Operational Excellence

Intels Quest for Supply Chain Excellence

Shifting markets and product mix forces the microprocessor giant to transform its supply chain infrastructure.
By Bill Roberts

ntel Corp. is best known for its microprocessors and its marketing prowesseverybody knows the Intel Inside campaign. However, the semiconductor pio-

neer has not been known as a supply chain company, and that is something it is now working to change.
How do we create the most responsive supply chain we can to respond to changing market dynamics? asked Stuart Pann, who wears two hats at the $35 billion Santa Clara, California-based companyvice president for sales and marketing and cogeneral manager for customer fulfillment, logistics, and planning. We are trying to cut time out of every step. We want to drive supply chain excellence and help Intel customers go faster. Pann made his comments during a keynote speech titled Driving Supply Chain Excellence at Microsoft Global High Tech Summit 2007. He explained how globalization and markets are changing the world of work for 86,000 employees at Intel. In the 1990s we could sell just about everything we made, he said. We had built it, people bought it. Now, we are based on demand. As demand for microprocessors
How do we create the most responsive supply chain we can to respond to changing market dynamics? Stuart Pann, Intel Corp.

How Intel Revamped Its Supply Chain Approach

Tactic Reorganize Delayed configuration New infrastructure New sales culture
Source: Intel Corp.

broadened beyond PCs to various consumer devices, the 20-week lead times (raw material to shipped processor) acceptable to the PC market no longer apply. Consumer device markets demand different supply chain responsiveness, including tighter inventory control and greater flexibility in finishing the product (microprocessor) before it is sent to the manufacturer, Pann explained. We needed to configure the supply chain to take advantage of the new opportunities, he said. We required a very different supply chain than the one we have used in the past.
A Work in Progress

Explanation Four separate groups in assembly and test; now one point of contact for customers Final burn-in done right before assembly and test End-to-end integration of systems with customers, suppliers, and partners The toughest challenge was shifting to a demand-based model

In 2005, Intel created the customer fulfillment, planning, and logistics unit from existing resources and set out to improve supply chain efficiency and get closer to the customer. One of its first steps was to gauge the nature of the problem. We were literally changing microprocessor backlog data three times a quarter, Pann said.

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In the 1990s we could sell just about everything we made. We had built it, people bought it. Now, we are based on demand. Stuart Pann, Intel Corp.
And that was not fast enough. The companys sluggish processes led customers to routinely over-order, he added. In a work still in progress, Intel is making several changes. There used to be four Intel groups involved in day-to-day operations at assembly and test sites. The company reduced that to one groupthe frontline customer business operation team that deals directly with the site and with the customer. Assembly and test is a four-week window during which most change orders come. But, once in assembly and test, it is hard to make changes in the parts. Intel now makes the final fusing and configuring of the part after the customer gives the final word on what it wants, and the process takes a few days.
Changing Existing Behavior

Solution Spotlight
More Effectively Respond to Increased Customer Expectations
As manufacturing supply chains grow longer and more complex, the need for real-time visibility across these extended supply chains grows. People need ways to proactively manage variability and disruptions to more effectively respond to increased customer expectations. Solutions from Microsoft Corporation and its partners provide a high degree of demand and supply visibility, helping people in high tech and electronics create an efficient supply chain visibility infrastructure. Enter Microsoft Office PerformancePoint Server 2007, a single application built to enable the complete performance management cycle by bringing together three core performance management capabilities: > Monitoring: Easily see what is happening now in your organization, measure it against your objectives, and understand how your actions impact corporate goals. > Analytics: Quickly discover what is driving performance and look at what adjustments you might make to take advantage of new opportunities. > Planning: Efficiently build budgets, forecasts, and plans in the interface everyone knowsMicrosoft Office Excel. PerformancePoint Server 2007 offers auditing capability, centralized control, enhanced security, and the proven data platform of Microsoft SQL Server 2008. For more information: htsinfo@microsoft.com and http://www.microsoft.com/business/performancepoint/default.aspx

The role of information technology (IT) is central. Customer planning reengineering was a big shock to the system, Pann said. We had to gut most of our computing infrastructure. We are doing it in stages. Several of our

Sam Coursen, Freescale Semiconductor Inc.

major initiatives need quick end-to-end business integration with customers, supply chain partners, and suppliers. This is a multiyear transformation. The need for IT-supported supply chain transformationand the difficulty of accomplishing itwas a recurring theme at the Summit. During a panel discussion among several executives at days end, Pann said the toughest part of transforming his company is changing existing behavior inside Intel. Another panelist agreed. In answer to a question about creating business value, Sam Coursen, vice president and CIO at $6.4 billion semiconductor manufacturer Freescale Semiconductor Inc. in Austin, Texas, said: Change management is one of the biggest challenges. Philip McKinney, vice president and CTO for the personal systems group at Hewlett-Packard Co. in Palo Alto, California, and also general manager of its gaming unit, offered another perspective on change management. He

has been leading an effort to change research and development (R&D) practices at the $100 billion IT company and said the biggest transformation issue is protecting the team from the organizational hurdles. It has taken us two years just to convince senior management and the board to change the metrics in how they measure R&D.
Bill Roberts is a Silicon Valley-based freelance writer who covers business, technology, and management issues.

Lessons Learned
Intel has applied several semiconductor manufacturing techniques to supply chain improvements. These techniques specifically include the following: Simple and highly visible metrics Cycle time reduction Pareto analysis and yield curves

JOURNAL OF THE MICROSOFT GLOBAL HIGH TECH SUMMIT

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