10.2.2 SUPPLY CHAIN MANAGEMENT 2: ASSIGNMENT 2 [100] QUESTION ONE [40] Read the following and answer the questions that follow: One of the world's largest manufacturers of computer chips, Intel needs little introduction. However, the company needed to make a lot of 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. 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. Intel had already whittled packaging down to a minimum and with a high value-to-weight ratio, the chips' distribution costs could not really be pared down any further. The only option was to try and reduce levels of inventory which were, at that point, 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 try and get this cycle time down and therefore reduce inventory. 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-daylong process Introduced a formal S\&OP planning process Moved to a vendor-managed inventory model wherever it was possible to do so 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. Source: https://www.logisticsbureau.com/3-mini-case-studies-successful-supply-chain-costreduction-and-management/ 1.1Explain Intel's supply chain cost reduction challenge 1.2 Outline Intel's path to cost reduction. 1.3 "Intel decided to try what was considered an unlikely supply chain strategy for the semiconductor industry: a true make-to-order scenario". Briefly explain the make-to-order strategy and its benefits towards supply chain operations (10) 1.4 Explain the vendor-managed inventory model 1.5 Identify Intel's reasons for holding inventory