Abstract

In 2007, Intel Corporation (Intel), the American multinational semiconductor manufacturing company, was in the process of developing a low power processor chip called Atom. As the name suggested, the new Atom chip was the size of a grain and had a form factor which was suitable for netbooks and mobile applications ranging from hand-held medical devices to robotics. Such devices represented an annual revenue potential of $10 billion or more for Intel. Although Atom was only a product line extension for Intel, it had a significant difference in its unit economics when it came to supply chain costs. Intel’s traditional processors were sold for around $100 per unit. On an average, the total supply chain cost and inventory costs per unit of Intel’s traditional processors worked out to be 5.5% of the unit cost. This was justifiable given the high cost of conventional processors. But Atom had an introductory price of US$ 20 which was expected to fall to US $10. At such low prices, the supply chain expenses were working out to be 40% higher than the affordability target. To maintain the same revenue to supply chain cost for Atom, there had to be a radical approach to establishing the supply chain of Intel’s new chip. The case describes how the team tasked to bring down the supply chain cost of Atom went about tracing an approach to bring down the cost to within the affordability targets.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Evaluate the supply chain of an organization on the basis of different metrics (Efficiency, Inventory turns, Order cycle time, etc.) and analyze how effectively it aligns with the organizational strategic objective.
• Design a supply chain for a new product by considering the constraints of the existing supply chain.

Keywords

Intel,Intel Atom,Supply Chain,Make to Order,Operational performance,Asset utilization,Efficiency,Customer Response,Supply Chain Operations Reference,Order Fulfillment Lead Time,Forecasting,Pull-based model,Delivery performance