, help desksupport, time and material billing, and field service activity

• Marketing Management: provides automated, collaborative marketing communications via thecustomer's preferred method of contact

• Analytics & Knowledge Management: increases customer value through uncovering the most profit-able customers; determining what they want and how best to serve them; and what it costs to servethem without IT assistance

http://www.cleartechnologies.com

DasaultCATIA: is the leading product development solution for all manufacturing organizations, from OEMs, throughtheir supply chains, to small independent producers. The range of its capabilities allows CATIA V5 to beapplied in a wide variety of industries, such as aerospace, automotive, fabrication and assembly, andconsumer goods including design for such diverse products as jewelry and clothing. CATIA V5 is the onlysolution capable of addressing the complete product development process, from product conceptspecification through product-in-service, in a fully integrated and associative manner. It facilitates truecollaborative engineering across the multidisciplinary extended enterprise. ENOVIA Solutions enable you to graphically define, share and manage product, process and resourceinformation throughout the whole product lifecycle across the extended enterprise. ENOVIA's leading edgee-business Product Lifecycle Management Solutions give to enterprises of all sizes a broad range ofintegrated applications that cover all aspects of: Product Lifecycle Support (from concept and definition toproduction, service and retirement), Product, process and resource Information Management, B2B andExtended Enterprise Collaboration, and Integration with SCM, ERP and CRM applications. SMARTEAM's suite of market-leading Product Lifecycle Collaboration solutions provides enterprises of allsizes a broad range of integrated, web-centric, business process solutions covering all aspects of productlifecycle support, and integrating with supply chain management, enterprise resource planning, and otherbusiness process management applications. Developed in conjunction with innovative industry-leading customers, and integrating best-in-class business practices for product development management


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SMARTEAM's integrated solutions capture, promote, and support these best practices throughout theextended enterprise. http://www.dasault.com

Exact Software

Exact Software markets an extensive range of software products for all types of customers, large and small.Besides accounting software, Exact has software for human resource management (HRM), customerrelationship management (CRM), enterprise resource planning (ERP) and e-business.http://www.exactsoftware.com

Glovia

Glovia is web-enabled B2B transaction applications. There are several modules:

• glovia.com - Glovia's manufacturing and services ERP solutions can provide a competitive edge tocompanies utilizing software for mixed-mode manufacturing (Engineered-to-order through repetitive),projects and contract management, service management and integrated financials.

• glovia.e - Glovia's global collaborative e-commerce framework includes a Global Order Manage-ment system which is composed of eOrder, eStatus and eQuote all of which support the "ultimateweb experience". Our eConfigure solution is designed to allow the configuration and ordering ofcomplex engineered products. Using our eService product customer satisfaction is increased bydelivering instant access to vital customer and product information anytime, anywhere.

• glovia.ec - Glovia's closed-loop collaboration extends the "value chain" by enabling suppliers,partners and customers to create a private, secure trading network across multiple, disparatesystems.

• glovia.hub - Glovia's private digital marketplace platform is designed to take the pain out of globale-business by seamlessly linking market-makers to suppliers and customers regardless oflanguage, currency or operating system.

http://www.glovia.com

HyperionHyperion produces business performance management applications which enable enterprise-wideoptimization of resources and profitability. It also helps identify opportunities for future growth. Their modulesinclude:� Hyperion Performance Scorecard� Hyperion Business Modeling� Hyperion Planning� Hyperion Financial ManagementHyperion can also tailor applications to fit a company’s needs.http://www.hyperion.com

i2Through the IBM and i2 alliance, i2 has been providing its solutions to IBM’s customers. The i2 5.2 family ofintegrated solutions is built so that companies can concentrate on the part of the value chain that will givethem the highest return on investment. These solutions span supplier relationship management, supplychain management, and demand chain management to enable end-to-end workflows for any industry.Within these broad solution sets, i2 helps companies monitor, decide, and act on information to makelong-term strategic decisions down to the execution phase, when a company must react to last-minutechanges like the breakdown of a delivery truck or a last-minute order change. i2 solutions marry planning


