How Resilient Does Your BOM Look? AltiumLive 2022

Shortages, tariffs, natural catastrophes, and a pandemic have impacted the way we design and manufacture products over the last several years. Knowing the parametric viability, compliance, sustainability, and the procurability of your approved components, is more critical than ever before.

Learn how to ensure resilience of your BOMs using Octopart’s supply chain information within Altium Designer and how the newest Nexar API integrated within your MRP/ERP system can make a positive difference for you!

Highlights:

• Alex Sapp introduction and professional background.
• What is Nexar?
• Learn how to ensure resilience of your BOMs using the available supply chain information
• Overview of procurability
• Importance of using an API feed

Additional Resources:

• Learn more about Altium Nexar
• Connect with Alex Sapp on LinkedIn
• Octopart: The electronic part data platform
• Lawrence Romine talks about Altium Nexar Ecosystem

Transcript:

Alex Sapp:
Hi, good morning. My name's Alex Sapp and today I'm going to be speaking with you at AltiumLive to discuss how resilient your BOM is. All throughout my career in electronics, I've been exposed to OEMs requesting alternates for lying down situations. And particularly in the last couple of years, I've really seen it exponentially increase. And that's why I'm so empathetic to what engineering and supply chain management go through to design and plan.

Alex Sapp:
I going to just vet myself, if you will, and give you just a high level summary of some of my past. I'm certified in a few things, and that would be appropriate to discuss which would be component inspection for counterfeit mitigation. I'm an ISO guy. I'm heavily involved in my past in ISO and AS certification. I'm a certified auditor. And I'm a bit analytical. I have a Six Sigma Green Belt certification from my time at GE Healthcare Solutions. And during that time at the OEM prior to moving into distribution, I experienced so many of the issues I'll be discussing today, which actually greatly impact the engineering teams and how you do business and how you react to the market trends and what's going on in the market.

Alex Sapp:
So, Nexar is a business unit that was devised by the Altium team. And the Nexar business unit is profound in my opinion. And I'm so excited to be part of it and really preach what all of the great things that we're going to be doing for the electronics community in the future and currently. It's so profound that we're even going to be availing competitors' products on this platform specifically to remove the friction between folks within the supply chain, the engineering world, basically the entire ecosystem. And this platform as a service is going to provide programmatic access through Altium applications while you're in the design solution. And it's really exciting. So looking forward to you all taking part in Nexar, utilizing its services and watching us evolve, really, well over the years.

Alex Sapp:
The problem statement for today's presentation is specifically something that everyone in the food chain has been going through. For example, design and component engineers, business analysts, show cost modelers, NPI engineers, NPI buyers, prior to it ever even getting to the EMS, assuming that the OEM's utilizing an EMS to build. And these shortages, the tariffs that occurred, we had natural catastrophes that shut down and burned down factories. And then we had the pandemic and all of these things impacted the way that engineers are designing. And frankly, it's affecting how we manufacture products too. These last several years have been very, very revealing in new ways to do business and exciting new paths of cross pollinating data. It's really exciting times that we're in.

Alex Sapp:
So the ability to know that your BOM is viable and compliant and sustainable and procurable is more critical than ever before. And some of the things that I'll show you today will tap into that because they are moving into the future into our data as a product offerings. So today's purpose is to learn how to ensure resilience of your BOMs using the available supply chain information that's piped into either Altium 365 or Altium Designer by way of the next .

Alex Sapp:
It's really something to behold when you consider all of the interconnections and the symbiotic nature of all of these disparate parties. The majority of the folks that are attending this conference and this webinar are on the left side of the field here, where in the electronic design space the thought is to unify all of this data model, bring real continuity to all of the intricate design information that's needed. And this graphic, it really shows the distinct separation, the engineering world from the supply chain and manufacturability of products. These products that you so carefully designed. And keeping in mind the 20-40 layers of technical banter that's occurring inside of Altium's design solutions.

Alex Sapp:
And knowing that you're half blinded by the lack of some of the real time and accurate data of things that have been procurable in the past. And the future is going to bring that data to you so that you could do the best with what you have. And that's precisely what you all have been doing over the years is designing the best with the information that you have. And I think today it will open your eyes, hopefully it will open your eyes to some of the new things that we've devised and the lack of friction, if you will, to get the data more easily, more accurately and more readily available.

