Intel Takes Top
Spot with Complete
Cultural Shift
Intel, this year’s top Supply Chain Innovator, transforms virtually every aspect of its supply chain to
meet changing demand. In the process, it goes from “worst in class” to setting new industry stan-
dards for customer service.
n the 1990s, silicon chip makers could
pretty much dictate terms to their customers. Need a few million microprocessors for your latest line of PCs, video
games or cell phones? Intel, the world’s
biggest supplier, would tell you if, when and
how much you’d get. At a time of massive
demand for new high-tech products, it was a
seller’s market by any definition of the term.
If there’s an indisputable lesson to be
learned from economic studies, it’s that dominant players don’t stay that way forever. By
the turn of the new century, Intel was beginning to pay a price for the way its operations
were set up, in the form of growing customer
dissatisfaction. The company’s inherent inef-ficiencies could no longer be ignored.
Intel had designed its supply chain to
service a handful of large original equipment manufacturers (OEMs), who
required a limited number of SKUs. Order
fulfillment was predicated on several
guidelines: that constrained supply be disbursed in a “fair and equitable” manner,
that commitments for product be backed
up by physical supply, and that quantities
be fixed as far in advance as possible, to
ensure predictability in the chain.
Not a bad plan from a supplier’s stand-
point. Intel’s customers, however, weren’t so
content. They were required to place orders
at least three months ahead of delivery, and
their change requests had to pass through
several levels of review before being allowed.
(Assuming, of course, that they were.) That
disadvantage began to chafe as a fragmenting
customer base led to more volatile demand,
and increased pricing pressures. Order
changes stepped up in frequency, and Intel
simply couldn’t keep up with the flow.
A study of 10 semiconductor companies
by IBM Global Services found that most
could respond to a supply request on the
same day it was made. In 2004-05, Intel
needed seven to nine days, a dismal record
which made it “worst in class,” according to
supply chain strategy program manager
Nikhil Chhabra. Or, to put it more bluntly:
“Some of our customers hated us.”
The year 2005 saw the launch of an initiative that Intel dubbed “Just Say Yes.” The
name signaled a determination by the company to forge a new approach to customer
relations. More than a marketing campaign
with a catchy slogan, the plan involved a
number of ambitious goals touching upon
multiple aspects of the supply chain. First up
was the ability to respond quickly to change-
order requests. That would be followed by an
improvement in committed dock-date performance, a push to reduce errors in demand
forecasting, and an overall reduction in
inventory levels. (That last achievement was
especially important, given Intel’s insistence
on reaching all the other objectives without
boosting safety stock.)
“Just Say Yes” ended up involving hundreds of separate projects. Given the size
and scope of Intel—87,000 employees
worldwide, nearly $38bn in revenues and
net income topping $5bn—that’s hardly
surprising. In 2006, the company processed
more than 1.5 million change orders.
The effort was structured around four
“pillars,” targeting improvements in responsiveness, inventory balance, delivery performance and forecast accuracy. At bottom,
says Chhabra, was the common goal of figuring out “how many times we can say yes
in a [business] day.”
How It Was
Under the old way of doing business,
change-order requests had to pass through
four separate departments: three separate
reviews for “business validity,” followed by
an attempt to match demand with actual sup-
