Intel Corporation Supply Chain Analysis

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Intel Corporation Supply Chain Analysis

Introduction:

Intel Corporation was founded in 1968 and is now the biggest semiconductor chip manufacturer over the world. It now has more than 600 facilities within 107.4 thousand employees worldwide (Intel, 2016). The main businesses Intel providing are key components for computer production all over the world, including processors, chipsets, boards, systems and software, and so on. Nowadays, with the development of the internet and computer industry, the competition of hardware manufacturers becomes extremely fierce while Intel can still be the world’s leader of semiconductor chip manufacturer and designer. According to the 2017 top 25 supply chain announced by Gartner, Intel ranks top 6 among the list. Two main characteristics of the Supply Chain Top 25 ranking are the demonstration of demand-driven leadership and corporate social responsibility (Intel IT, 2017). There is no doubt that its successful supply chain mode helps Intel stays at the top of the hardware manufacturing area.

Structures of Supply Chain:

The process of Intel corporation’s semiconductor supply network can be divided into several different layers which are monitored by the same organization. There are more than 17,000 suppliers in more than 100 countries contribute to the supply chain. They provide equipment, accessories, raw materials, logistics transportation and various non-production materials and travel services for Intel (Intel, 2018). The first layer of the supply chain is mining and producing the bare silicon wafers and this part comprises of hundreds of separate steps. This layer will take 10 weeks averagely because the wafers need to be divided into different integrated circuits. The circuits will be sent to an E-test once they are manufactured and they will be sorted according to whether the functions of integrated circuits are intended (Jeffery, 2005). It will take another average of 10 weeks from E-test to delivery and totally 20 weeks for the whole supply chain, but Intel’s forecasting and management make more than 50% orders be met within 4 weeks by using efficient strategies and management approaches.

Strategies of Supply Chain:

The main object of Intel’s management strategy is to actively manage their supply chain to make business value for both Intel Corporation and its customers. Their successful management approach helps them reduce risks and improve the quality of the product. Intel also focuses on achieving environmental and social goals and raising the overall performance of suppliers. In 2017, 86% of suppliers participating in their CSR leadership program and met all of the requirements, a significant increase from 57% in 2013 when the program started. Again, 100% of first-tier suppliers have responded to the CDP supply chain survey in 2017 (Intel, 2018).

High Standards for Internal and External Environment

Intel creates accountability to satisfy or exceed the same standards that they set for suppliers and audit themselves to the same standards. Intel provides the Electronic Industry Citizenship Coalition Code of Conduct (EICC Code) for both suppliers and themselves that requiring to satisfy the standards about environmental, social and ethical issues under the electronics industry (Intel, 2016). In addition, Intel uses the EICC Validated Assessment Process (VAP) tool to audit their own performance. In 2017, their assembly and test facility in Kulim, Malaysia was audited, and got overall score was 197 out of 200 finally. Again, Chengdu, China facility was audited in 2016 received a perfect score following a closure audit in 2017 (Intel, 2018).

In order to ensure that suppliers are accountable, Intel uses various of tools and processes to manage suppliers’ performance such as the Program to Accelerate Supplier Sustainability (PASS), Supplier Report Card (SRC), Assessments, and Audits, and Targeted Action Plans. PASS helps suppliers to create internal ability around corporate responsibility by strict commitments about obedience, transparency, and ability-building. The amount of participating suppliers has reached more than 300 in 2017 from 100 in 2013, and 86% of participants satisfied all PASS requirements at the end of 2017 (Intel, 2018). Assessments and Audits offer more than 300 environmental, safety, and human rights issues that Intel can better analyze the risk profile of suppliers. From 2013 to 2017, their suppliers experienced over 450 Responsible Business Alliance (RBA) VAP and Intel RBA-based target audits. And Intel aims to audit 100% of high-risk supplier sites in two years (Intel, 2018).

Skills and Capabilities Founding

Intel offers training, infrastructure and tools for suppliers to meet comprehensive, sustainable improvements. For example, Online Resource, it is accessible for all suppliers to enter Intel’s complimentary interactive Supplier Sustainability Resource Center. This centre covers more than 20 critical topics’ information such as management systems, working hours, social insurance in China, lean manufacturing and so on (Intel, 2016). The feature of user feedback is direct, two-way dialogue via the platform which brings new perceptions about critical sustainability topics. Again, Intel launched a face-to-face workshops program in 2014, they worked with the supply chain sustainability consultant, ELEVATE, to support suppliers to address work-hours management. Besides that, Intel has direct engagement with suppliers in order to increase suppliers’ performance and achieve higher efficiency. In 2016, Intel and Dell co-hosted an executive round table in Taiwan to cooperate in innovative approaches that speed up supplier progress on sustainability performance (Intel, 2016). In 2017, Intel provided custom training plans for select suppliers to reinforce their management’s insights and eliminate any compliance gaps (Intel, 2018).