Alex Sapp:
Nexar really unites these disparate parties. Pardon me. This particular graphical, it depicts the sheer size and magnitude of this industry and how the Nexar platform shall bring them all together. It's connecting the electronics industry value chains to drive productivity and manager production risk. You'll notice that all of these vendors and all of these pieces of the puzzle are incredibly important to one another. Some are valued at different estimates in the revenue stream, but all of them are incredibly important. After all, this is a $2 trillion industry.

Alex Sapp:
One thing that is so exciting for me, and for many of my colleagues is the transparency that has arisen through cloud solutions. When you look at this graphical, you'll see there's a clear segregation. On the left hand side, it's kind of the past. There were a host of manufacturing deadlines that were missed. There was constrained supply chain. And through that production lines went down and a lot of it had to do with single sourced parts. Engineers may just not have known that the shortages would've occurred and that they had to put more effort into approving more alternates that were available. But then there was caveats with alternates, because if you don't have all of the information on the front end to make an informed, educated decision, again, you're doing the best with what you have. So I'm going to talk from left to right here.

Alex Sapp:
And you'll see that in time when we look at 2018, 2019, the shortage was huge. Multilayered ceramic capacitors, memory. So many things that were affecting the electronics that we use every day. It really, really was a challenge and it remains a challenge, but this was the beginning stages most recent shortages where just to find parts from your approved suppliers was a really big, difficult deal. It forced engineering teams to find alternate parts for the ones that they thought were safe. The last thing they want to do is re-spin a board. It's expensive, it's time consuming. And during this era, all of these supplier quality engineers had to get involved, supply chain got involved. You had field applications engineer's activity getting heavily increased. And then we had the tariff enacted and then instantly purchase price variance skyrocketed. It wasn't just the shortage.

Alex Sapp:
Now you had a 25% tariff tacked on. So people had to make decisions. Do we build with these parts that are designed in, even if they are available at a 25% less margin on these particular parts if we bring the men from overseas? These are big decisions that had to be made and they impacted everyone in the value chain. So then the pandemic occurred in 2020, and we all know the shortage recurred. But was very interesting about the whole scenario that we were in, and this is excellent for me because it bodes well for the internet industry and cross pollination of data through API feeds, e-commerce was forced upon us all of a sudden. We had to work. We had to source parts. We had to design PCBs. But we had no choice, but to start utilizing tools like Zoom and Altium 365. It's been an amazing, I guess, evolution of time.

Alex Sapp:
Now, when this greater adoption of API came into place, the application program interfaces, it was very exciting for me to see, because what's interesting is that it doesn't matter how big your organization is, or how technically savvy you are, or how many people you have. Frankly speaking, not everyone understands how to dance with API. And this even is the same for contract... I'm sorry, component manufacturers who are multi-billion dollar conglomerates. They even some don't have an API with real time data cross pollinating. So it really shifted the world. It was a bit of a paradigm. You had to use e-commerce. Cloud-based solutions were the smartest things that could possibly occur. And that's when we had our Netflix moment. It was somewhere in that tier that we knew that we had to be in the cloud. We knew that there was these intricate conversations of 20-40 layers of communication in the engineering front, but they also needed that purview of supply chain information and technical data and compliance data.

Alex Sapp:
Is it? Does it have conflict? All of these things the engineers really know and need to know to make an informed decision. And the engineers, when they're designing these PCBs are basically writing a song that the rest of the value chain has to dance to, unless of course there's issues. So in 2021, we realized heavily that we needed to inject even more into this API that we're creating, this Nexar API. There's technical compliance, supply chain data already available within Altium 365, but the Nexar team is now adding those other elements. So here we come to the crescendo, if you will, on the right hand side of the graphic here. Cloud solutions, they offer timely, transparency, agnostic data. There's no dog in the fight for us. We're not selling parts. We're merely providing data as accurately and rapidly as we can.

Alex Sapp:
And now with some new tools that we've been devising and we've been having a lot of fun with our data. It's very exciting what's coming in the future with our organization, is now we're able to bridge engineers and supply chain analysts on the onset of a design. And this sounds strange, but it's so true. Looking backwards while looking forward. So we're looking forward at lead times and availabilities and pricing, but when you're making these selections, how curable was that part last year? How viable are those parts? They're definitely form fit function. But are they available when you need to invoke those alternates? So I'm going to share with you a real world story that I personally experienced. Now, noting I used to work for GE Healthcare Solutions. I was a Six Sigma Green Belt there, and we were doing a lot of analyses.

