45,000
SKUs
600+
Vendors
9
DCs
$10M
Total savings
Applied Materials runs a time-critical service parts network across North America, supporting several hundred high-value semiconductor equipment installations. The network spans 45,000 SKUs, 600+ vendors, and 9 distribution centers. Costs were escalating, and there was no quantitative basis for deciding where to improve it.
So Applied Materials partnered with Solvoyo to rationalize the network and reduce Total Cost to Serve. The project produced $10M in total savings, publicly reported by Applied Materials, while meeting or exceeding service level agreement (SLA) targets.
Escalating Costs with No Quantitative Basis for Change
A time-critical service network is expensive to run well. The one at Applied Materials had three problems:
- Escalating costs in the time-critical service network
- No quantitative basis for network-wide improvement initiatives
- Network changes made as judgment calls
Optimizing the Service Parts Network for Total Cost to Serve
Solvoyo rationalized the time-critical service network to reduce Total Cost to Serve, which covers multi-echelon spare parts inventory investment, handling costs, and expediting costs.
Solvoyo’s strategic network design work determined the optimal size of the service network and the role of each facility.
It also assigned service locations to distribution centers and set optimal safety stock levels. The result was a lower Total Cost to Serve while meeting or exceeding SLA targets.
$10M in Total Savings, Publicly Reported by Applied Materials
Applied Materials publicly reported $10M in total savings from the network redesign. The network changes also delivered:
- Optimal network size and facility roles determined across the service network
- SLA targets met or exceeded while Total Cost to Serve came down
- Depot consolidation with significant infrastructure cost savings, according to Applied Materials’ Vice President, Global Services
- A sustained inventory reduction of $5M, also reported by the Vice President, Global Services
What Does This Mean for You?
In the words of Applied Materials’ Vice President, Global Services, the project shifted the company from an inventory-centric perspective to total-cost optimization. Results like that come from optimizing the network as a whole instead of one facility at a time.
If your service network costs keep rising and every change to it is a judgment call, you are where Applied Materials started. Its answer was to bring down Total Cost to Serve, which adds up inventory investment, handling costs, and expediting costs, while meeting or exceeding SLA targets.
About Company
Applied Materials runs a time-critical service network across North America supporting several hundred high-value semiconductor equipment installations, spanning 45,000 SKUs and 600+ vendors.
Achievements
$10M in total savings, reported publicly
Optimal service network size and facility roles determined
SLA targets met while reducing Total Cost to Serve
Don’t take our word for it
The Strategic Network Design project with Solvoyo succeeded in shifting our ‘inventory-centric’ perspective to one of ‘total-cost optimization.’ We have consolidated our depots leading to significant infrastructure cost savings as well as a sustained inventory reduction of $5 Million.
80% of IT tools investment fails if the partners don’t strive to continuously improve and adapt. That is what sets our partnership with Solvoyo apart.
With Solvoyo, we eliminated spreadsheets from the process and simultaneously increased process speed and planner efficiency across all regions.
Solvoyo’s S&OP platform gives both the regions and the HQ the ability to maintain a supply plan harmonized with demand and inventory investment targets. We now identify supply plan discrepancies proactively. Along the way, we eliminated Excel from the process and simultaneously increased process speed and planner efficiency across the enterprise.
We see rapid changes in demand, and when the inventory is short, we adjust our production plans accordingly. The adjustment requires a lot of manual work, causing suboptimal plans and inefficiencies on the production site. With Solvoyo’s optimized plans, not only do we make easy and smart decisions but also respond to any rapid change at the speed of the market.
