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Commodity Procurement at Intel

Intel senior commodity manager Suzanne Ralls discusses how processes that begin with the "ideal state" have helped simplify and improve commodity procurement at the company.

Commodity Procurement at Intel

If you want to know where to find improvement opportunities in your supply chain, look for the pain points and start there, says Ralls.

An example from her own experience involved problems keeping track of information in RFQs. “Our internal customers were dissatisfied with the speed with which we could support them and the accuracy of our information,” she says. “We were constantly doing RFQs and having to repeat them, which resulted in a lot of waste. So we wanted to get a handle on the pricing of our components and have greater accuracy and be more predictive with the information gathering.”

Because these were low-cost items, no one wanted to put in the time necessary to develop traditional contracts, “so we had to think outside the box,” Ralls says. “We decided to start with the ideal state. We asked, if we could have fixed pricing with no contract, what is the smallest contract we could have; what are the minimum terms we could have?”

As a result, Ralls’s team developed a short-form contract that might be no more than one page. This gave them accurate information, but the group then had to develop an internal infrastructure to store and track the information. “We had to develop requirements on what kinds of information we wanted to keep and where to store it and who needed to see it,” Ralls says. “It was really a painful process, but once that was in place we had the winning sauce – we had our contracts taken care of, fixed pricing, a place to store the information and we accomplished a third piece, which was to narrow the supply base.” Moreover, they were able to track and freely share the information, she says. “This was really helpful for our customers and they were very happy with the outcome of the project.”

Identifying the ideal state and working backward is a powerful device to use when trying to get people to change something they have been doing for a long time, says Ralls. “You imagine a world where you didn’t so things this way instead of just trying to work on a 5-percent or 10-percent improvement. And really think about what it would take to achieve that ideal state.”

Once you have a vision, you then have to engage the right people, she says. “At a big company like Intel, engaging people is just crucial. You have to figure out who is willing to do the work and whether they are good at it. Then you need to reach into the different areas that will have to adopt the change to make sure that people who are respected in that area are engaged. If you don’t get the right people engaged, change will be all push; if you do, it becomes more of a pull.”

Another tactic Intel uses to drive improvements is to write down business processes. “People are resistant to this because they figure if they know how to do something, why should they have to write it down,” she says. “But the process of writing things down and making them explicit makes the work better; it just does. It makes people look at what they are doing and that’s when they see the inefficiencies.”

Additionally, when you make a business process explicit by writing it down, people realize what the expectations really are. “We have gone through that several different times, several different ways and it has been very enlightening for the people involved,” she says.

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