Alex Sapp:
And I recall, we were sending out lists of parts, more than 100,000 MPNs to the supply chain and were getting these fragmented responses.

Alex Sapp:
They weren't really quoting much. And the bills of material that we have were locked. They were locked by the Food and Drug Administration. You can't just do an ECO and throw a new part in there and expect that it's okay. These are touching patients. And it actually touches a lot with my career. I was a service manager managing tons of field service engineers, utilizing these board level components to bring a printed circuit board back online, to bring a system online while a patient was radiated and on the table.

Alex Sapp:
So needing these specific parts, that specific with no alternates approved, because it's touching a patient, it really creates a lot of issues. You can't just flip flop and choose any parts you like. It's a process. So I just want to tell you that in one particular situation, I know that there was a $7 million penalty that was paid for not being able to finish a build. And I'll talk a little bit later about that. It was a high reliability prime contractor built. So now let's talk a little bit of about how resilient is your BOM. What are you doing right now to ensure that your BOM is resilient? Up to now, what tools have been available to you?

Alex Sapp:
So when you see these three stages, if you will, I just really want to focus on the last two. The reason being is that, we're currently providing hoards of data through the API integration. So we're helping you design with visibility. But when you encounter these inevitable shortages and you have to identify suitable alternates, you're not always going to find form fit function. You may only find a FF. Availability is a big factor. And it's so important and I implore you to look to getting the Nexar API injected into this design solution that you're using, because it'll strengthen your ability to do it and do it in a methodical, safe manner. The exciting thing about the third stage, if you will, is taking things and looking at it a little bit differently. And you hear a lot of times people talk about scrubbing your bill of material, normalizing the data, which we're quite expert at. And I'm going to talk about that in the next couple of slides. But being able to know the procurability of a part tells you specifically how effective your alternates are. It just does.

Alex Sapp:
You can look at factory lead times that are posted online. You can even look at supplier estimated time of arrival. But that's not locked in. That's not fixed. Something may occur. So that's why our contention is that looking at the procurability, utilizing a service like the Nexar supply and design intelligence that we're building really, really will help set the stage on the front end so that the supply chain and manufacturing dance that occurs afterwards happens as seamlessly as possible. Because when you're fighting shortages, you're not just fighting the shortage for now, but you're plotting a success course. You want to dig deeper and understand more. And along those lines, just from an engineering and supply chain management perspective, one of the use cases of this curability data has resulted in literally a 30-40% decrease in expedites on the supply chain side. It's amazing. So next, I wanted to talk with you about some important takeaways that I'm really hoping that you'll walk away with today. The first one being designing more effectively using a robust API within your design solution.

Alex Sapp:
So when you design with a well informed database inside your solution, it just makes you so much more effective. Now, individual APIs are great, and a lot of companies will have an API from the biggest franchise distributors. But one of the important things to think about when you think of Nexar's API is that it's completely agnostic. There's no dog in the fight for us. At the end of the day, our ultimate goal is to transmit, show you real time, accurate data, technical data, compliance, and environmental data that's going to allow you to be fast and quick and efficient, and we don't have any druthers if you design in one manufacturer or the other. We really don't. Our goal is to transmit data to you rapidly so you make a good decision. Because everyone's risk is different. Everyone has different risk tolerances.

Alex Sapp:
So this slide, it really depicts how, when you query our database, the normalization algorithms that we have and logic that we have, it really helps. It helps a lot and I've seen this in real world scenarios. So it allows you to decide easier to find no matter what parameters you search under. If you look at... Sorry. If you query a part number that has varying characters in it or spaces in it, we normalize that. And then once you integrate it and we feed this data back to you via the API, you'll see a little example on the right here, where we've given you a specific response to a specific query about a microchip part. And we give you exactly what you asked for. What's interesting too, is, is whether you're querying one fourth watt or 0.2t watt, you get the same result. Pico, nano, micro, milli, kilo, mega, giga, doesn't matter.

Alex Sapp:
And one of the really exciting things about our API that's fairly recent is we moved from a rest API to GraphQL. So what that means is is that instead of querying our database and getting dumped this massive aggregate of data on you, at which time you have to slice and dice the data to make it effective for you, now, you query an argument to our API with specificity. You say, "Only this supplier," or, "Only this manufacturer." Because a lot of suppliers and manufacturers utilize the same part numbers, the same MPNs. So anyhow, this is a delivery mechanism of clean and concise data directly into your system.