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and decision-making to the execution phases of value chain management. Today's enterprise resourceplanning (ERP) applications can still be leveraged to record what already happened in your value chain. Butbusinesses need forward-looking systems that can bring together the diverse systems of all businesspartners and channels, to allow the entire value chain to react for maximum customer benefit andprofitability. http://www.i2.com

IFS

IFS applications are built on a foundation of open architecture. The components provide future-proof supportthat allows companies to quickly and easily respond to new business opportunities. IFS Applications spansthe entire demand and supply chain, easily integrating your operations with customers, suppliers andpartners wherever they are located. Modules include: project delivery, collaboration portals, engineer to orderand quality management, supply chain management, project management, document management.http://www.ifsworld.com

Ironside

The Ironside Solutions provide powerful B2B eCommerce solutions for manufacturers and distributorsenabling them to connect to their trading partners, ( in the supply chain and the demand chain) with real-time transactions. These solutions leverage existing enterprise system business logic and information, andthey can even augment this information when necessary.

Ironside Solutions consist of the Ironside B2B Integration Platform and the Ironworks Solutions. Modulesinclude: Order Management, Vendor Management and Customer Service Solution. http://www.ironside.com

JD EdwardsThe J.D. Edwards collaborative planning and fulfillment solution solves the dilemma of selecting a softwaresolution that must be significantly modified. Distributors no longer have to sacrifice scalability and flexibilityto realize distribution-specific functionality.

J.D. Edwards has been helping distribution organizations achieve the following business objectives for over25 years:

w Control and optimize inventory levels

w Control and optimize warehouse and transportation costs

w Manage remote customer inventories

w Provide immediate, knowledgeable response to customer inquiries

w Enhance profitability through optimal pricing/promotion capabilities

w Focus employee activities on exception and high value-add activities

For more information, contact http://www.jdedwards.com

LANSA Commerce EditionLANSA Commerce Edition is a suite of business-to-business (B2B) and business-to-consumer (B2C)components that are built upon LANSA's award-winning ‘LANSA for the Web’ tools. Commerce Editionallows you to rapidly generate e-business applications that integrate existing IBM eServer iSeries andxSeries Windows applications to the Web and wireless world.

LANSA Commerce Edition provides an easy, rapid and configurable solution to help extend core iSeries andWindows applications to both customers and business partners alike. Commerce Edition is acomponent-based solution that allows the selection of functionality for B2B or B2C Web site. Thecomponents provide a core set of standard business rules and definitions that are common across multiple


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Web sites, including customer self-service, merchandising and administration. LANSA Commerce Editionallows for configuration of the business rules and definitions through a set of simple questions and answersto fit specific application needs. For more information, contact http://www.lansa.com

LANSA for the WebWith LANSA for the Web, building business-to-business (B2B) and business-to-consumer (B2C) intranetand wireless applications that securely access and update iSeries® and Windows NT® or Windows® 2000data. With LANSA's 4GL it is easy to generate industry-standard graphical HTML, Java, XML, or WirelessMarkup Language (WML) output.

LANSA's e-business Frameworks allows adoption of Web-design standards used in many high profile Websites. The Frameworks contain Web components such as Order Transaction and Extended Search thatdevelopers can use to quickly generate Web applications. LANSA creates HTML or XML documents storedin IBM DB2® Universal Database for iSeries or Windows NT platform-based databases that can be editedand graphically enriched by your Web-authoring tool of choice. For more information, contact http://www.lansa.com

Lilly Software Associates

Lilly Software Associates provides end-to-end enterprise and supply chain software applications formanufacturing, distribution and warehousing. Incorporating e-business solutions, Lilly Software is helping itscustomers successfully compete in today’s global marketplace. In addition to expanding its offerings withe-business and Customer Relationship Management (CRM) applications, Lilly Software's supply chainproduct line also includes Enterprise Resource Planning (ERP), patented Advanced Planning and Schedul-ing (APS), Manufacturing Execution Systems (MES), Quality Management, and Warehouse ManagementSystem (WMS) capabilities. Complete integration between applications allows companies to create compre-hensive business strategies that result in superior levels of customer service, on-time delivery, and profitabil-ity. http://www.lillyassociates.com

