Montage Technology: Fabless Manufacturer Gains Timely Visibility Of Operational And Financial Data Across Global Operations
“We needed a flexible, affordable ERP system that could give us visibility throughout a complex, international supply chain that involves multiple trading partners in various high-tech industries, Microsoft Dynamics AX for High Tech Industries was exactly that.”
Vice President of Operations
Montage Technology Group
Montage Technology Group Limited (Nasdaq:MONT) ("Montage") is a global fabless provider of analog and mixed-signal semiconductor solutions addressing the home entertainment and cloud computing markets.
As a fabless supplier in the semiconductor industry, Montage oversees a complex supply chain that involves numerous suppliers, subcontractors, and intercompany transactions. They were looking for a ERP solution to match their growing business and special industry features.
Their operations were managed by a mix and match of different systems. They used UFIDA for finance and accounting and operational data was managed via spreadsheets. This meant that consolidation of operational and financial data needed to be managed manually. To ensure that the operation data was accurate and timely as well as to synchronize the operation and finance data, Montage deployed Microsoft Dynamics AX for High Tech Industries, a solution from Microsoft Gold Certified Partner sa.global.
By consolidating financial and operations management on a single system, Montage standardized global operations and optimized business processes. Now, company executives and process managers enjoy visibility into all levels of the operation.
Kenneth Chew, Vice President of Operations explains, “We needed more sophisticated accounting capabilities and an ERP system to manage distribution channels and multisource products. We needed a solution that would enable us to manage the supply chain from wafers to finished goods, both from a planning and financial perspective.” The company also needed to ensure tight integration between the financial and manufacturing aspects of such a system to fully realize accrued manufacturing costs.
Montage Technology is a global leading fabless provider of analog and mixedsignal semiconductor solutions addressing the home entertainment and cloud computing markets. From its offices in Asia and the United States, the company serves customers worldwide, including many major home entertainment and cloud computing brands.
As a fabless manufacturer in the semiconductor industry, all their manufacturing is outsourced and Montage relies on a network of subcontractors to produce, assemble, test, package, and deliver its products designed to its exacting specifications. Montage managers in the company’s China headquarters faced a daunting task of overseeing not only the complex supply chain and external vendor relationships but also the global operations of numerous subsidiaries across China, the United States, Hong Kong and South Korea.
For many years Montage relied on a mix of the UFIDA finance and accounting package along with spread sheets to manage their operations. For their operations, an internal spreadsheet system was used to release production orders to the subcontractors, and all production feedback was provided via spreadsheets from the subcontractors. The entire physical inventory was managed by the subcontractors. The receiving and delivering were handled by the subcontractors and the related in/out reports were provided to Montage to record.
To further complicate operational management, most sales orders involve intercompany transactions. However to manage this with their existing systems, only sales orders for external customers were being processed. Intercompany transactions were handled at a financial level but not on a logistics level.
Further, the inability to share data across these systems made reporting extremely difficult. It took analysts several days and multiple iterations to consolidate inventory and production reports manually. Intercompany sales/purchasing, and demand forecasting were all manual processes. For consolidated group reports across the Montage Group, the finance team performed manual consolidation by working from spreadsheets that various business units sent in, which created opportunities for human error.
With the increasing complexity making growth more complicated, company executives undertook a search for a new enterprise resource planning (ERP) solution. The ideal solution would help them unify financial and operations management on a single platform, standardize worldwide operations and reporting across business units, and provide the capability to optimize business processes on an ongoing basis.
Zhang Jian, Financial Manager notes, “We had four simple objectives; first, to fully control the outsourced production; second to automatically update production feedback; third, be able to calculate production cost and variance on an immediate basis; and lastly to automate the generation of financial reports.”