Alex Sapp:
The next takeaway that I'd like you to look at is how one can safely identify alternates in an inevitable shortage inside or within Altium Designer and Altium 365. So the next slides will be Altium 365's component library. And then we'll start drilling down a little bit into Altium Designer. I would imagine these screens are quite familiar to you. So we would suggest that to safely identify risk within your component library. And as I said, these screens are probably familiar to you. This particular screenshot is of the Altium 365 library level. And you can see that because we've integrated the data programmatically into the workflow, you can see that we have technical and compliance data real time pricing, availability, different alternates that we've identified for you. And there's some distinct warnings as well, such as if you look at the origin red colorization, just want to bring focus to certain issues.

Alex Sapp:
Maybe it's a single source part that's only available from one supplier, or maybe it's only manufactured by one company. Perhaps there are stock issues. There's just no material or not enough material to get you by. Perhaps there's duplicate parts in there. And then risky lifecycle. That's always important. Drilling deeper into the Altium 365 library to identify different issues. This particular screen identifies stock issues in the supply chain. So it's indicating not only that there's a problem with this particular part. But the beauty of having all of this data in one screen, it also identifies that this particular part is on another bill of material too. So when you're analyzing things, and you're trying to make repairs to a problematic bill of material, this is a one to many opportunity. So again, transparency of data, making things easier, delivering key data to you more rapidly. In this next screen of the Altium designer, now you're able to actually identify alternate parts. And this is an inside of 365. This is an AD itself. And you can also find suppliers who have the part in stock.

Alex Sapp:
But I'd like you to note the colorized column in the center. That denotes manufacture life cycle. So in this case, you may see obsolete, you may see end of life, or it might be not recommended for a new design. All of these are critical pieces of information so that you don't design in the wrong part. And I personally know a lot of engineers that are my friends and they like to reuse the same parts a lot. So when you kind of take that out of the equation and you augment it with a little bit more critical information, then you can start making some good decisions.

Alex Sapp:
All the way on the right you'll also see stock issues, which obviously we want to bring to your attention, because there might be cases where you've decided that we don't care that it's end of life or obsolete. This is not a legacy product. We've only built this because of the sales team. Now we're selling new products and we have enough stock to get us by for attrition. There is those decisions as well. But we want to bring all of it to you frictionless so that you can make the right decision yourself. As you're further identifying issues and alternates, this is still within the Altium Designer tool, I have a couple of different windows. The first one is, is that you'll see there's no stock on any of the approved parts. And in fact, in this particular case, there's only one approved part on the ACL, the approved component list. Now, when you invoke alternates and you look at similars, the third window will depict that the API queried similar parts and gave some engineering some choices or gave the engineering team some choices.

Alex Sapp:
And then of course, you accept that you put it into the bill of material and continue through the process. But it's critical that you identify these things as soon as possible. Which segues right into what I personally consider the most exciting bit about my presentation today. The third takeaway is... And this is a quote that's been restated by numerous people. I happen to pick Churchill. "Those that fail to learn from history are doomed to repeat it." This is a fact. When you look backwards in time and you look at either your specific supplier or all authorized suppliers, or open it up to a include gray market, you're actually able to paint a realistic picture for yourself of what's to come.

Alex Sapp:
I recall that I was dealing with a high reliability prime contractor. They paid a $7 million penalty to the DCMA, which is the Defense Contract Management Agency, because they didn't meet DFARSs, Defense Federal Act Regulations and FARs. So at the end of the day, the guidance system that wasn't manufactured on time because they didn't have this kind of granular data on the procurability of certain parts that were in their bill of material, they fell down hard.

Alex Sapp:
Leadership got involved. Supplier corrective actions were issued. Internal corrective actions were issued. A program manager was let go. All of these things happen as a result of the supply chain, but what we can do is we learn from this and we start to identify ways that mitigates that. So when you talk about procurability of a part, we look at a pretty easy algorithm. It just says the percent of last year that a part was procurable. And you can change that timing to any range of time you want. Octopart and the Nexar API have 10 years of empirical data from 280 sources of supply. This is a massive amount of data. We have millions of users. So when you look at this data that we've been sitting on here, and you kind of look at it from a different aspect or a different angle, this is going to empower you.

