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Intel’s Supply Chain Sweet Spot

Intel Corp. has spent much of the last five years making improvements to its supply chain, which is one area of its business where it hopes to reduce costs, create greater business efficiency, and enhance its collaboration with customers.

It would appear from recent reports that several supply chain strategies the company has implemented were designed to deal with a build-up of inventory of the kind that occurred in the third and fourth quarters of 2012.

An “IHS iSuppli Supply Chain Inventory Market Brief” that looked at global semiconductor inventories showed that Intel recorded the largest decrease in inventory value during the fourth quarter, down $585 million from the third quarter, which represents an 11 percent reduction. Intel's inventory levels fell at a surprisingly fast rate, according to IHS analysts, due to aggressive moves to cut stockpiles as well as the company's efforts to redirect space and equipment to 14-nanometer lithography.

Process-Oriented

Over the last five years, Intel has recorded 65 percent shorter lead times, 300 percent faster response to customers, and a 32 percent reduction in inventory.

Over the last five years, Intel has recorded 65 percent shorter lead times,
300 percent faster response to customers, and a 32 percent reduction in inventory.

Building supply chain agility
These results give us reason to take a closer look at what Intel has been doing to build a more nimble supply chain as it attempts to fulfill more than 750,000 orders a year from 16 factories spread across seven countries and 30 warehouses. In the recently released “2012-13 Intel IT Annual Report,” the company explained that it has focused on integrating information systems and automating processes that have advanced supply chain optimization. Over the last five years the company has recorded 65 percent shorter lead times, 300 percent faster response to customers, and a 32 percent reduction in inventory. The report goes on to say:

    For example, we partnered with the business to release a new automated planning system that increases Intel's inventory accuracy, enabling delivery of the right products at the right time. The system eliminates over 1,500 planning spreadsheets, reducing the need for human interpretation of data, improving accuracy, and reducing inventory costs. This solution also increases employee productivity, saving 2,000 employee hours this year, with an anticipated additional savings of 5,500 hours over the next two years.

Additional supply chain measures
According to the report, the company has also made efforts to strengthen other aspects of its supply network including:

  • This year Intel will continue its efforts to improve its new high availability database architecture which runs supply chain data from its factories. The solution enables upgrades, maintenance, and operation of mission-critical applications without downtime by using a standby database and a form of redundancy known as stretch clustering.
  • Intel has built a process-driven contract generation and lifecycle management capability on a service-oriented architecture. Designed for nearly instantaneous response to contract inquiries worldwide, this solution replaces a cumbersome paper-based system for more than 1,000 Intel customers, ranging from multinational corporations to smaller channel partners. It also enables regulatory compliance at each step in the process. Intel now uses this web-based capability to manage more than 7,000 contracts annually across its sales regions.
  • In 2010, Intel started an extensive program to adopt an IT service management model. Under the new system the company has created service teams, assigning employees distinct roles and implementing standard processes. Each IT service delivers a customer-driven outcome and is grouped as a portfolio with other services that share a common purpose, such as supporting a factory or sales force. According to Intel, as a result of these changes, the company is deploying services five times faster than in 2011.

As Intel improves its chip technology, deals with a declining PC market, and copes with an evolving smartphone and tablet market, it's important to know that the company is still making a concerted effort to improve its supply chain as it tackles the demands of a changing technological landscape.

20 comments on “Intel’s Supply Chain Sweet Spot

  1. Taimoor Zubar
    April 30, 2013

    I think one of the strategic objectives of Intel's supply chain should be to reduce their inventory carrying. Given the dynamic nature of their products where the pace of product obsoletion is extremely fast, the risk of losses through products getting obsolete are pretty high. Reducing the inventory carrying would make Intel leaner and allow them to save considerable costs.

  2. Wale Bakare
    April 30, 2013

    The fear over PC markets being overtaking by smartphones is one major factor that's primarily responsible.

  3. Mr. Roques
    April 30, 2013

    INTEL realized it needed a really fast supply chain (which normally goes with a lean inventory). The reason is the speed at which processors are released, they need to release a new one every couple of months. Now that they are entering the smartphone market, its even faster.

