service business - the fishman-davidson center · gss service supply chain management who is...
TRANSCRIPT
T h e Y i e l d M a n a g e m e n t C o m p a n y
Service Business
Joe ChamberlainSr. Director,GSS Service Supply Chain Mgmt
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GSS Service Supply Chain Management
AgendaAgenda
l Overview of KLA-Tencorl Aftermarket Opportunityl Change Roadmapl Preliminary Resultsl Lessons Learned
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K
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GSS Service Supply Chain Management
Who is KLA-Tencor?Who is KLA-Tencor?
l The world leader in yield management and process control solutions for semiconductor manufacturing and related industries.
l Products and services for in-line wafer defect monitoring, reticleand photomask defect inspection, electron beam metrology, wafer overlay, film and surface measurement, as well as overall yield and fab-wide data analysis.
l This technology is used by every major semiconductor manufacturer around the world.
Source: VLSI Research, 2-03
204
274
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50
100
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$B
2000 2005
Semiconductor Sales
CommunicationTechnology: 16%
Auto andIndustrial: 22%
ConsumerElectronics: 12%
Data Processing: 41%
Gov’t/Other: 9%
Semiconductor World Market
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GSS Service Supply Chain Management
What’s unique about this business?What’s unique about this business?
lLeading edge technology� Latest generation Materials, Process, and Equipment Technology
provide the the capability to build integrated circuits with 90 nanometer critical dimensions.
lMost capital intensive industry� A state of the art 300mm wafer fabrication facility can cost $1B -
$2B and an hour of machine down time can cost >>$1M in revenue.
lEpic boom and bust cycles� The seeds of the next downturn are being sown as we speak
lCaptive Supply Chain/Sourcing� “Copy Exactly!” philosophy
lExtremely narrow customer base� 10 customers make up 80% of total revenue
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GSS Service Supply Chain Management
Service EnvironmentService Environment
l <10% of Service Group’s Revenue from Parts Sales
l Model fill rate based on cost optimized stocking strategy - 65% in 4 hours, MDAP <=1%
l <10% consumables
l 70% of active parts are repairable
l ~0.5 part per tool per month
� 5,000 pieces per month
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Service
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GSS Service Supply Chain Management
Aftermarket OpportunityAftermarket Opportunity
l Service revenue contribution is growing.� Revenue over the Service Life of a Installed
Product is equivalent to the initial tool sale.
l Pressure will continue to mount on Service Revenue streams to be able to match “Product” gross margin contributions.� In our industry Service lags.
l While pressure mounts for Service to achieve the same contribution, investment in IT Solutions lags.
l Service contribution provides some insulation from “down” cycles.
Source: AMR Research
24%
45%
20%
76%
55%
80%
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10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Revenue Profit IT Expenditure
Service Product
l In service supply chain, asset management and positioning is at the top of cost food chain.l The decision on right part, at the right place, at the right time, drives everything else.
KLA-Tencor Rev 24%, up from 15% two years ago.
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Problem Statement
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GSS Service Supply Chain Management
The Problem – May 2001*The Problem – May 2001*
l Poor parts availability is a major customer complaint and threatens to impact future business.
l Past investments in inventory and supply chain improvements have failed to achieve sustained results.
l Cost of poor operational performance is creating significant drain on service profitability.
l Service profitability is key to success during downturn.
* Joined KLA-Tencor
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Data Analysis
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GSS Service Supply Chain Management
Deteriorating Inventory PerformanceDeteriorating Inventory Performance
Inventory growth outpaced installed base growth….
100
105
110
115
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Q102 Q202 Q302 Q402 Q103 Q203 Q303
Installed Base
Inventory
… and inventory was more than 3 times higher than best in class* performance
Inventory as % installed base (normalized)
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0.50
1.00
1.50
2.00
2.50
3.00
3.50
KLA Tencor Best In Class
* PRTM/PMG 2003 Service Supply Chain Benchmark Study for electronics equipment makers
% Growth from Jan 2002 Baseline
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Field Inventory Targets were growing uncontrollably.
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Root Cause
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GSS Service Supply Chain Management
Root Cause SummaryRoot Cause Summary
l Forecasting capability of existing execution system (DRP) was not designed to be effective in an extreme low usage environment (Linear Model assumptions are not met).
l Field stocking model did not achieve optimum balance between fill rate performance and inventory investment.
l Poor interface between systems created data integrity and timing issues.
l Past improvement efforts relied on short-term actions which prioritized material by location, customer or product. These actions could not be sustained when other priorities arose.
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GSS Service Supply Chain Management
06001,2001,8002,4003,0003,6004,2004,8005,4006,0006,6007,2007,8008,4009,0009,60010,20010,80011,40012,000
>=50494847464544434241403938373635343332313029282726252423222120191817161514131211109876543210
Total Pieces Requested During Past 12 Months
Nu
mb
er o
f P
arts
Pla
nn
ed
0%5%
10%15%20%25%30%35%40%45%50%55%60%65%70%75%80%85%90%95%
100%
Per
cen
t of T
ota
l Par
ts
Number of Parts% of Total
Challenge of Low Failure Rate PlanningChallenge of Low Failure Rate Planning
7% of parts consume >1 part per month globally
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Solution
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GSS Service Supply Chain Management
Service Supply Chain StrategyService Supply Chain Strategyl Implement a scientific solution to resolve the Stock Planning
process.l Drive data integrity and integration through the entire
process.� All foundation data, usage, demand, installed base and inventory.� Single ERP, Data Tests and Validation.� Increased data reporting frequency.
– Weekly Inventory Flash, Daily Usage Review
l Take operational cost out of the supply chain by taking layers out.
l End of Manufacturing Sustaining Engineering, take cost out of the 3x Service Life Cycle.
l Integrating the stock planning and execution capability systems to ensure they’re being driven by the same data. � Leverage improved forecasting data to drive optimized distribution.
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GSS Service Supply Chain Management
Service Supply Chain StrategyService Supply Chain Strategy
1. Service Planning and Optimization (SPO™)� World-class spares planning system
2. Multi-Echelon Fulfillment Process� Local/Regional/Global service targets to achieve Mean Down
Awaiting Parts goal, reduce fab lost production.
3. Global Demand/Inventory Visibility� Ability to source parts globally 7 x 24 x 365
4. Configured Installed Base Database� Detailed knowledge of local installed base at the component level
5. Global Supply Chain Capability� Sourcing, Quality, Test, Reverse Logistics, Engineering
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Preliminary Effects
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GSS Service Supply Chain Management
Improvement in Key Service MetricsImprovement in Key Service Metrics
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03
% Improvement from Baseline
Local Fill Rate Regional Fill Rate Global Fill Rate Supply Chain Cost (% of Rev)
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GSS Service Supply Chain Management
Repair17%
Logistics16%
Excess37%
Materials23%
Overhead7%
Q4 02Q4 02
Overhead7%
Materials39%
Excess8%
Logistics21%Repair
25%
Q4 03Q4 03
Service Supply Chain ExpenseService Supply Chain Expense
l The mix is moving in the right direction.l Excess expense at its lowest point in 3 years.