Supply Chain And Logistics Management Practices

Published Date: 02 Nov 2017

Final Report

Supply Chain and Logistics Management Practices

Of

Intel Co.

By

Sandip Bhandari

Ivo Kolev

Intel Corporation business encompasses manufacturing technology and operations. Intel factories turn raw silicon wafers into complex and advanced integrated circuits. The manufacturing process produces integrated circuits that are delivered to customers as finished goods or subsequently used in the assembly of products such as CPUs, graphics processing units (gPus), memory units, communication controllers, motherboards, wireless devices, and solid-state drives (Sdds). The priority of Intel Co. is to enhance its abilities as the world’s largest and finest designer and manufacturer of electronic chips. It is focused toward fulfilling the technological demand of various business sectors and continuously strives to change and improve the technology, which ultimately defines the way of life of humans.

Intel Corporation, headquartered in Silicon Valley, California, USA was founded in 1968. It is the largest designer and manufacturer of advanced integrated digital technology platforms in the world. Intel invented the microprocessor, "computer on a chip" in 1971. Intel technological platform consists of a microprocessor and chipset and may be enhanced by additional hardware, software, and services. The Company has more than 300 products for desktops, mobiles, servers, storage, networking and software. The customers using Intel products are basically Original Equipment Manufacturers (OEM) and Original Design Manufacturers (ODM). Intel products are used in a wide range of applications, such as PCs, servers, tablets, smart phones, automobiles, automated factory systems, and medical devices. The overall supply chain structure of Intel Co. is very well regarded. It is consistently included in top 10, with "Gartner" placing it on the 7th position for 2012.

The manufacturing process of Intel products begins with the wafer fabrication. We can see from the above figure there are seven wafer fabrication facilities and four test and assembly facilities. Intel has over 1,000 distributors and 25,000 dealers across the world to fulfill the demand worldwide. The suppliers for Intel products are silicon suppliers. Intel’s manufacturing facilities convert the silicon material into wafers, and those wafers are the primary component of the products that Intel offer in the market. The wafer fabrication is done mostly in technologically advanced areas, as the product is very sensitive and needs the most updated technologies. Intel Co. has thousands of suppliers worldwide, including subcontractors, providing various materials and service needs. As of December 29, 2012, 56% of wafer fabrication was conducted within the U.S. at facilities in New Mexico, Arizona, Oregon, and Massachusetts. The remaining 44% was conducted outside the U.S. at facilities in Ireland, China, and Israel.

Products

Wafer Size

Process

Locations

Microprocessors

300mm

22nm

Israel, Arizona, Oregon

Microprocessors

300mm

32nm

New Mexico

Microprocessors

300mm

45nm

New Mexico

Chipsets and microprocessors

300mm

65nm

China, Arizona, Ireland

Other products and chipsets

300mm

90nm

Ireland

Chipsets and microprocessors

200mm

130nm

Massachusetts

Over the years, Intel has used airplanes and ships as well as third parties for transportation of its sensitive products. The choice of shipment of order to customer depends on the lead time of customers. Establishment of Intel IT has enabled automation to optimize transportation routing and management of carrier performance and payment. With the IT transportation cost optimization solution, vigorous shipping strategies, such as ocean shipment are used, which is less expensive than shipping by air. The trade-offs between these transportation modes is cost (higher for air) and lead time (significantly longer transport times on the ocean). The IT solution allows the business to identify when and where lead time is not an issue. As a result, Intel Co. has increased its ocean shipment by 30 percent. The locations of facilities in major cities, which are also very close to coast, suggest that Intel has its priority of using ocean route for transportation.

Intel Co. operates its supply chain in terms of push, pull and hybrid model. The company’s primary supply chain model is a Pull Model, where Intel manufactures products after receiving order from the customers. Intel has very high end information sharing communication with its customers. Most of the company’s warehouses are located near the large customer, or a bunch of small customers. For example headquartered in Silicon Valley, Intel Co. can look after numerous companies as Google Inc., Apple Co., HP Co. etc. Intel extensively uses Vendor managed Inventory (VMI) system. These factors assist Intel in faster and low cost shipping and enable to manage inventory.

Intel IT has enabled automation and BI solutions to help optimize transportation routing and management of carrier performance and payment. This practice has helped Intel to use the ocean route more for transporting its products between locations. This cheaper means has helped Intel save capital.

Simulation and modeling capabilities has helped planners predict the inventory needs that helps decrease the likelihood of excess inventory. Intel IT solutions enable multi-echelon inventory optimization to right-size safety stock buffers across the entire supply chain, taking into account complex interdependencies, long lead times, demand uncertainty, and supply volatility. The result is a reduction in excess inventory and an improvement in customer service levels.

