{"id":25826,"date":"2017-11-15T21:13:14","date_gmt":"2017-11-16T02:13:14","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/digitization-at-intel-the-company-that-created-digital\/"},"modified":"2017-11-15T21:13:37","modified_gmt":"2017-11-16T02:13:37","slug":"digitization-at-intel-the-company-that-created-digital","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/digitization-at-intel-the-company-that-created-digital\/","title":{"rendered":"Digitization at Intel \u2013 the company that ‘created digital’"},"content":{"rendered":"

Background<\/strong><\/p>\n

Semiconductors are the \u2018brains\u2019 that power computers, smartphones, and tablets.1<\/sup> To fuel our digital revolution, the size of this industry naturally exploded. Exhibit 1 shows that global semiconductor sales revenue grew tenfold from USD ~33 Bn in 1987 to USD ~338 Bn in 2016.2<\/sup> As the industry matured, revenues got consolidated and captured by key global players; Intel pioneered the industry, and captured ~16% of the global market share in 2016.3<\/sup><\/p>\n

\"\"<\/a>
Exhibit 1: Semiconductor sales revenue worldwide rapidly increase from 1987 to 2019 (in billion U.S. dollars)2<\/sup><\/figcaption><\/figure>\n

In line with most manufacturing companies, supply chain optimization played a major role in reinforcing semiconductors companies\u2019 competitive advantage. Digital solutions then emerged to help optimize supply chains, and a recent study shows that more than 67% of CEOs consider digital supply chains to be \u2018disruptive and important\u2019 as shown in Exhibit 2.4<\/sup><\/p>\n

\"\"<\/a>
Exhibit 2: CEOs prioritize digital supply chains with respect to their Supply Chain Strategy4<\/sup><\/figcaption><\/figure>\n

\u00a0<\/strong><\/p>\n

Relevance for Intel<\/strong><\/p>\n

Intel\u2019s profitability is directly linked to the efficiency of its supply chain for a multitude of reasons. Firstly, the semiconductor industry has been plagued by constantly decreasing margins, putting more pressure on manufacturers such as Intel to significantly scale up their operations to remain profitable. In fact, Intel \u201cfulfills over 1 million orders a year from several factories across 100 countries.\u201d5,6<\/sup><\/p>\n

Secondly, the business includes huge variability in customer demand coupled with a large number of suppliers. In fact, \u201cthe average order is changed 6 times and only 1% of orders are shipped without any changes.\u201d Also, Intel\u2019s supply chain \u201ccomprises more than 19,000 suppliers in over 100 countries.\u201d7,8<\/sup><\/p>\n

Thirdly, the semiconductor industry is known for very short innovation and new product development cycles. Actually, according to multiple reports, the industry was \u201cranked 2nd<\/sup> most innovative manufacturing industry in the US.\u201d9<\/sup> Since this innovation directly affects the product development process, manufacturers are constantly pressured to migrate towards more agile supply chains.<\/p>\n

 <\/p>\n

 <\/p>\n

Intel adopts a three-pillared solution<\/strong><\/p>\n

\"\"<\/a>
Exhibit 3: Intel adopts a three-pillared solution<\/figcaption><\/figure>\n

Intel quickly recognized the necessity to optimize its supply chain through digitalization. As such, Intel launched the \u2018Just Say Yes\u2019 program to \u201cintegrate IT solutions across all levels\u201d7<\/sup>; it also invested in the \u2018internet of things\u2019 to \u201cunlock value in supply chain management\u201d10<\/sup>; and developed a 5-year digital strategy to \u201coptimize business processes, drive operational excellence, and provide higher levels of customer satisfaction.\u201d6<\/sup> By integrating IT solutions in its supply chain, Intel reduced new manufacturing process ramp up time by 50%, decreased order-fulfillment lead time by 65%, and lowered inventory levels by 32%.7<\/sup> Similarly, Intel\u2019s investments in the \u2018internet of things\u2019 enabled \u201cimproved supply chain logistics planning,\u201d10<\/sup> and thus reduced time spent loading freight containers, as well as improved handling accuracy. Finally, Intel\u2019s digital strategy unlocked real-time decision-making by leveraging big data and enabling manufacturing components to \u2018sense-and-respond\u2019 on the spot. Through this strategy, Intel aims to \u201cimprove end-to-end visibility\u201d and create a \u2018glass pipeline\u2019 supporting \u201creal-time analytics, real-time data, and real-time processing.\u201d Moreover, this approach allows Intel to \u201cimplement advanced algorithms to enable deep analysis and correlation of data from disparate sources, both structured and unstructured.\u201d Also, this supply chain transformation strategy will simplify the manufacturing process and allow Intel to \u201ccoalesce all data elements and key supply chain metrics into a single version of truth.\u201d6<\/sup><\/p>\n

