The electronics industry has struggled for years to keep down the number of components in its products – with limited success.
Shorter product life cycles have tended to increase the number of widgets that manufacturers need to keep items such as computers, mobile phones and entertainment systems up-to-date.
But now Japanese manufacturers including Sony and Toshiba have upped the ante by promising to cut the number of parts they use in their consumer products by as much as eight times. Sony, whose performance has been sluggish of late, has announced it will reduce the number of components it requires from 840,000 to 100,000. The ambitious target is part of a three-year improvement programme intended to turn Sony around.
Toshiba, which has been sinking under the number of models of PC it has to produce to suit different markets, has said it plans to trim the number of parts it uses by 20 per cent.
Sony will pursue a two-pronged strategy – redesigning products so that they have fewer parts, and dividing those parts into Sony components and common components which will be bought from a reduced roster of suppliers. Sony currently does business with some 3,400 suppliers; the company hopes to cut this number to 1,000.
This sharp reduction will fall heavily on the smaller, local companies that feed Sony factories, but the decision is likely to have a major impact on the electronics business as a whole.
Despite the high tech aura that surrounds the business, much of it is fragmented and consists of relatively small manufacturers producing specialist components. There is likely to be major consolidation in the industry if it follows Sony’s lead.
Not only is the number of suppliers likely to fall, but those that remain will be bigger and will have to work much more closely with companies like Sony. Manufacturers will have to develop common platforms for families of products which are differentiated by a smaller number of key, customised parts.
As in the automobile industry, which has made a concerted effort to cut the length of its supply chains and introduce collaborative styles of working, electronics components manufacturers will have to invest in systems to support this greater transparency.
Production will have to be planned in parallel through the entire supply chain, since serial production planning by each link in the chain creates too much delay. It will require companies to share much more information with their partners than they are doing now.
We will also see mergers of supply chains. A smaller number of supply networks will replace the countless supply chains that connect users and their suppliers today. These networks will manage the flow of information, products, and cash far more cost effectively and efficiently than individual networks.
The industry will also have to get better at aggregate forecasting. Aggregation levels need to correspond with how products are planned and built, thereby enabling a smoother production flow, lower manufacturing costs at the supplier, and more reliable supply for the customer.
Inventory too will come under the microscope. Suppliers will be looking not only to speed up inventory systems, but also cut the number of inventory locations and location management processes.
However, parts reduction will depend on the ability of designers not only to reduce the number of parts required for each product, but also to reuse as many components from one product to the other. They will also work to integrate components so that previously separate items are combined.
The trend will benefit Far East suppliers who have been moving up the food chain anyway, taking advantage of design and technology know-how gained through contracts for commodity items. Low cost production areas such as China are most likely to gain from the drive to leaner electronics manufacturing.
Investment in the region is already running at a high rate, particularly by Western companies. Both Infineon Technologies and STMicroelectronics have beefed up their presence in Asia.
Japan has already pioneered many innovations in manufacturing such as just in time production and kanban. With so much at stake it would be a brave person who betted against Sony achieving its ambitious target.