Intel extensively uses information system for identifying the past, present, and future trends to make its decisions on planning and operations. Intel sets expectations for supplier performance and reinforces those expectations with periodic assessments. Intel’s largest customers have generally moved to lean-inventory or just-in-time operations rather than maintaining larger inventories of their products. Also, Intel’s customers are pulled to be located around the warehouses in addition to vendor managed inventory (VMI) system.

The Intel customer quality support services encompass materials declaration, manufacturing enabling, product change management, order fulfillment quality, technical quality, and returns management. Intel listens to customers through daily interactions and through the Intel’s Customer Excellence Program. This program is a structured process for obtaining and prioritizing independent customer feedback on the quality of Intel’s products and services.

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Intel’s products primarily compete in the market based on factors such as performance, energy efficiency, integration, innovative design, features, price, quality, and reliability. One of their important competitive advantages is the combination of their network of manufacturing, assembly and test facilities with their global architecture design teams. This network enables Intel to have more direct control over their processes, quality control, product cost, production timing, performance and manufacturing yield. Intel does not have to depend on a third party company to make products for them. This ability gives Intel Co. power over its own action. Intel’s innovation consistently strives on providing products that are reduced size; consume less energy, have high performance, and have low costs. This is also the proof that Intel has over 80% of market share in semiconductor business in the world.

E-Business Group is Intel’s strategy created in for the pursuit of becoming a "100 per cent e-corporation." This strategy enables the corporation’s interactions with its customers, its suppliers, its employees, and its affiliates through the internet. Intel is aggressively moving towards paperless purchase orders, shipment notification and deployment processes. In trying to achieve this, Intel now offers its suppliers two options: a web based solution known as Intel Web Suite; and a system-to-system/business-to-business (B2B) "e-solution" known as Rosetta Net XML standards.

Today, Intel generates over 85 percent of revenue from online orders, and virtually all Intel customers are transacting business with Intel over the internet. Intel is striving to become a 100% E-corporation, which means- all Intel’s interactions with its customers, its suppliers, its employees, and its affiliates are through the internet.

Intel corporation marketing objective is to build a strong, well-known Intel corporate brand that connects with businesses and consumers. Intel promotes brand awareness and generates demand through their direct marketing as well as through co-marketing programs. Direct marketing activities include television, print, and Internet advertising, social media, and industry and consumer communications. Purchases by customers often allow them to participate in cooperative advertising and marketing programs such as the "Intel Inside Program." This program broadens the reach of Intel products and has made Intel a household name. Through this Program, certain customers are licensed to place Intel logos on computing devices containing Intel platform technologies.

In 2005, Intel executives visited several customers to get direct feedback and to discuss how Intel could better serve them. The goal was to improve business processes based on real customer needs. During these visits, customers indicated dissatisfaction with the order fulfillment process. A typical response to changing an order could take up to 1.5 weeks; during that time period, the customer didn’t know if Intel could promise to deliver the product when requested. The delay in response was due to the need for multiple levels of approval. In response to this feedback, Intel launched the "Just Say Yes program," which led to extensive changes to the customer order fulfillment and changes and provided intense focus on customer responsiveness.

The risks and uncertainties for Intel Co. can be highlighted by the following points.

The semiconductor manufacturing business is ever changing and highly competitive. Failure to anticipate and respond to technological and market developments could harm competitive ability.

Intel Co. is a global business that has investments and services all over the world. Some business activities may be concentrated in one or more geographic areas. As a result, the company ability to manufacture, assemble and test, design, develop, or sell products may be affected by factors as macroeconomic, natural disasters, security, terrorism etc.

The primary source of Intel products come from nature. Any irregularities with environmental laws and regulations could harm the business and results of operations.

In order to compete, any firm must attract, retain, and motivate key employees, and the failure to do so could harm results of operations. The transitional phases after new employee takes charge may not be always fruitful, and the firm may risk losing business.

Intel Co. focuses on monitoring environmental regulations concerning resource exploitation and emissions. These corporate regulations address several factors such as energy, water use, recycling, silicon sources and emissions. Over the past several years, Intel Co. has considerably reduced the use of lead (Pb) and halogenated flame retardants in their products and processes. Intel Co. collaborates with the U.S. Environmental Protection Agency (EPA) for the procedural management of waste. Also, Intel heavily uses the resell program to avoid excess of waste materials. One third of its products are consistently being sold annually through resell programs. Intel Co. has investments in energy conservation projects to reduce greenhouse gas emissions working with suppliers to improve energy efficiency.

The Intel brand is consistently ranked as one of the most recognizable and valuable brands in the world. It represents our commitment to moving technology forward to connect and enrich the life of every person on Earth. As the world leader in computing innovation, Intel designs and builds the essential technologies that serve as the foundation for the world’s computing devices Intel’s success rests on the availability of skilled workers, a healthy technology ecosystem, and knowledgeable customers. As stated earlier, one of their important competitive advantages is the combination of their network of manufacturing, assembly and test facilities with their global architecture design teams. In turn, the health of local economies—including those where our employees live and work—depends on access to technology and quality education.