Manugistics Enterprise Profit OptimizationManugistics Group, Inc., the leading provider of Enterprise Profit Optimization (EPO), helps companieslower operating costs, enhance profitability, and accelerate growth by optimizing the supply-demandnetwork from design and procurement through pricing and delivery. Enterprise Profit Optimization is anemerging business discipline made possible through the combination of the proven cost-reducing power ofsupply chain management (SCM) solutions, Supplier Relationship Management Solutions (SRM), and therevenue-generating capacity of pricing and revenue optimization (PRO). Manugistics solutions help solve critical business needs:

w Enterprise Profit Optimization (EPO) solutions tightly integrate pricing and marketing actions onthe demand side with the complex and ever changing conditions of the supply chain to helpenhance profitability across the enterprise

w Supply Chain Management (SCM) solutions address the manufacture, movement, storage andservice of products no matter how complex the business or how far-reaching the trading network

w Supplier Relationship Management (SRM) solutions facilitate multi-tier collaboration amongsuppliers, outsource manufacturers, and distributors. Pricing and Revenue Optimization (PRO)solutions help enable companies to optimize the prices they offer for all products, to allcustomers, through all channels by balancing the trade-offs between expected contribution tomargin and such strategic objectives as market share.


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For more information, contact http://www.manugistics.com

Mapics

MAPICS is a visionary, global software company focused exclusively on delivering best value solutions toleading mid-market manufacturers that enable them to compete better in today’s collaborative environment.focus on providing flexible solutions for Complex and High Tech Manufacturers. http://www.mapics.com

Onyx

Onyx has several modules for electronics companies:

• Onyx Employee Portal: a powerful Web-based Customer Relationship Management (CRM) solutionthat consolidates customer information gathered by sales, marketing and service organizations todeliver a complete view of the customer.

• Onyx Partner Portal: a Web-based Partner Relationship Management (PRM) solution that empow-ers your company to effectively collaborate with partners, suppliers or brokers to expand yourindirect business network and cultivate loyalty.

• Onyx Customer Portal: a Web-based portal solution that delivers tools to transform your Web siteinto a sophisticated, intelligent interface for customers to research, purchase or self-assist, 24hours a day, seven days a week.

• Onyx e-business Engine: the backbone for Onyx Enterprise CRM Solutions, it is built on anadvanced, enterprise-scalable Internet architecture; with three successive Internet-based versionsreleased in production at customer sites around the world, Onyx Internet technology is proven inmission-critical enterprise environments. http://www.onyx.com

PeoplesoftPeopleSoft EPM 8.3 is an extended ERP suite that embeds analytic capabilities directly into its enterpriseapplications, including PeopleSoft CRM Analytics, Financial Analytics, Workforce Analytics and SupplyChain Analytics. EPM 8.3 extends this value with Internet applications. Integrated, scalable andbrowser-based,EPM 8.3 enables real-time connection among customers, suppliers and employees.

PeopleSoft 8 Supply Chain Management provides real-time information by means of fully integrated,end-to-end solutions for collaborative enterprise. From order capture, collaborative planning and fulfillment toservice and measurement is available through a Web browser.

PeopleSoft 8 Customer Relationship Management is based on PeopleSoft Internet architecture (no code onthe client), PeopleSoft 8 CRM can be deployed on virtually any Internet-enabled device anywhere. Allows forseamless integration with other PeopleSoft applications or applications from other vendors. PeopleSoftFinancials: a suite of Internet enabled applications allowing customers, employees and suppliers universalaccess to relevant content including financial, project and treasury management. http://www.peoplesoft.com

QAD eQQAD eQ is an intelligent central order management suite of Sell-side, Buy-Side and Replenishmentapplications that extends the back-office ERP systems to collaborate with customers, suppliers, and tradingpartners to deliver a competitive advantage. For more information, contact http://www.qad.com