\u00a0<\/strong><\/p>\n

Additional considerations for Intel<\/strong><\/p>\n

\"\"<\/a>
Exhibit 4: Intel ranked 6th<\/sup> in Gartner’s 2017 Supply Chain Top 257<\/sup><\/figcaption><\/figure>\n

Given Intel\u2019s actions to digitize its supply chain, it \u201centered the Garner Supply Chain Top 25 in 2009 at the rank of 25.7<\/sup> In 2017, Intel became the 6th<\/sup> best manufacturer in terms of supply chain best practices\u201d11<\/sup> as shown in Exhibit 4.\u00a0Accordingly, Intel risks focusing too much on improving current processes and refraining from experimenting with innovations on the process design level. Going forward, Intel should institutionalize the \u2018bimodal\u2019 practice of \u201cmanaging two separate but coherent styles of work: one focused on predictability (improving well-understood areas); the other on exploration (experimenting to solve new problems).\u201d12<\/sup> Moreover, Intel should further invest in vertical integration by consolidating suppliers and integrating their systems with its own. Through real-time data sharing, Intel can improve its procurement efficiency, optimize just-in-time ordering, and enhance both its operations and those of its suppliers. Finally, Intel can capitalize on advancements in 3D-printing and integrating that in its manufacturing processes. According to a Strategy& report, this technology promises to \u201crevolutionize warehousing and distribution of spare parts\u201d, since it allows for \u201cspare parts to be manufactured as needed at facilities maintained locally \u2013 even on-site, if demand is high enough.\u201d13<\/sup><\/p>\n

Looking ahead<\/strong><\/p>\n

In conclusion, Intel is embracing the digitalization of supply chains to lead the highly competitive semiconductor industry. To sustain this leadership, Intel will need to stay at the forefront of supply chain innovation, both internally and externally. One potential internal innovation is leveraging real-time manufacturing data in research and new product development. Will this data availability decrease overall R&D costs? Externally, Intel can investigate whether blockchain can unlock vertical integration with its suppliers. Can blockchain be the solution to protect data privacy and security while also allowing for real-time data sharing?<\/p>\n

 <\/p>\n

 <\/p>\n

(799 words)<\/p>\n


\n<\/strong><\/p>\n

\u00a0<\/strong><\/p>\n

Sources:<\/strong><\/p>\n

1<\/sup> Wellesley College. (2015, May 4). Rapid innovation in semiconductors provides hope for better economic times.<\/em> ScienceDaily. Retrieved November 15, 2017 from ScienceDaily.com: www.sciencedaily.com\/releases\/2015\/05\/150504094322.htm<\/a><\/p>\n

2<\/sup> Statista. (2017). Semiconductor industry sales worldwide 1987-2019.<\/em> Retrieved November 15, 2017 from Statista.com: https:\/\/www.statista.com\/statistics\/266973\/global-semiconductor-sales-since-1988\/<\/a><\/p>\n

3<\/sup> Gartner, Inc. (2017, January). Gartner Says Worldwide Semiconductor Revenue Grew 1.5 Percent in 2016.<\/em> Retrieved November 15, 2017 from Gartner.com: https:\/\/www.gartner.com\/newsroom\/id\/3573717<\/a><\/p>\n

