IT and Productivity. Cost Reduction of IT Automation Within Intel Manufacturing Plants

Intel Manufacturing Computing Outline „ Why are we spending our time on this { „ How do we measure IT ROI { { { „ Context Productivity How we measure cost Benchmarking versus non-IT spending How do we reduce cost { h/c, consolidation, supplier cost red, 1 Why are we talking about IT costs? Aren’t there more interesting things to discuss? Cost Management Cisco Systems built six new buildings to expand its presence at the high-tech Research Triangle Park in North Carolina when the dot-com business was sizzling. All six buildings now are empty. Koninklijke Philips Electronics NV plans to return its semiconductor division to profitability by the fourth quarter of 2003 by closing fabrication plants (fabs) and focusing on its core business. Banks will face an assortment of IT issues and challenges during 2003, according to a report, IT Issues for Banks, by Giga Collaboration. Worldwide spending on software will Just last month, the leading trade group increase 3.5 percent this year to US$76.1 acknowledged there's been a long-term billion from $73.5 billion in 2002, with shift towards a lower growth rate for buyers still cautious when spending their semiconductors software budgets, Dataquest Inc., At the same time, U.S. companies are rapidly expanding their operations to lowwage countries such as China and India. There, Goldberg said, ``People have become a commodity, so to speak, and you go where the supply is.'' 2 How Do We Measure IT Value? Cost versus Productivity ROI for IT projects IT spending versus non-IT spending IT Business Value „ „ „ Productivity gains versus real cost reduction Have to spend money to save money Not as “scientific” as traditional improvement projects { Manufacturing equipment improvements 3 How Do We Reduce Costs? The Case Study Your Recommendations? „ „ „ What would you propose to achieve a 30% to 50% cost reduction from the events described in the case Pro’s/Con’s of each option Additional non-h/c spending cuts { „ Implementation risks Implementation logistics { People impact, operational performance 4 Intel Cost Reduction Direction What are we currently doing? Cost Reduction Current Status „ „ „ Implementing hubs in certain areas Centralized management within the manufacturing organization Grow centralized scope over time { „ Leverage LCG if/where possible Aggressively pursue non-headcount cost reduction 5 Backup Current IT “Hot Topics” „ Cost Management { „ Enabling Technology { „ Asset management, refresh cycle, globalization, allocation Wireless, collaboration Security { Remote management, EOL 6 Case Study Review Details Headcount Rev/Employee $120.0 95 $115.0 90 $110.0 85 Headcount (K) $100.0 80 $95.0 75 $90.0 Revenue/Employee ($K) $105.0 $85.0 70 $80.0 65 $75.0 60 $70.0 Q1 99 Q2 99 Q3 99 Q4 99 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 7 Revenue Net Income $9,000 $3,500 $3,000 $8,500 $2,500 Revenue $2,000 $7,500 $1,500 Net Income $8,000 $7,000 $1,000 $6,500 $500 $6,000 $0 Q1 99 Q2 99 Q3 99 Q4 99 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Factory Automation Cost Breakout 97M Spent YTD Office Oper, 18% Comm, 2% Depr, 9% Alloc, 2% Payroll, 65% 8 Local versus Central Local Model Where We Are Today Hub Model Central Model S/W Integrated Support Hubs S/W Where We Could Go Some H/W Consolidation H/W H/W Least Expensive Least Factory Centric Most Expensive Most Factory Centric Domain Current H/C Apps/Reports Database Admin Station Controller Dev Infrastructure AMHS Apps AMHS H/W AMHS CWW Station Controller Apps Modeling 133 106 14 128 56 37 187 72 72 14% 12% 0% 17% 40% 43% 100% 78% 45% Total 805 39% Local H/C Remote H/C Total 86% 88% 100% 83% 60% 58% 0% 22% 55% 7 6 0 16 23 17 156 45 40 94 74 14 74 14 11 0 27 32 101 80 14 90 37 28 156 72 72 32 26 0 38 19 9 31 0 0 24% 25% 0% 30% 34% 24% 17% 0% 0% 61% 310 340 650 155 19% Local % Remote % Delta from Percent Current Decrease Current Org Design Manufacturing Computing Factory Startup 80 – 100 Sustaining Factory 50 – 80 F11, F12, .. F11X, F24, .. Closing 25 – 35 F15, CE ~ 300 IT ~ 4000 Other ACT, Trg, Plg, etc ? ~ 800 MC 9 Future Org Design Manufacturing Computing IT/CE Automation Core Functions 30 – 50 Site Auto Centralized Functions DBA, CC, … ~? Suppliers ? CE ? IT ~ 4000 Local? Regional? International? 10