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RelavisRelavis eBusinessStreams eSales (formerly OverQuota) enables teams to sell strategically through highlycollaborative and coordinated account plans that greatly improve interactions with customers and channelpartners; by understanding and sharing the customers' needs and preferences, the organization buildscustomer loyalty by providing them a unified and focused experience. Relavis eBusinessStreams eService is a customer service module that improves customer service byenabling better communication, coordination and collaboration between customers and the teamssupporting them; areas of focus are Ticket Management and Problem Resolution, Customer Self-Service,Workflow andEscalation, Querying, Reporting and Analysis, Chat and Text Analysis. Relavis eBusinessStreams eMarketing automates targeted and personalized multi-channel marketingcampaigns, driving collaborative interaction between everyone in the marketing and relationship cycles,including customers and channel partners; this collaborative approach allows an organization to address itscustomers' specific needs, while focusing on the highest returns for the effort; the customers receivecontinuous added value, thus ensuring higher revenues; areas of focus are Lead Management, CampaignManagement, Knowledge Management and Data Mining. http://www.relavis.com

mySAPmySAP Customer Relationship Management (mySAP CRM) is a complete, customer-centric e-businesssolution. With mySAP CRM, a company’s people, processes, and information are seamlessly connectedwith customers -- throughout the entire value network.

mySAP Supply Chain Management (mySAP SCM) is the supply chain solution that delivers real businessvalue. By dramatically improving your ability to plan, respond, and execute, mySAP SCM enables acompany to adapt to the inevitable exceptions that occur in the race to meet market demands. Thisincludes portals that allow employees, partners, vendors, and customers to communicate and collaborate.

mySAP Product Lifecycle Management ties suppliers into the design process, increasing quality andreducing time to market.

mySAP Supplier Relationship Management allows for location of the best suppliers and shorten sourcingcycles.

mySAP Customer Relationship Management gives you visibility into the one demand signal that counts: theend customer.

mySAP Exchanges, formerly mySAP Marketplace, fosters the efficiencies of virtual communities byproviding a collaborative platform that drives business processes across multiple software systems andvalue-added services. http://www.sap.com

Siebel

• Siebel Field Sales and Service provides a holistic view of all customer touch points across allchannels: web, call center, field sales, and channel partners. Siebel Sales provides comprehensivesales pipeline management including: Campaign Management, Lead Management, ContactManagement, Opportunity Management, Territory Management, Account Management, Proposing aSolution, Forecasting, Closing the Deal, Incentive Compensation, and Professional Services. WithSiebel Field Sales and Field Service Applications, sales and service personnel can synchronizewith corporate databases, enabling them to better respond to time critical sales opportunities andservice requests.


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• Siebel Call Center Applications include Siebel Call Center, Siebel Service, and Siebel Telesales.Siebel Call Center provides up-to-the-minute and in-depth customer and product information. Itenables agents to manage, synchronize, and coordinate all customer interactions over multiplecommunication channels such as the Web, telephone, fax, e-mail, interactive voice response (IVR)systems, and voice over IP. Siebel Service guides and assists customer service professionalsthrough the entire service process. It is used to track customer service requests, leverage priorsolutions, provide resolutions and immediately route customer inquiries to the most appropriateagent based on the agent's training, expertise, and availability. Additionally, Siebel Service ensuresthat each service request is resolved within the agreed upon time, using automated workflow andescalations to route, monitor, and resolve each inquiry. Siebel Telesales providing essential salesfunctions including opportunity and forecast management, account management, contact manage-ment, campaign management, activity tracking, and quota and incentive management.

• Siebel Marketing enables the planning, management, and execution of multi-channel marketingprograms. Siebel Marketing applications support the entire closed-loop marketing process withintegrated analytic, campaign management, data quality, and personalization capabilities.

• Siebel Partner Relationship Management (PRM) f.k.a. eChannel, is an enterprise partner manage-ment platform that automates the business processes between enterprises and their partners

• Siebel Employee Relationship Management (ERM) helps organizations attract, develop, manage,and retain informed employees. Siebel ERM supports every stage of the employee life cycle, fromdate of hire through training, performance management, and retention – all within a single applica-tion.