Industry Collaboration

Collaboration is key to solving broad, long-standing matters. Intel as one of the founders of the Responsible Business Alliance (RBA) actively collaborate with supply chain-related organisations including RBA, Semiconductor Industry Association and SEMI, they assist to establish electronics industry standards, improve auditing processes, conduct training, ensure membership compliance and so on. Also, Intel co-founded the multi-industry, multi-stakeholder Responsible Labor Initiative (RLI), which is responsible for protecting and promoting the rights of vulnerable workers (Intel, 2018). They declare that they will try their best to minimise or eliminate the likelihood of vulnerable workers being in forced and bonded labour circumstances.

Supplier Diversity

Intel believes that cooperating with a variety of supply chain can take more innovation, more opportunities and greater value to their business. Intel diversity not only towards employing and retention, but also contains diversifying venture portfolio, strengthening the technical channel and spending with diverse suppliers. While Intel has been committed to supplier diversity for many years, in 2015 Intel greatly strengthened that commitment with a new objective to expand spending with various suppliers to $1 billion by 2020 (Intel, 2016).

Issues of Supply Chain & Solutions:

Although everything seems going on well with Intel’s reasonable management, there are still some issues needing to be dealt with. For instance, the total time for Intel supply chain is averagely 20 weeks (which is actually quite long) and moreover, more than 50% of their orders are met in 4 weeks while the semiconductor components only have a life cycle of 1.5 years. So, the demand for semiconductor components is very unstable. The drops of demand for components may make a large amount of inventory which is at the end of product life left in companies’ warehouse. On the contrary, the rises of demand may result in stocking out and bring lost revenue. The main problem here (Actually for the whole microprocessor) is that the life cycle is just 1.5 years. Although reducing inventory may be a strategy, the problem is that the stockout cost is too high compared to the inventory cost (Jeffery, 2005).

So how to deal with the problem of the unstable demand of the semiconductor components for Intel? Mariah Jeffery determined to develop “a method for determining and controlling inventory levels” (Jeffery, 2005) and she found that no policy can achieve a win-win stage between minimizing cost and minimizing variability. Jeffery showed that updating the inventory projection models more frequently (than monthly rate) does not benefit the moderately variable products and so that tighter control should be executed for highly variable products. This author concluded for Intel corporation that they need to make a choice between the desire to minimise variability compared to the cost and the amount that could be invested in forecasting.

In addition, Intel as a world leader in the design and manufacturing of essential products and technologies that fulfils over 1 million orders a year from several factories and 30 warehouses. Intel needs to deal with more than a terabyte of supply chain and manufacturing data every day. With the development of business, supply chain efficiency and agility become very important for the corporate’s continuous success. Decreasing supply chain cost is always a crucial point for large companies. But it is equally significant to ongoing innovate, while synchronously keeping supply chain stability. Until just a few years ago, Intel’s legacy supply chain structure did not support business agility and innovation (Intel IT, 2017). The growing business environment with cumulative cost pressure and new E-commercial models made a traditional method to supply chain management cumbersome. Ageing data warehouse and batch-driven processes have resulted in multiple data hops, data latencies of up to 12 hours, data fragmentation, data reconciliation and quality issues (Intel IT, 2017).

In order to solve these issues, Intel determined to re-architect the supply chain that enhances decision-making capabilities. Also, Intel determined to install an in-memory database and advanced analytics with SAP HANA technology. SAP HANA provides real-time data management which means data can be analysed within seconds of it being saved or created, no need to wait hours for a report or to perform analysis (Intel It, 2017). Intel creates an integrated data platform (IDP) to integrate the SAP HANA system with its Cloudera Distribution of Hadoop cluster. Thus, the combination of SAP HANA’s in-memory capabilities and Hadoop’s big data capabilities provides a real-time “sense-and-respond” supply chain. This kind of supply chain data transformation strategy satisfies the principles of end-to-end visibility, responsiveness and simplification. These capabilities play a crucial role in creating business value by maximised margins, faster product achievement, decreased operating costs, decreased inventory days, and increased superior operation (Intel IT, 2017).

Conclusion:

In summary, Intel as a leader in the microprocessor industry should continue to set high requirements for both internal and external standards. They need to make efforts on suppliers’ skills and capabilities building and actively work in industry collaboration. Under the supply chain responsibility, Intel is expected to protect and promote the rights of vulnerable workers in the electronics industry, they need to use their influence to reduce forced and bonded labour in the world. Again, Intel should provide ongoing investment in diversity development and aim for 2020 goal of $1 billion annual spendings with diverse suppliers.

References:

Intel (2016). 2016 Corporate Responsibility Report. [online] Intel Corp. Available at: http://csrreportbuilder.intel.com/PDFfiles/CSR-2016_Full-Report.pdf [Accessed 21 Apr. 2019].
Intel (2018). 2017-2018 Corporate Responsibility at Intel Report. [online] Intel Corp. Available at: http://csrreportbuilder.intel.com/pdfbuilder/pdfs/CSR-2017_Full-Report.pdf [Accessed 21 Apr. 2019].
Intel IT (2017). Transforming Intel’s Supply Chain with Real-Time Analytics. [online] IT@Intel. Available at: https://www.intel.com/content/dam/www/public/us/en/documents/white-papers/transforming-supply-chain-with-real-time-analytics-whitepaper.pdf [Accessed 22 Apr. 2019].
Jeffery, M. (2005). Achieving Cost-effective Supply Chain Agility For The Semiconductor Industry. University of Central Florida, 574.