The document discusses lean supply chain principles and how Intel applied them to reduce costs for their Atom chip. It defines the eight types of waste that lean focuses on eliminating from processes. Intel needed to significantly cut supply chain costs for the lower-priced Atom chip. Their only option was reducing inventory levels by decreasing the nine-week order cycle. Through iterative improvements like reducing testing windows and implementing vendor-managed inventory, Intel was able to lower the order cycle from nine weeks to just two, achieving a supply chain cost reduction of over $4 per chip.

2.  supply chain is a technique whose component parts
include material suppliers, manufacture facilities,
delivery services, and clients, all connected by a
feedforward run of materials and a feedback run in
sequence.

3.  Waste is any step or action in a process that is not required to
complete a process (called “Non Value-Adding”) successfully.
When Waste is removed, only the steps that are required
(called “Value-Adding”) to deliver a satisfactory product or
service to the customer remain in the process.

4.  Defects – Products or services that are out of specification that require
resources to correct.
 Overproduction – Producing too much of a product before it is ready
to be sold.
 Waiting – Waiting for the previous step in the process to complete.
 Non-Utilized Talent – Employees that are not effectively engaged in
the process
 Transportation – Transporting items or information that is not required
to perform the process from one location to another.
 Inventory – Inventory or information that is sitting idle (not being
processed).
 Motion – People, information or equipment making unnecessary
motion due to workspace layout, ergonomic issues or searching for
misplaced items.
 Extra Processing – Performing any activity that is not necessary to
produce a functioning product or service.

5. Lean traditionally focuses on the elimination of the eight
kinds of waste classified as :
• Defects
• Over-production
• Waiting
• Non-utilized talent
• Transportation
• Inventory
• Motion
• Extra-processing.

6. Intel One of the world’s largest manufacturers of computer
chips, Intel needs little introduction. However, the company
needed to make some significant supply chain cost reductions
after bringing its low-cost “Atom” chip to market. Supply chain
costs of around $5.50 per chip were bearable for units selling for
$100, but the price of the new chip was a fraction of that, at
about $20.

7. The Supply Chain Cost Reduction Challenge:
 Somehow Intel had to reduce the supply chain costs for the Atom
chip, but had only one area of leverage—inventory.
 The chip had to work, so there were no service trade-offs that
could be made. Being a single component, there was also no way
to pay less in the way of duties.
 The only option was to try to reduce levels of inventory, which, up
to that point, had been kept very high in order to support a nine-
week order cycle. The only way Intel could find to make supply
chain cost reductions was to bring this cycle time down and
therefore reduce inventory.

8.  The Path to Cost Reduction: Intel decided to try what was considered
an unlikely supply chain strategy for the semiconductor industry: a true
make-to-order scenario. The company began with a pilot operation using
a manufacturer in Malaysia. Through a process of iteration, they gradually
sought out and eliminated supply chain inefficiencies to incrementally
reduce order cycle time. Further improvement initiatives included:
 Reduced the chip assembly test window from a five-day schedule, to a bi-
weekly, 2-day-long process
 Introduced a formal S&OP planning process
 Moved to a vendor-managed inventory model wherever it was possible to
do so

9.  Supply Chain Cost Management Results:
Through its incremental approach to cycle time improvement, Intel
eventually drove the order cycle time for the Atom chip down from
nine weeks to just two. As a result, the company achieved a supply
chain cost reduction of more than $4 per unit for the $20 Atom chip—a
far more palatable rate than the original figure of $5.50.