The Intel Supply Chain Challenge
Jim Kellso
Senior Supply Chain Master
Intel Corporation
January, 2008
Intel Confidential
“The
reasonable
man adapts himself
to
To be
an Unreasonable
Person?
the world;
the unreasonable one persists in trying to
adapt the world to himself
Therefore all progress depends on the
unreasonable man."
- George Bernard Shaw
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How and Why to be an
Unreasonable Person?
Some assertions:
–Progress comes from desire to create change—
unreasonable people
–Improvement comes from Innovative change which is
focused on real business problems
–Innovation just doesn’t happen…it needs care, feeding
and DIRECTION
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An Insatiable Appetite for Innovation
Throughout our history, we’ve transformed the world:
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Agenda
–A little more about Intel
–Intel’s Supply Chain Network
– “Changing” Environment and Strategy
–The process of Directed Innovation
–The outcomes of the process
–The Results
–Questions
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Contract
Manufacturer
Capital Equipment
Supplier
Distributor
Fab
Wafers
Sort
Die
Assembly
Units
Test
Distributor
OEM/Disti/Retail
Units
OEM
Fabricator
Indirect Material
Supplier
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Customer’s Customer
Supplier’s Supplier
Intel’s Supply Network
Capital Equipment
17 Fabs—soon
Supplier
Contract
Manufacturer
to be 18 ( first fab in China/Asia)
Customer’s Customer
Supplier’s Supplier
Intel’s Supply Network
6 Assembly / Test sites—soon to be 7 (Viet Nam)
Distributor
Fab
Sort
Assembly
100,000 Products
Test
Distributor
OEM/Disti/Retail
Units
Die Customers
Units
95,000 Wafers
Unique
70,000 Genuine Intel Dealers
Indirect Material
60,000
Wafer
Supplier
starts / week
270 New Product Versions
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OEM
Fabricator
Intel’s High Volume Fabrication &
Assembly/Test Sites
Ireland
IFO/F24
Colorado
Oregon
Fab 23
Shanghai A/T
Israel
Mass.
Fab 8/18/28
Fab 17
FO, F20, D1C
D1d
China
China
Chengdu A/T
California
D2
Arizona
New Mexico
Costa Rica
Fab12/22/32
Fab 11/11X
San Jose A/T
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China
Dalian
Fab 68
Malaysia
Viet Nam
Penang A/T
Kulim A/T
Ho Chi Minn City Cavite A/T
Viet Nam A/t
Philippines
CPLG Vision / Mission
 Customer Fulfillment, Planning and Logistics Group
 CPLG Vision
– Agile fulfillment capability that is easy for customers and maximizes shareholder
value.
 CPLG Mission
– Increase customer and Intel success by optimizing supply and demand, and
delivering valued supply chain solutions.
 2007 focus areas
– Customer: Enable the field to win customer trust.
– Inventory: Optimize Intel’s Inventory pipeline levels/mix to deliver customer
satisfaction and maximize Intel’s profitability.
– Execution: Drive efficiency in all areas of the Supply Chain.
– Foundation: Strengthen our foundation through increased knowledge, skills and
capabilities.
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A little about CPLG
– Approximately 3500 employees world wide
– Includes customer service, planning and logistics operations
– Responsible for ~3 billion dollars of inventory
– 500 million dollars of transportation spending annually
– Major facilities in Penang, Manila, China,
Costa Rica, Amsterdam, California and Arizona.
– Hubs in Shanghai, Shenzhen, Hong Kong, LA and Miami, Tokyo
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Our Supply Chain Strategy:
Build a High Velocity Supply Chain
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Metric Driven Supply Chain structure
Supply Chain Metric
Say “Yes” to Customer's Upside, Pull-Ins, Swap requests in 1 Biz Day
Improve Customer Committed Dock Date (CDD)
Order Fulfillment Quality DPM
Percentage of CPU SKUs with 2-6 wks of Finished Goods Inventory
Pipeline Inventory
% Mix Forecast Variability Reduction per quarter on strategic, volume families.
% of CPUs & Chipsets SKUs on new Item and BOM Nomenclature
Helping Intel’s Customers Go Faster
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Challenge: Meeting Demand
and Optimizing Supply
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Complexity Today – Simplification Critical for Future
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Contract
Manufacturer
Capital Equipment
Supplier
Distributor
Fab
Wafers
Sort
Die
Assembly
Units
Test
Distributor
OEM/Disti/Retail
Units
OEM
Fabricator
Indirect Material
Supplier
Customer’s Customer
Supplier’s Supplier
Long throughput cycle in semiconductor
industry
Semiconductor manufacturing TPT varies between 2-4 months
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Challenge: Fulfilling Demand while
Optimizing Inventory and Factory costs
Supply
Demand
Factory
Costs/Output
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The key challenges
Complexity driven by:

Customer

Products

Market

Platform strategy
Made more difficult by need for
affordability/profitability
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Supply Network Research
Vision
–Supply Network becomes a competitive
advantage.
–Virtually connected with suppliers and
customers.
–Meet aggressive goals to reduce cycle time
and costs.
–Positive impact on bottom lines of Intel and
its customers.
–Supply chain is HIGHLY RESPONSIVE
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Inventory vs Service Level
Tomorrow’s
Efficient Frontier
Service Level
Today’s
Efficient Frontier
How Do you Get There:
Productivity Improvement
AMB:
Lead Time
Demand Forecast Variance
Supply Variance
2008
65%
2007
45%
2006
19%
17woi
22woi
Inventory
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28woi
What’s next?
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Paul Said it in the Q2 07 BUM:
The Business Strategy
Expand our business through proliferation of what we
do best:
–Keep leveraging the current market in CPU’s
–Develop and deploy to the new market of connected
devices
All fueled by the continuous growth the internet
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Extending Intel Architecture …
Ultra Low Power
Sufficient Performance
Extreme Integration
~$10B
~$10B
Performance
Performance/Watt
User Valued Features
~$10B
2011 Unit TAM > 900 Million Units
Ultra
MID
CE
Low-Cost PC
PLATFORMS
Notebook
Desktop
Common Element: The Internet
July 2007
Intel Confidential
BUSINESS UPDATE MEETING Q3 2007 INTEL CONFIDENTIAL – INTERNAL USE ONLY
Server
Common Factors
 Increasing complexity
 Inability to predict—
–Demand
–Supply
 Because we can’t really ever predict GREAT
–Need for speed
–Need for later differentiation
–Have to be FAST and LEAN
 Need to satisfy customers
 Need to relate the capabilities together so that we align
inventory, planning and customer expectations together
Intel Confidential
Characteristics of an Excellent Supply Chain
An excellent supply chain:
1. Supports, enhances, and is an integral part of a company’s competitive business
strategy
2. Leverages a distinctive (not necessarily unique) supply chain operating model to
sustain competitiveness
3. Executes well against a balanced set of operational performance
objectives/metrics
4. Focuses on a few business practices that reinforce each other to support the
operating model and best achieve operational objectives
* L. Lapide, “The Four Habits of Highly Effective Supply Chains”, Harvard Business Review Supply Chain Strategy Newsletter, HBSP
and MIT-CLT
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This is what we have to build to support the low cost pc
supply chain……
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