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.
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.