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CASE STUDY: Integrated Supply Chain Solution
How a large semiconductor OEM overcame a supply chain with too many suppliers, low buying leverage, extended lead times, and numerous stock-outs, to name a few problems.
Several years ago a large Northeastern semiconductor manufacturer sought a change to improve the efficiency and reliability of its supply chain. After an exhaustive six month study they selected iPower to implement a comprehensive integrated supply solution. With over 8,000 unique parts, many with a high volume and low dollar profile, the need was clear for vendor consolidation and a streamlined supply chain process.
The Solution
There were five major steps involved introducing an integrated supply chain for this customer:
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1) It was determined that based on the iPower supply chain over 100 suppliers and 8,000 parts could be consolidated into five material groups. Further it was determined that these five material groups could be converted into a single vendor number:
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i. Electrical/electronic
ii. Bearings/power transmission
iii. Hardware
iv. Fluid connectors/seals & gaskets
v. Other industrial components
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2) Preliminary quoting of these newly formed material groups showed a double digit saving potential.
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3) iPower had the experienced resources to dedicate on site to guide the conversion of this massive number of items.
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4) iPower had the technology to route thousands of SAP transactions to its supply base maintaining PO, PO line, and Quantity integrity.
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5) iPower had the experience to convert inventory items to a Point of Use VMI that would be critical to the long term plan.
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The Implementation
Upon implementation, the consolidation program was in full gear with a full time buyer/planner and part time expeditor handling thousands of transactions monthly. All 8,000 parts were immediately converted to iPower and 75 vendors were eliminated immediately.
The move immediately freed up purchasing capacity with the existing ranks allowing them to spend more time focusing on the demands of critical A and B items. Review processes were put in place to constantly assess the mix of items to be handled by iPower. This allowed a highly collaborative free flow of critical items to be pushed back up to the customer to manage and new C items pushed down to iPower to acquire.
The Results
Over the last five years the program has grown three-fold. It has grown at this astounding rate because it has delivered on its promise. Purchase prices declined and have remained stable over a five year period even though the market for metals and energy related products has climbed significantly.
Lead-times have been dramatically reduced in both number of items and number of days. Today over 97 percent of all items are under 30 day lead-times. On time delivery and quality went through the roof. The statistics for inventory items are as follows:
Inventory items managed by iPower in 2007
- 4,000 Inventory Items
- 16,900 PO Lines
- 1.2 MM Parts through incoming inspection
- 99.97 On Time Delivery 99.92 Quality rating
- 1% Favorable PPV (Yr over Yr)
As expected the VMI program has grown into a very sizeable initiative as the customer seeks ways to plan and purchase less items. The numbers are as follows:
- 1,331 Active Part Numbers
- 5,108 Active Bin Locations
- 17,391 PO Lines
- 4.MM Incoming Part
Finally, the iPower solutions have been extended into the Tool Crib and Consumable Supply Cabinets. Sales growth in this area has been considerable.
- 770 Active Unique Part Numbers
- 1,449 Active Locations
- 10,462 PO Lines
- 82,253 Delivered items
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The Award
The customer has been so pleased with the measurable results of the supply chain solution that in 2007 iPower was awarded the Outstanding Supplier Performance Award for our commodities.
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