• Universal Application Network represents an innovative new paradigm for multi-application integra-tion. It is the first and only standards-based, best-in-class solution that fully meets the key objec-tives of enabling organizations to deploy end-to-end industry-specific business processes whilereducing the cost, complexity, and time of cross-application integration. Universal ApplicationNetwork transforms application integration from a complex and expensive technical challenge intothe strategic ability to implement customer-facing business processes across and beyond theenterprise.

• Siebel provides Industry Applications for financial institutions, healthcare, insurance, communica-tions, consumer sector, life sciences, public sector, automotive, energy, and travel and transporta-tion. These industry applications are solutions with out-of-the-box functionality designed specificallyfor that industry.

Siebel Midmarket Edition provides an integrated set of multichannel sales, marketing andcustomer service capabilities for the small to medium size business.

• Siebel Sales for MidMarket provides Opportunity Management & Sales Pipeline Analysis, AccountManagement & Contact Management, Organizational Charting & Expense Reporting, Calendar &Activity Management, and Extensive Reports.

• Siebel Contact Center for MidMarket provides Service Request and Solution Management, AssetTracking, Account Management & Contact Management.

• Siebel Service for MidMarket provides for Effective, Accurate and Quick Customer Service, ServiceRequest Management, and Solution Management.

• Siebel Channel for MidMarket provides Channel Partner Management, Personalized Partner HomePage Capabilities, Opportunities, Accounts, Contacts, Activities Management, and an AutomatedQuote to Order Process.


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• Siebel Customer for MidMarket provides Integrated Customer Home Page Capabilities, RichPersonalization Options, Product Catalog, Searching and Comparison Tools, and 24x7 CustomerSelf-Service over the Web.

http://www.siebel.com

Silvon

Silvon Software delivers focused, high-performance business intelligence solutions for manufacturers,distributors, and retailers. Companies in this business segment, commonly referred to as the Supply Chain,share a set of common characteristics and business intelligence requirements unlike those of otherbusiness segments.

Supply chain businesses are usually typified by:

• High daily volumes of transactions

• Many customers

• A wide variety of products

• A multi-tiered selling organization

Because of the high daily volume of transactions spread across so many customers, products, andchannels, operational decisions must be made quickly to maximize opportunities and reduce the threat ofloss. Because this business environment can change so rapidly, decision-makers must be able to respondquickly and to review easily the results of previous decisions.

While other decision-support vendors have attempted to adapt their offerings to fit your requirements,Silvon's long-term focus on the Supply Chain ensures that our analytic solutions are inherently optimized forour customers' real-world, fast-paced needs. http://www.silvon.com

Synquest

SynQuest, Inc. specializes in providing supply chain planning software that is designed to significantlyreduce manufacturing and logistics costs and, at the same time, enable companies to meet customerrequirements. SynQuest software uses financially focused technology to solve specific, high value supplychain problems for target markets including automotive, consumer durables and industrial manufacturers.Our supply chain planning solutions feature rapid implementation for a fast, compelling return on investment.SynQuest is headquartered in Atlanta, Georgia with offices around the world. Business strategy planning,profit margin planning, inbound logistics planning, complex order planning, manufacturing managementplanning. http://www.synquest.com

Websphere Commerce Suite IBM WebSphere Commerce software helps you sell goods and services online to a global and mobilemarketplace. Implement B2C, B2B, or private exchange business models using open, industry-acceptedstandards. And confidently engage with IBM WebSphere's proven technologies in next-generatione-commerce.

IBM WebSphere Commerce software helps you sell goods and services online to a global and mobilemarketplace. Implement B2C, B2B, or private exchange business models using open, industry-acceptedstandards. And confidently engage with IBM WebSphere's proven technologies in next-generatione-commerce.


