50% of 146 high tech companies regard supply chain management as a customer service differentiator, market strategy differentiator, or as a profit center - while the rest view supply chain as a cost center. This sector insight explores the concerns and process roadmap of supply chain executives in high tech industries.

1. December, 2007
High-Tech Industries: The Supply Chain
Executive's Strategic Agenda
Fifty percent (50%) of 146 high-tech companies regard supply chain Sector Insight
management as a customer service differentiator, market strategy Aberdeen’s Sector Insights
differentiator, or as a profit center - while the rest view supply chain as a provide strategic introspective
cost center. This Sector Insight explores the concerns and process roadmap and analysis of primary
of supply chain executives in high-tech industries. research results by industry,
market segment, or geography
High-Tech Industries: Leading the Pack in Transformation
High-tech industries are showing a higher percentage of companies that
indicate they have completed a redesign of their domestic and international
supply chains. This indicates that they are ahead of the curve in terms of
supply chain transformation based on the key pressures being faced in the
marketplace. The top three pressures faced by the high-tech industries are:
the need to contain supply chain costs to remain cost competitive (68%);
demands to manage a more global business (44%); and the escalation of
customer service demands (41%).
Figure 1: High-Tech Versus Other Industries in Terms of Redesign
of Supply Chains
60%
Sector Definition
High-Tech, 51%
High-Tech, 49% This report focuses on the
50% supply chain transformation
Overall, 39% intentions of 146 companies in
40% the high-tech sector.
Overall, 32%
30% The high-tech industry, for the
purpose of this sector insight,
20% includes computer equipment
and peripherals, consumer
10% electronics, high-technology,
semi conductors, and
0% telecommunication equipment.
Domestic International
Source: Aberdeen Group, December 2007
Some of the key business conditions faced by high-tech industries are:
• Centralization of supply chain organizations. Forty-six
percent (46%) of high-tech companies indicate that their supply
chain organizations are centralized. Best-in-Class companies are
evolving from multi-national to global companies through
centralization of their supply chain organizations and are bringing
© 2007 Aberdeen Group, Inc. Telephone: 617 723 7890
www.aberdeen.com 091707a

2. Demand Management: Need for Renewed Focus in A&D Sector
Page 2
procurement and order fulfillment into the fold with the supply
chain planning organizations.
• Response management - beyond visibility. Forty-six percent Related Research
(46%) of high-tech companies indicate that they have end-to-end The Supply Chain
supply chain data and process visibility. The greatest financial value Executive's Strategic
comes from leveraging visibility information to identify and eliminate Agenda 2008; November
root causes of delays or other production issues and to rapidly 2007
respond to changes that could negatively impact the business if
mismanaged or left unattended. Effective supply chain response
management reduces lead times and variability, enables lower
inventory investment, improves customer satisfaction and revenue
attainment, and cuts supply chain costs.
• Sales and operations planning. Fifty-four percent (54%) of high-
tech companies indicate that they have an executive position with
end-to-end supply chain responsibility. High-tech companies are
continuing to make headway in the S&OP process – sales CRM
system to supply chain system integration through sales forecasting
and order promising, attach rate forecasting for complex configured
products, and the incorporation of pricing and inventory as decision
factors within the S&OP process are some of the areas where high-
tech companies are gaining traction.
Technology Adoption Plans for 2008
Figure 2 shows the technology adoption plans for high-tech companies in
2008. The technology priorities clearly reflect the business drivers outlined
above. For instance response management/supply chain visibility and S&OP
come up as the top areas of focus.
Figure 2: Technology Adoption Plans for High-tech Companies in 2008
Supply Chain Visibility 55% "Outsourced manufacturing
requires a whole new approach
S&OP/Demand Management 40%
for managing demand. It
Inventory Optimization 34% becomes a game of balancing
supply and inventory constantly
Supplier/Customer Collaboration 25% and reducing lead-times."
Supply Chain Network Design 22% ~ VP of Supply Chain, Large
Global Semiconductor
Warehouse Management 18%
Manufacturing
0% 10% 20% 30% 40% 50% 60%
% of High-Tech Respondents
Source: Aberdeen Group, December 2007
© 2007 Aberdeen Group, Inc. Telephone: 617 723 7890
www.aberdeen.com 091707a

