Intel Capital Equipment Supply Chain Lead Time Cost-Benefit Model

Project: Research project

Project Details

Description

Intel Capital Equipment Supply Chain Lead Time Cost-Benefit Model Intel Capital Equipment Supply Chain Lead Time Cost-Benefit Model As a result of recent Intel SET (Structure & Efficiency Team) efforts, the Capital Equipment Supply-Chain (CESC) was identified as an area of strategiC importance requiring significant improvement to ensure long-term financial success and achieve world class performance. Intel as a corporation has spent on average $5.0B (14% of Operating Revenue) each year over the last ten on capital equipment purchases with the most recent year exceeding $5.8B. To place into perspective, this is more than the annual GDP (Gross Domestic Product) of over 50 countries per The World Bank. Correspondingly, over the last 6 technology nodes, it is estimated that Intel has overspent in excess of $1 B USD in capital equipment, purchasing capacity that was never needed. One contributing factor is that capacity additions to a factory (supply) must be committed on average a year ahead of wafer starts (demand) based upon a highly variable forecast. A second contributing factor is that an excess unit of factory capacity (supply) is less costly than a missed unit of customer sales (demand) by approximately a factor of 4. As such, conventional wisdom has been to error on the side of having excess capacity which translates into excess capital costs. The question is; how much excess capacity is acceptable to deal with the majority of the variability in the demand forecast and at what cost. Customer demand forecasting is inherently variable and often complicated by many factors including the supply chain lead time it takes to match supply with the demand. Yet, given historical performance, the variability in this demand forecast decreases significantly the closer in time the forecast is to the actual customer purchase. Correspondingly, matching capital supply to this variable demand often results in needing to balance costs and risks with meeting some expected customer service levels. Given a decreasing variability in the forecasted demand the closer to customer purchase, it becomes desirable to have a shortening supply chain that can take advantage of this diminished variability in the demand. Intel Capital Equipment Supply Chain Lead Time Cost-Benefit Model
StatusFinished
Effective start/end date12/10/0812/31/11

Funding

  • INDUSTRY: Domestic Company: $250,000.00

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