After considering several solutions, Montage chose Microsoft Dynamics AX 2012 with the vertical industry solution add on. To drive the implementation forward, Montage engaged Microsoft Gold Certified Partner sa.global. “Microsoft Dynamics AX 2012 along with the industry solution offered to us by sa.global gave us the core capabilities that covered our requirements along with a much easier path to tailor the solution to our processes.” explains Michael Pu, Senior IT Manager. “We were also very familiar with Microsoft Office Products and when we first saw Microsoft Dynamics AX, we could understand the basic operations quite easily and intuitively. This meant we would have faster user adoption which would ease any reservations users had about the new solution.”
Industry-Specific Solution and Partner
The availability of Microsoft Dynamics AX for High Tech Industries, which provides functionality specific for fabless semiconductor manufacturers, made Microsoft Dynamics AX an attractive solution. With sa.global's industry expertise, Montage had the confidence that it could work directly with a local implementation partner who understood and could tailor the deployment to the company’s needs.
Explains David Cheong, Country Head for sa.global China, “Our industry expertise enables us to address the specific requirements of fabless semiconductor manufacturing. For Montage, the layered functionality on top of Microsoft Dynamics AX to provide capabilities such as reverse bill of materials, yield management, vendor analysis, production planning, and scheduling along with very minor customizations gives Montage a very powerful solution.”
Fabless Semiconductor Management
It is critical and necessary for users to view, inherit and track the batch number and/or serial number for the raw materials and finished goods. A reverse Bill of Materials (BOM) production environment is required where yield-based planning and cycle times determine the number of wafer lot starts. So the solution has to provide the user the convenient visibility and suggestion for these special tracking dimensions throughout the production and support a reverse BOM production environment which is special for Hi-tech industry.
By using Microsoft Dynamics AX for Hi-Tech Industries, Montage staff can now manage every stage of the fabless manufacturing. After creating a purchase order for a silicon wafer from its outsourced manufacturing vendor, operations staff then adds the item to the receiving queue. Once Montage receives the item, a corresponding ledger entry is automatically created in Microsoft Dynamics AX, including increasing the inventory from one wafer to several hundred units. Says Martin Hao, Senior Materials Manager, “Our business is unique in that we are creating a reverse bill of materials. Microsoft Dynamics AX for High-Tech suits us perfectly and the whole solution was essentially turnkey.”
Montage earlier needed to collect data in spreadsheets from other vendors. Different vendors had different format. So first they needed to unify the format, then sort and validate the data. This was a major source for possible errors besides being time consuming. Through automated data exchange with customers and suppliers in Microsoft Dynamics AX, Montage no longer needs to manually record thousands of transactions per day.
Core Financials and Reporting
At Montage, accounting staff takes advantage of core accounting functionality, including general ledger, accounts payable, and accounts receivable in Microsoft Dynamics AX. Because this functionality is seamlessly integrated with the operations side, realizing accumulated costs throughout the product-manufacturing life cycle is greatly simplified. Says Zhang Jian, Financial Manager for Montage, “With Microsoft Dynamics AX all costs are accrued throughout the production of our product. And once that product is shipped, the solution reduces the inventory and increases the costs of goods sold.” With the click of a button, accounting staff can then export such data to Microsoft Excel spreadsheets to explore it further or package as a report.
A Unified Platform
Montage had already invested in many Microsoft technologies, including Windows 7, Microsoft Exchange Server, Microsoft SQL Server, Windows Server, the 2007 Microsoft Office system etc. With Microsoft Dynamics AX 2012 linking all of these, it helps them to maximize their existing IT investments.
The consistent interface between Microsoft Dynamics AX and the Microsoft Office system helped users adapt to the new system. And the ability to easily copy and paste data between applications in the Microsoft Office system, such as Microsoft Office Excel, and Microsoft Dynamics AX streamlined many analysis processes.
While Montage hasn’t yet performed a ROI analysis of the new solution, the benefits are qualitatively evident:
- The logistics system and the financial system are integrated synchronously, which make the operations and finance processes run smoother, more accurately and most importantly in a timely fashion.
- Operations are easier to manage due to the application of High-tech add-on which meets Montage’s unique industry need.
- The production feedback and production costing have achieved their goal of automation which saves time and reduces error during daily work.