Executive Briefings

Short Cycle Time Powers Intel's Low-Cost Supply Chain

When Intel decided to enter the low-cost chip market with its Atom microprocessor, a small form-factor product made for notebook computers and mobile internet devices, it needed a much lower-cost supply chain than the one that serviced its high-end products. The company achieved this goal by shortening its cycle time enough to enable a build-to-order strategy, explains Jim Kellso, senior supply chain master at Intel.

"We believe the Atom microprocessor is a new entry that will change the game in the very, very low-cost product area, but we knew that we could not make it into that marketplace with our existing supply chain, which was designed to provide high service levels for relatively expensive parts," Kellso says. "So, designing a second supply chain that would be very, very trim was a prerequisite for us to gain entry into the market."

This effort began with Kellso creating a team of supply chain experts with different areas of expertise from all parts of Intel. Kellso asked for half of these people's time for the three-month long project. "At Intel, half time is about 40 hours a week and I figured that was enough," he quips.

This team began by looking at Intel's current processes and their real costs, he says. "We realized that the core for us was inventory -- having the right amount of inventory." That meant the new supply chain could not operate with the long-range forecasts Intel typically asked its customers to provide. "If my cycle time is long, I have to build to forecast, but if my cycle time is short, I can build what the customer orders," he says. With that understanding, "the solution was really simple," says Kellso. "We needed to get our assembly and test cycle to be so fast that we could get the order, plan the order, and build and deliver the product inside of our customer's change cycle." Fortunately, he adds, "the product is fairly simple, which helped us a lot."

To view this video interview in its entirety, Click Here.

"We believe the Atom microprocessor is a new entry that will change the game in the very, very low-cost product area, but we knew that we could not make it into that marketplace with our existing supply chain, which was designed to provide high service levels for relatively expensive parts," Kellso says. "So, designing a second supply chain that would be very, very trim was a prerequisite for us to gain entry into the market."

This effort began with Kellso creating a team of supply chain experts with different areas of expertise from all parts of Intel. Kellso asked for half of these people's time for the three-month long project. "At Intel, half time is about 40 hours a week and I figured that was enough," he quips.

This team began by looking at Intel's current processes and their real costs, he says. "We realized that the core for us was inventory -- having the right amount of inventory." That meant the new supply chain could not operate with the long-range forecasts Intel typically asked its customers to provide. "If my cycle time is long, I have to build to forecast, but if my cycle time is short, I can build what the customer orders," he says. With that understanding, "the solution was really simple," says Kellso. "We needed to get our assembly and test cycle to be so fast that we could get the order, plan the order, and build and deliver the product inside of our customer's change cycle." Fortunately, he adds, "the product is fairly simple, which helped us a lot."

To view this video interview in its entirety, Click Here.