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Engagement Summary

Benefit: Reduced operating costs and smaller carbon footprint.

Industry: Semiconductor Capital Equipment

Engagement Detail

In semiconductor manufacturing, nothing hurts more than a production shutdown. For manufacturing equipment makers like KLA-Tencor, this means service parts distribution takes on urgency not unlike human organ transport, conjuring images of helicopters on rooftops and hearts packed in ice. It’s exactly the way KLA’s customers would like to imagine their service parts being handled. Of course, this also implies an abandonment of any pretense that efficiency counts at all. “Cost (and carbon) be damned—get me that part!”

Such pressures force KLA-Tencor’s global service and support organization to balance fire alarm metrics like customer satisfaction and parts fill rate against slow-boil business viability metrics such as operating cost and asset load. The basics of the traditional service level versus cost tradeoff are familiar enough, but the urgency is higher and the complexity greater than in most service parts operations, partly because of the value of time, and partly because of the technical complexity of the engineering. Add in the financial challenges of boom-and-bust cyclicality, and the global logistics strategy takes on a big role in KLA-Tencor’s business.

Partnering with TRG, KLA-Tencor developed an optimized global logistics strategy with opportunities to:

  • Reduce operating costs 19%

  • Reduce carbon footprint 8%

The global logistics analysis identified improvements to reduce costs and carbon footprint while improving customer responsiveness by:

  • Consolidated local distribution center locations

  • Lower cost regional DC location

  • Lower cost transportation modes/warehouse transfers/shipment sources

  • Implementing service level differentiation based on customer entitlement

  • Policies and procedures for lower cost shipments

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