  4. Wale Bakare
    April 30, 2013

    That's the tricky aspect of the smartphone. I hope Intel would be able to keep up with the volatility of the smartphone markets though. 

  5. ITempire
    April 30, 2013

    It is marvellous to see that Intel is making such rapid changes in its supply chain cycle to increase efficiencies and save costs. It is easier to continue the operations of the company but difficult to change things around; and changing things around is a characteristic of a successful and agile company.

  6. ITempire
    April 30, 2013

    @ Rich

    🙂 You are right. Like the stock market, you cannot control many factors included in the supply chain forecasting. Nevertheless, it is good to use the benefit of hindsight to plan for future inventory requirements and expected deliveries to customers.

  7. ITempire
    April 30, 2013

    @ Mr. Roques

    Do you have an idea as to which smartphones are using intel's chipsets ? I searched few but none had it. Does that mean Intel is currently out of competition in the smartphone market ?

  8. The Source
    April 30, 2013

    WaqasAltaf,

    Motorola's smartphones have Intel chips inside. Here's a link to more information.

    http://www.techradar.com/us/reviews/phones/mobile-phones/motorola-razr-i-1098183/review

    Thanks for reading this article.

     

  9. The Source
    May 1, 2013

    Rich,

    So you think Intel's supply chain forecasting tools (and process) would be similar to forecasting the stock market.  In what way?

  10. Daniel
    May 2, 2013

    Nicole, it seems that they are following a good model for speedy goods movement at a lower cost. I think other companies can also follow similar models to minimize the supply chain overheads.

  11. Daniel
    May 2, 2013

    “The fear over PC markets being overtaking by smartphones is one major factor that's primarily responsible.”

    Wale, you are somewhat correct. They want to capture the mobile chip market from ARM

  12. Wale Bakare
    May 2, 2013

    What about Freescale microcontroller/microprocessor? Why's Motorola not using its semiconductor?

  13. Wale Bakare
    May 2, 2013

    I would like to see the ARM respond to Intel's smartphone markets onslaught. And for sure, Intel supply chain is one good strategy to quickly join in the foray. I am waiting while the  smartphone's microprocessor markets drama unfolding.

  14. t.alex
    May 2, 2013

    As Intel invested heavily into the software, tools, and infrastructure to make things work automatically and seamlessly, I am curious how much has it spent on this and if the tools/software come from other third party vendors?

  15. Taimoor Zubar
    May 5, 2013

    The fear over PC markets being overtaking by smartphones is one major factor that's primarily responsible.”

    @Wale: That's certainly one of the main reasons why Intel should look towards cutting down on inventory. The smartphone market has made the demand volatile and Intel needs to reduce inventory and become lean so that it's able to cater to fluctuating sales.

  16. Wale Bakare
    May 5, 2013

    You are right on that but coming up with decisions could be tough at times to arrive at. 

  17. The Source
    May 6, 2013

    t.alex,

    The Intel 2012-13 IT annual report did not break down spending numbers on supply chain software, but what is interesting is that the company is focusing heavily on improving its supply chain at the same time that it is shifting its focus toward serving the mobile market as the traditional PC market segment declines.

     

     

  18. The Source
    May 6, 2013

    Jacob, 

    It's always advantageous to high-tech companies when their supply chain executives learn from other companies that have implemented new supply chain practices and are reaping the rewards from the changes they have made.  These days the supply chain is very complex, and any advantage that can be gained from implementing new technology or business practices that work is a good thing.   

  19. Daniel
    May 7, 2013

    “It's always advantageous to high-tech companies when their supply chain executives learn from other companies that have implemented new supply chain practices and are reaping the rewards from the changes they have made.”

    The source, peoples/companies are more interested in following successful models rather than develop new models.

  20. Taimoor Zubar
    May 22, 2013

    You are right on that but coming up with decisions could be tough at times to arrive at”

    @Wale: It's tough at the beginning but if you have a system which accurately records sales and demand trends and the ability to forecast based on internal and external factors, optimizing the inventory becomes a whole lot easier.

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