3. Demand Management: Need for Renewed Focus in A&D Sector
Page 3
Case in Point #1 - NetApp
Network Appliance, Inc. (NetApp) is a manufacturer of unified storage
solutions for data-intensive enterprises. This company’s supply chain has
recently adopted a response management concept.
Challenge
NetApp faced the need to rapidly anticipate and adapt to changing
conditions in the complex global environment. In 2000, during a period of
rapid growth, NetApp found itself with a number of ERP and APS
applications and processes that could not efficiently scale to support the
growing demands of a global corporation. In addition, they required visibility
across the company in order to automate the scheduling and manage the
varying impact of changes in customer demand.
Solution
A response management solution was implemented to address the
aforementioned issues. The key characteristics of this solution were:
• Rapid order sourcing: It takes a unique combination of information
and business rules to determine where an order should be sourced
and the appropriate delivery and build schedules for all steps in the
supply chain
• Closed loop with ERP: Provides closed-loop integration with their
ERP system to ensure complete automation and rapid response
• A flexible solution to change the business rules as the business itself
evolves
Benefits Gained
• Orders are now scheduled within minutes of order entry versus the
prior goal of manually scheduling orders within 24 hours of receipt
• 95% of orders are sourced and scheduled to be done without
manual intervention
• The aforementioned benefits have allowed planning and scheduling
personnel to adopt a more strategic monitoring mode. The planners
are able to manage by exception and address the true underlying
issues of the moment. This has resulted in improved production
efficiencies and reduced planning cycle times.
Case in Point #2 - LSI Semiconductors
LSI Corporation is a $3.2 Billion USD provider of silicon, systems, and
software technologies. LSI Semiconductors provides a silicon-systems
approach within targeted growth segments like storage, networking, and
consumer industries. This company has recently engaged in a directive to
manage complexity and combat uncertainty.
© 2007 Aberdeen Group, Inc. Telephone: 617 723 7890
www.aberdeen.com 091707a

4. Demand Management: Need for Renewed Focus in A&D Sector
Page 4
Challenge
A recent merger between LSI semiconductors and Agere Systems resulted "In B2B environments the
in several benefits like scale, growth, and efficiencies in their supply chain. demand signal that we get is
There were significant synergies in market segments and customers. The out of phase due to three
merger afforded the ability to provide inorganic as well as organic reasons. The first is latency
investments to grow. However the merger also provided challenges in because the time has shifted
terms of increased complexity of supply chain and increased uncertainty. when the demand signal is
processed. The second is
amplification – changes in
Solution demand become exaggerated
The realization was made that the best solution to addressing this due to each trading partner
uncertainty was to create flexibility and visibility within the supply chain. A taking hedges out or adding
hedges to the forecast. The
B2B multi-enterprise platform was leveraged to provide this flexibility. Some
third phenomenon is
salient characteristics of the solution were: two-way closed loop interference where market
communication flow, proactive management of supply constraints, events add to the
aggregated view of demand, and early and automated notification of uncertainty. The best choice
discrepancies to all partners. and only choice for us is to
be very flexible and
Benefits collaborative.”
• Improved shipping performance to customer request "on dock" ~ Don Alvine, Vice President
of Supply Chain and
• Margin improvement through cycle time improvement from RT Chief Procurement Officer,
visibility LSI Semiconductor
• Better than industry average inventory performance
Required Actions
• Extend supply chain visibility. Ramp up the use of global supply
chain visibility analytic tools. Best-in-Class are more than twice as
likely as Industry Average companies to be performing various
analyses, including tracking total landed costs, conducting root cause
and trade lane analysis, and traceability / genealogy analysis at the
item level.
• Implement S&OP process with closed loop integration with
execution. Seventy-one percent (71%) of Best-in-Class companies
have a continuous monitoring of the S&OP output to ensure plan
quality versus 20% of Laggard companies. The ability to measure and "It didn't happen overnight. We
monitor the performance of their S&OP plans is a clear have been transforming both
differentiator for Best-in-Class companies. our company and supply chain
for the last ten years."
• Create a globally integrated supply chain organization.
~ Tim Carroll, Vice-President,
Thirty-eight percent (38%) of Industry Average companies indicate
Global Supply Chain
that they have a centralized supply chain management organization Operations, IBM Integrated
versus 67% of all others. No longer can companies run different Supply Chain Aberdeen Supply
supply chains for different products within the same business units. Chain Summit 2007 Key Note
Consolidation and rationalization of business processes within the Address
supply chain organizations is a necessity that has to be embraced.
© 2007 Aberdeen Group, Inc. Telephone: 617 723 7890
www.aberdeen.com 091707a

5. Demand Management: Need for Renewed Focus in A&D Sector
Page 5
For firms to succeed in the dynamic environment of the global economy, it
is essential to implement a holistic strategy that takes full advantage of the
available technology enabling intensive visibility, integration, and S&OP
monitoring.
For more information on this or other research topics, please visit
www.aberdeen.com.
Related Research
Demand Management in Consumer Driving Sales and Top Line Revenue
Industries; December 2006 Requirements Through Executive S&OP
Demand Management in Discrete (April 2007)
Industries: A Research Preview; October Executive S&OP: Process and Technology
2007 Strategies (June 2007)
Author: Nari Viswanathan, Research Director, Supply Chain and Logistics,
Aberdeen Group (nari.viswanathan@aberdeen.com)
Founded in 1988, Aberdeen Group is the technology- driven research destination of choice for the
global business executive. Aberdeen Group has 400,000 research members in over 36 countries around
the world that both participate in and direct the most comprehensive technology-driven value chain
research in the market. Through its continued fact-based research, benchmarking, and actionable
analysis, Aberdeen Group offers global business and technology executives a unique mix of actionable
research, KPIs, tools, and services.
This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's
methodologies provides for objective fact based research and represent the best analysis available at the
time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by
Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or
by any means without prior written consent by Aberdeen Group, Inc.
© 2007 Aberdeen Group, Inc. Telephone: 617 723 7890
www.aberdeen.com 091707a