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Thursday, May 26, 2011

Crisis Management in the Semiconductor Industry

About 20 years ago, while I worked for Motorola, the company began a major initiative to develop and implement effective crisis management plans in support of all its operations worldwide. Several of our fabs and factories had various levels of crisis management planning and processes in place, but there was no standard process in place, and in fact, many major operations had no plans in place at all. Like most large companies, Motorola had experienced a range of crises in their operations around the world, ranging from workplace shootings, fires and explosions, and media alarms about product safety or executive behavior. I remember going to a two-day meeting in Las Vegas where facility managers, division heads, PR and community relations folks from multiple business units got together to discuss and formalize a standard process for crisis preparation and planning.

It was a big deal; a major corporate initiative.

Those memories came back a few weeks ago upon hearing Keenan Evans, ON Semiconductor’s Sr. Vice President Quality, Reliability and EHS, discuss the company’s Crisis Prevention and Management Plan, at the ConFab in Las Vegas. ON, formerly Motorola’s semiconductor operations, demonstrated how advanced crisis management planning can help save lives and respond effectively after the devastating Japan earthquake and its after-effects. While it was 20 years ago, I still had the sense that the initial meeting in Las Vegas was the beginning of a process that culminated in a swift and successful response to a nightmare disaster.

Evans provided a great overview of the planning principals and execution details that were effective in minimizing the earthquake’s impact and quickly getting operations up to full production status. He told an interesting story about how good crisis management plans need more than binders, procedures and protocols, but a commitment to regular exercises and drills. It requires the kind of thankless planning and preparation that many people don’t want to do, that don’t get anyone promoted, that you hope you never to execute. Buts it’s the kind nitty gritty work that large, complex organizations have to exist in our complex world.

Evans described a three-tiered response to the earthquake/tsunami. First, an Emergency Response Team was immediately activated to address personal safety through building evacuations and critical risk assessments. Then, the Crisis Management Team worked to accurately assess the impact of the emergency. Finally, Business Continuity Planning actions were put into place to address short-term needs and begin to meet longer term needs.

Within the first hour all global operations were notified of the events through established messaging and Sharepoint alerts. In the next 10 hours, confirmations that all ON fab personnel were safe, as were all ON personnel traveling in Japan. Initial customer inquiries were received in these first hours and status messages were sent to all employees, and posted on the company website.

Between 10-24 hours after the event, the ON Business Continuity Team convened and began to execute pre-established actions plans addressing global supply chains, planning, logistics, security, HR, EHS, facilities, customer service, and insurance. Within the first 24-hours, the BCT began assessment of local infrastructure stability, impact on materials and chemical suppliers, and alternate sourcing opportunities identified. While only one of ON’s facility sustained major damage, power outages and radiation leaks began to be growing concerns.

Despite rolling blackouts, in one week three of ON’s five sites returned to production. The major immediate issue for ON was the availability of bulk chemicals needed for water and waste water treatment. With damaged roads and mass transit, logistics were impaired and several key suppliers had sustained production stoppages. ON dispatched a Global Sourcing Team to identify and qualify additional suppliers in areas considered at risk. To plan for ongoing power outages, rental generators and co-generators were pursued.

While ON was rapidly restoring their production lines, ongoing news coverage of the nuclear event, electric power shortages and radiation leaks initiated widespread customer inquiries and demands for delivery guarantees, special labeling assuring radiation-free parts, and other requirements flooded ON operations. Many of the demands would impossible to meet even under less-pressing time constraints, but diligent communications and customer service were able to restore customer confidence and order schedules.

By week two, chemical supply issues were solved and alternative sourcing of key supplies were put in place. Power stability was addressed with the purchase of several power generators and the implementation of a co-generation system began. Local transportation and logistics began to normalize and radiation levels were confirmed at normal levels at all ON sites.

As April came, all of ON’s sites returned to production and the power situation further stabilized. Customers received daily delivery schedules and even insurance carriers visited ON sites to begin the financial processes. By end of month, the new generator sets were dispatched on site (see photo at right) and the co-generation system was connected. In addition, alternate supplies of specialty substrate materials were secured and alternative BGA substrate sources were in qualification.

The company announced on May 4, “Of ON Semiconductor’s six manufacturing facilities in Japan, five came back to full production capacity and the sixth factory is ramping towards full production.”

In summary, Evans confirmed that ON Semiconductor’s P2R2 approach worked successfully. ON’s inter-site and global production network contributed to restoring production capacities and solid relations with a global supplier base helped assure a rapid recovery. Many of these tactics are in place at other fabs and key suppliers, confirming the ability of the Japan industry to respond effectively to an extreme and unprecedented event.