IT Strategy Keeps Pericom in the Chips

In the semiconductor industry, IT managers know that manufacturing is the most visibleaspect, but it's the efficiency of unseen processes that spell success. In an industrywhere microchip products operate in nanoseconds, can customers expect a comparable levelof service -- not weeks later, but within the same day?

Pericom Semiconductor's (San Jose, Calif.) patented innovations and "siliconfamilies" include CMOS interface logic chipsets, clock frequency generators anddrivers. But Pericom's 50 percent annual expansion further magnified already existingproblems. For example, the increased chance of mishandling orders and other data betweencompany headquarters and other offices and warehouses throughout the United States, Europeand Asia as well as to distributors, contracted manufacturers and customer-OEMs.

A Platinum Inception

Since its 1993 inception, Pericom used a Platinum Technologies (Oakbrook Terrace, Ill.)DOS-based system for distribution, General Ledger, Accounts Payable and AccountsReceivable. As the company grew, it was unable to update the system and modify the smallpart number fields to provide for larger numbers or correlation with customer partnumbers. That limitation required "seat-of-the-pants" fixes and workarounds.

Nor did the existing system accommodate line item details. Line items containingmultiple deliveries forced company planners to manually separate and fulfill orders. Notsurprisingly, the ability to trace specific deliveries to corresponding line numbersbecame even more important as the number of customers grew steadily.

One pressing problem was to respond to customers clamoring for Electronic DataInterchange (EDI). Sales and production departments used Excel spreadsheets to initiateand track work orders. They noted work order changes on the margins of paper reports andrelied on these sheets to instigate order changes downstream. Putting a manual,paper-based interface on an otherwise automated data system was not what the companyreally needed.

Mapping the design needs of customer-OEMs, often through a distributor, requirespowerful tools. Pericom's search for an ERP solution began with documenting enterpriserequirements. A search team of managers from Customer Service, Distribution, GeneralAccounting, Production Control and Manufacturing Planning and Operations turned up fivepossible software solutions.

The team compared the merits of those applications. The suitability of some and theiradaptability to industry-specific process management requirements removed most of theprospects from the short list.

The OneWorld suite, from J.D. Edwards, however, stood out. But as an AS/400application, it presented a complication to Pericom's Windows NT-based computingenvironment.

Semi-Suite Mapping

The product mapped well with processes specific to semiconductor manufacturing anddistribution. For example: much more detailed line item reporting, provisions for rapidorder validation, support for integration of the legacy database and future Web-enablementto support the streamlining and remote access of sales functions.

The remaining reservation, the requisite importation of an AS/400 system, became moot.Having established a relationship during the product suggestion cycle, Pericom and J.D.Edwards reached an agreement to host beta testing of OneWorld. As a client-server solutionin the company's NT environment, OneWorld dovetailed nicely into the existing technicalcompetencies (and investments) with CAD systems already based on HP-UX, NT and an OracleRDBMS.

In 1997, Pericom became the first operational client-server site running OneWorld on a2-way HP 9000 D350 Enterprise Server, with 1.1GB RAM and 52GB storage. All three companieswere significantly accountable to each other, dedicating senior management to ensureresource availability.

The good news for users is that corporate data is now more integrated and accessible.For IT managers, there are a number of consequences: Being the "engine" for ERPprocesses that will extend throughout the enterprise, hardware selections take on greatersignificance. Because of the high cost of downtime, reliability is key. Therefore,platforms cannot be considered commodities and purchase decisions become pivotal.

Pericom engineers were already using HP 9000 workstations and software from CadenceDesign Systems, Inc. (San Jose, Calif.). Electing to use the client-server architecturewith HP-UX, the choice of the OneWorld ERP system enables Pericom to bring additionalleverage and utility for the engineers.

The first phase brought 75 users online with OneWorld's Distribution and Financialmodules. The MIS department wrote batch reports to interface the J.D. Edwards Demand andFinished Goods inventory information with Access, the legacy database with work inprogress data.

Because the same managers who evaluated and selected the suite's tools orchestratedplanning and implementation, Pericom was able to install in April and go live in Decemberof 1997.

Rock On The Water

The microprocessor industry measures acceptable manufacturing failures in fewestdefects per millions. Pericom's goal is fewer than 30 electrical defects per millionunits. But when the rate of defects becomes so low it's like trying to squeeze water outof a rock. Then humans cause more defects and errors than manufacturing operations.

When sleeve after sleeve of microprocessors test to extremely low defect rates, themost troublesome situations become calls from customers saying, "You shipped me thewrong part number," or "I ordered 2,000 and you shipped me 1,852." That'swhen Pericom needed to concentrate on improving other areas of the operation, such asdistribution.

The first move was to modify split-line scheduling. Working with the J.D. Edwardsconsultants, Pericom optimized the system with validation logic. Data such as orderminimums and standard lot sizes that had been used to manually validate orders is nowautomated, freeing Customer Service staff to concentrate on exceptions, rather than onevery order.

Now, when a shipment is rescheduled, Production Control codes it electronically withyield, time, materials availability, pricing and engineering data. This benefits Pericomin two ways: Customer Service is able to communicate with the customer; and Operations cananalyze problems and opportunities.

In a business characterized by customers' products changing at an exceptional pace,once we solve the impact of this on manufacturing, we can accomplish similar success withdistribution and related service processes for our customers faster than our competition.

--Dan Wark is Vice President of Operations at Pericom Semiconductor Company.

PROOF IN THE CHANGE

Using the pre-existing DOS-based system, Pericom's order accuracy was 95 percent compared with an industry average of around 90 percent. The ERP system went online early in 1998 with 75 users of the OneWorld Distribution, General Ledger, Accounts Payable, and Accounts Receivable modules.

Since installation, over 98 percent of line items have been shipped on time. Among the other improvements:

Orders get into the system faster. Previously, there was a lag time of 24 hours before orders were even entered. Now, if in an order comes in at 10 a.m., it can often be shipped by that afternoon.

Order validation is highly automated. Previously, Customer Service consulted an Excel spreadsheet to compare the shipment to the order. Now, the system automatically validates the quantity, price per quantity, price per line item and price per order based on the contract with each distributor. It also manages new contracts by adapting to pricing changes by date.

Quick inclusion of new products. OneWorld allows changes without downtime. Tracking the development of new products allows anyone in the company to know if an item is in pre-release or full production.

The J.D. Edwards Manufacturing module is targeted to go live in January 1999. At that time, the OneWorld suite will drive nearly 80 percent of Pericom's operation.