4<\/sup> O’Marah, K. (2016, November 17). Digitization In Supply Chain: Five Key Trends.<\/em> Forbes. Retrieved November 15, 2017 from Forbes.com: https:\/\/www.forbes.com\/sites\/kevinomarah\/2016\/11\/17\/digitization-in-supply-chain-five-key-trends\/#7ffde06428ad<\/a><\/p>\n

5<\/sup> Clark, D. (2015, June 01). Corporate news: Margin, pricing pressures behind chip-merger wave.<\/em> The Wall Street Journal. Retrieved November 15, 2017 from The Wall Street Journal Asia: http:\/\/search.proquest.com.ezp-prod1.hul.harvard.edu\/docview\/1684310431?accountid=11311<\/a><\/p>\n

6<\/sup> Intel. (2017, September). Transforming Intel\u2019s Supply Chain with Real-Time Analytics.<\/em> Retrieved November 15, 2017 from Intel.com: https:\/\/www.intel.com\/content\/dam\/www\/public\/us\/en\/documents\/white-papers\/transforming-supply-chain-with-real-time-analytics-whitepaper.pdf<\/a><\/p>\n

7<\/sup> Intel. (2012, January). Transforming Intel’s Supply Chain to Meet Market Challenges.<\/em> Retrieved November 15, 2017 from Intel.com: https:\/\/www3.intel.com\/content\/dam\/www\/public\/us\/en\/documents\/best-practices\/transforming-supply-chain-to-meet-market-challenges.pdf<\/a><\/p>\n

8<\/sup> Intel. (n.d.). Supply Chain Responsibility at Intel.<\/em> Retrieved November 15, 2017 from Intel.com: https:\/\/www.intel.com\/content\/www\/us\/en\/corporate-responsibility\/supply-chain.html<\/a><\/p>\n

9<\/sup> Fujiki, C. (2015, August). The U.S. Semiconductor Industry is one of the Most Competitive Manufacturing Industries in the United States.<\/em> Retrieved November 15, 2017 from semiconductors.org: http:\/\/www.semiconductors.org\/clientuploads\/Industry%20Statistics\/U.S.%20Semiconductor%20Industry%20Competitiveness%20White%20Paper%20-%20Final%20for%20posting%20-%2008042015.pdf<\/a><\/p>\n

10<\/sup> Intel. (2016, October 14). Innovative IoT Technologies Unlock Value in Supply Chain Management.<\/em> Retrieved November 15, 2017 from Intel.com: http:\/\/blogs.intel.com\/iot\/2016\/10\/14\/innovative-iot-technologies-unlock-value-supply-chain-management\/<\/a><\/p>\n

11<\/sup> Gartner, Inc. (2017, May 25). Gartner Announces Rankings of the 2017 Supply Chain Top 25.<\/em> Retrieved November 15, 2017 from Gartner.com: https:\/\/www.gartner.com\/newsroom\/id\/3728919<\/a><\/p>\n

12<\/sup> Gartner, Inc. (n.d.). IT Glossary – Bimodal.<\/em> Retrieved November 15, 2017 from Gartner.com: https:\/\/www.gartner.com\/it-glossary\/bimodal\/<\/a><\/p>\n

13<\/sup> Strategy&. (2016). How digitization makes the supply chain more efficient, agile, and customer-focused.<\/em> Retrieved November 15, 2017 from strategyand.pwc.com: https:\/\/www.strategyand.pwc.com\/media\/file\/Industry4.0.pdf<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Intel, the world's semiconductors pioneer, is leveraging digital supply chains to optimize its manufacturing.<\/p>\n","protected":false},"author":10051,"featured_media":25827,"comment_status":"open","ping_status":"closed","template":"","categories":[298,3235,3991,2123,2029,1446,2019,161,1914],"class_list":["post-25826","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-big-data","category-digital-supply-chain","category-digital-technology-and-supply-chains","category-digitalization","category-digitization","category-intel","category-internet-of-things","category-manufacturing","category-semiconductors","hck-taxonomy-organization-intel","hck-taxonomy-industry-semiconductor","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nDigitization at Intel \u2013 the company that 'created digital' - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/digitization-at-intel-the-company-that-created-digital\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Digitization at Intel \u2013 the company that 'created digital' - 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