Alex Sapp:
So the number of days that your approved component stock level was equal to, or greater than your usage last year, and then to divide that by 365, in this particular case. It aids you in identifying your risk tolerance. We've been really experimenting with our data. So if you look at the part at a customer part number level, a CPN level, some folks call it the IPN. Whatever's your fancy. And you look at it at that level, often times your BOM looks quite safe. And as we're experimenting with this, and we're kind of peeling the onion and drilling deeper and deeper, we see that things seem really safe at first glance, but may not be. And let me get into it with you. This particular CPN 924559 has seven approved parts.

Alex Sapp:
And last year, this OEM consumed 65,000 pieces roughly in a 12 month period. Now their engineering management felt safe. Supply chain management felt safe. Lock and load the BOM, sent to the EMS for a build. Now they don't really care about which part they use, but typical supply chain, procurement teams will just keep reloading an order with a supplier. And that's part of the dynamic of the supply chain and how it impacts engineering in some ways. Moving on to the next slide. Now we're looking at the manufacturer part number level. No longer the higher level. And on this list, you'll see each and every one of these parts that's approved. And I apologize for the arrows. What I really wanted to highlight in this funnel of parts, why it's not as safe as they originally thought? One of these parts was never procurable from their suppliers last year.

Alex Sapp:
That speaks volumes. What happens when you need to invoke that alternate? Sorry, that's not even viable. That means that this is the opportunity, whether it's on the front end at the design stage, when you're looking at curability or an EMS is doing a bid for bid, and they're looking at the viability of a bill material, and they communicate with the OEM saying, "Sorry, we don't don't think this is safe. Let's work together in concert to have a better BOM or at least better parts that are actually available." You see the other part that's orange, it was only available 30% of last year. And then I won't read these other two, but as you see, only three of these parts were actually curable 100% of the time last year. And again, I want to echo back, what are we looking to do here?

Alex Sapp:
We can either look at specific suppliers. This particular OEM has 28 approved suppliers. And then we could also open it up to the 115 authorized and franchise suppliers that we have and our Octapart powering this Nexar API. Or as I said, if you're not risk averse, and it's not touching a patient or going miles into the ground in a drilling rig, or going to space where tolerance is the strict as possible or missile defense applications. You're really able to see the big picture here. So pretty interesting that only three of these parts were procurable last year. And, hey, if you want to look at an opportunity to negotiate, now you know that there were two other parts other than the one that you were buying that were indeed available.

Alex Sapp:
Now, procurement can negotiate those parts because they're not really forced to buy from the one supplier they keep reordering from. But the most important takeaway from there is that they can share that knowledge with engineers and the engineers can do a deeper evaluation to identify other alternates. When you marry the supply chain information of procurability with all of that knowledge of these design and component engineers, it really is strong. It's demonstrably better. I look at this slide here and you see the real story on this particular CPM. It doesn't have seven approved parts. That are effectively purchasable. It only has 4.54.

Alex Sapp:
When you look at the table below, I sorted it descending from the effective number of approved part numbers, and you can see that this particular part it's in kind of bad shape. Because there is one part that's approved that wasn't procurable at all, and we can slice and dice the data as you see fit. But as I said, it's demonstrably better when you're designing, re-spinning, quoting or analyzing your BOM, procurability is a key element.

Alex Sapp:
Important takeaways summarized. Using an API feed within your design solution. It enriches your visibility. It lets you see deeper in the supply chain so that you're making decisions that you feel good about and that a business analyst or a cost model, won't come back and say, "Sorry, go back to the drawing board." And worst case scenario, my engineering friends, they really truly dislike re-spinning boards. They don't want do it. It's expensive. It's time consuming. So using an API feed really helps. Now, if you have this API feed and you are in a corner, you want to query these alternates within our data set.

Alex Sapp:
They may not always be form fit function, but we can get you there. And the last piece is, is that looking at historical procurability I just went on about, it definitely helps you create a resilient BOM on the front end. Everyone wants that. So with that said, I thank you so much for your time today and listening to me converse about some of our new products that we offer. I'm more excited than I've ever been in my career. And I look forward to chatting with any of you because you all may have different use cases, you may have different concerns, you may have different KPIs that this data will make you look better and make the dance that you're creating work out really well. So thank you again for your time. I'm always available and I'll chat with you soon.