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WebSphere Commerce solutions:� B2B e-commerce: Make it easy for your customers and trading partners to do business with you today

and to continue to do business with you tomorrow.� B2C e-commerce: Move to the forefront of online retailing to global and mobile consumer markets.� Commerce-enabled portals: Allows businesses to address multiple constituencies with personalization

needs beneficial to both B2B and B2C commerce solutions. � IBM WebSphere Commerce for Digital Media: Allows you to store, search, view, manage, collaborate,

sell and download digital assets, reaching customers online around the world.� IBM WebSphere Commerce Analyzer: Make factual e-business decisions. Detect visitor trends and

preferences, manage Web site content and structure, and improve the overall effectiveness of Webinitiatives and marketing campaigns.

� KANA and IBM WebSphere Commerce: Integrate your e-commerce activities with your contact centerand CRM operations.

� Vignette, divine and Interwoven together with WebSphere Commerce: Combine IBM's WebSphereCommerce software and expertise with our content management software partners, and betterstreamline and personalize thedeployment of web content for your customers and partners.http://www.ibm.com

9.2 Hardware Vendors

SymbolSymbol Technologies is a world leader in mobile data management systems and services. The companyapproaches the market with:

w Innovative, high-performance products, principally laser bar code scanners, hand-held computersand wireless communications networks for voice and data; the company adds deep value withcomplementary capabilities in ergonomics, ruggedization, miniaturization and power manage-ment.

w Industry systems expertise, and business partnerships delivering value-added capabilities inretailing, transportation/logistics, warehousing, manufacturing, healthcare, education,government/military, hospitality and finance.

w Superior professional services, customer support, and education and training worldwide.

w Bar Code Scanning: Laser scanners ensure that data is captured quickly and accurately. Avariety of peripheral devices could be used.

w Wireless LAN: Using 802.11b standards, standardized wireless LANS for voice and dataexchange.

Automatic Data Capture (ADC) solutions from Symbol and its business partners keep manufacturers and retailers in touch with every facet of the supply chain. For more information, contact http://www.symbol.com/logistics


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10.0 White Papers for Review

IBM Global Electronics Web sitehttp://houns54.clearlake.ibm.com/solutions/industrial/indpub.nsf/detailcontacts/IND_Electronics?OpenDocument

BM Electronics Case Studieshttp://houns54.clearlake.ibm.com/solutions/industrial/indpub.nsf/detailcontacts/cs_electronics?OpenDocument

IBM Electronics Solutionshttp://houns54.clearlake.ibm.com/solutions/industrial/indpub.nsf/detailcontacts/Engineering_Solutions

Georgia Tech Logistics Institute - Cross-dockinghttp://www.tli.gatech.edu/cgi-bin/whitepapers/papers.cfm


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11.0 Associations and Organizations

Australian Electrical and Electronics Manufacturers Associationhttp://www.teema.org.tw/

Consumer Electronics Associationhttp://www.ce.org

Electronics Manufacturers

http://www.ema-oregon.org/

Electronic Business On-Linehttp://www.e-insite.net/eb-mag/

Electronic News On-Linehttp://www.e-insite.net/electronicnews/

Electric Newshttp://www.ebnews.com/

Global Engineering Documentshttp://global.ihs.com/industry_stds.cfm?customer_id=%21%25K%2C%2B%0A&shopping_cart_id=%27%25X%5B%2FJ0%2CH%5B0%20%24%0A&rid=NEMA&input_doc_number=NEMA%5FTrading%5FArea%5FMaps&lang_code=ENGL&org_group=ELEC

Indian Electrical and Electronics Manufacturers Associationhttp://www.ieema.org/

Industry Source for Engineers and Technical Managershttp://www.eet.com/

Institute of Electrical and Electronics Engineershttp://www.ieee.org/portal/index.jsp

National Electrical Manufacturers Associationhttp://www.nema.org/

Symbol Technologies – Transportation Management Systemshttp://www.symbol.com/products/whitepapers/whitepapers_transport_mgmt.html

Taiwan Electrical and Electronics Manufacturers Associationhttp://www.teema.org.tw/


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12.0 Acknowledgements

Melissa Angio Ed CaldwellEd ParkStephen ReidAlex Ruskewich


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