Multi-pronged supply chain collaboration initiative saves company $22 million
Applied Materials has about 400 suppliers, up to 30,000 orders in process at any given time, and operates in a market—semiconductor manufacturing—that is highly cyclical. Talk about supply chain complexity.
To cope with that complexity, the maker of semiconductor production equipment needed to improve its collaboration with suppliers around processes such as forecasting material needs and receiving materials, first article inspection, freight service level controls, and demand collaboration. The company launched a multi-phased project, eXtended Process Control, to allow suppliers to respond to the ups and downs in demand and shorten customer lead times.
Freight level service controls, for example, involved the company paying for expedited shipping when a product had to meet its delivery deadline. This was happening ith 20%-40% of shipments. Applied Materials reworked that process, limiting expedited shipping to critical parts.
Controlled release was a process that took place within the ERP system to match purchase orders to open discrete jobs. The company was able to use the software to tell suppliers what to ship, where to ship, and what the order was fulfi lling. In addition, the demand collaborator segment gave 250 suppliers visibility into 12-month demand forecasts and supplier inventories.
The eXtended Process Control project addressed not only those processes but also the details of collaboration with suppliers. Applied Materials automated the communication of changes in accepted purchase orders to suppliers. Users can send manufacturing requirements directly to suppliers, asking them to accept or decline the changes.
Another new capability is automated ERP updates. Suppliers can update changes in the ERP system and can collaborate on date, price, quantity and other requirements.
Applied Materials saw many improvements from this project. The company was able to change forecast updates from e-mails to automatic uploads to suppliers. By giving suppliers an API to process or download orders and upload those changes, Applied Materials reduced order processing time.
The cost of the project was $4.5 million, and the company saw savings of $22 million.
Applied Materials reduced supplier times by one to two weeks and increased
supplier on-time delivery by 10%-15%.