Ivalua NOW 2023 – Dispatch #3: Managing Supply Chains in the Age of Volatility « CPO RISING – THE SITE FOR CHIEF PROCUREMENT OFFICERS & LEADERS IN SUPPLY MANAGEMENT

The Ardent Partners analyst team descended on Nashville on May 3rd and 4th for the ivalua NOW 2023: Americas conference. This event was well attended and came on the heels of the company’s slightly larger EMEA conference which was held in Paris at the end of March. Ivalua typically selects unique venues for its annual user conferences and this year was no different with the event taking place in the Country Music Hall of Fame and included field trips to the Grand Ole Opry and Gibson’s Garage.

It has been 10 years since Ardent first attended (and participated) in Ivalua’s annual event back in 2013 and it has been a pretty impressive decade of growth and innovation for the company. Ivalua reached many major milestones over the past year which included: passing 900 total employees, exceeding $150 million dollars in annual revenues, supporting almost 1500 certified Ivalua consultants, and launching the “Environmental Impact Center.”

Over the next few weeks, we’ll be sharing dispatches from various sessions attended at the event. Be sure to check out our previous Ivalua dispatches in the “Related Research” section at the end of the article.

Keynote Session: Managing Supply Chains in the Age of Volatility

Today’s third dispatch from the ivalua NOW 2023 event features Applied Materials’ Archie Mekonnen, vice president of global information services, and Brent Graves, director, global supply chain, and their session “Managing Supply Chains in the Age of Volatility.”

The focus of the session dealt with managing supply chains into the future. Mekonnen and Graves are responsible for strategic initiatives and IP programs for the company. They also oversee the company’s SAP system and the third-party applications that surround it — including Ivalua for supplier collaboration for direct materials.

Fortune magazine once said “Applied Materials is probably the largest and most important company that no one has heard of.” The company manufactures the machines and equipment that make semiconductors and displays. To put that into perspective, 80% of a cell phone’s BOM content from a cost perspective touches one of its machines.

The company earned just under $26 billion in revenue last year, of which $2.8 billion was spent on research and development. Applied Materials is a global enterprise with 33,000 employees spread across 24 countries.

An Era of Growth and Digitization

In terms of its industry, the company has evolved through four eras in the semiconductor space, beginning in the 1990s with mainframes and desktop computers before moving into era two where the internet and PC community exploded, followed by era three with mobile devices, and finally the current era where artificial intelligence is expected to double the market size within the next seven years.

As such, to meet the anticipated market growth, supply chain digitization is a business imperative to help it scale successfully. The first step was devising a strategy to make it happen. This meant meeting with the head of supply chain to discuss how to approach the future. Several areas of concentration were identified.

Supply chain mapping. Following three years of supply chain volatility, the focus was to devise a “boring” supply chain, one that was repetitive and predictable. Attaining that meant overcoming the challenge of supply chain visibility. Over the last three years, the company has had solid transparency into its first-tier suppliers. However, below that level was a struggle, leading to chip shortages that impacted its tooling. The enterprise needed to understand the connections between its tier-one suppliers and those several levels deeper. How does this supply chain mapping occur? How do we understand suppliers’ capacity? How does that get mapped to the part level? These were critical questions that needed answering.

Planning and forecasting. Applied Materials wants its suppliers to have 18-24 months of forecasted visibility. Machine learning and other technologies are now making it easier to examine historical data and align that with expected consumption. The company needed to provide suppliers with a longer-range forecast, while also building a buffer to react to any changes.

Collaborative supply chain. It is important to connect the engineering and supply chain teams during the early design process to communicate potential issues in real time. Heavy investment in collaborative technologies can make those connections and insights possible. It is imperative that design and performance issues are addressed prior to supplier involvement to avoid significant cost implications.

Build to scale. Many people were hired during the pandemic to meet demand. The challenge now is bending the productivity curve to hire effectively against projected revenue. It comes down to doing more with less and removing complexity from the process. Implementing digital solutions to enable that is critical.

Applied Materials and Ivalua Partner on Results

To address these issues, Applied Materials is working with Ivalua to implement its supplier management solution for supply chain mapping and tracking manufacturing to capacity. Who are all the suppliers and where are their manufacturing sites located? Where are all our parts being manufactured? With those insights, tier-one suppliers can communicate that information further down the supply chain. Collectively, the data can be leveraged for scenario planning to identify potential bottlenecks.

Other areas of progress for Applied Materials include:

Implementing a capacity collaboration capability with first-tier suppliers.
Completing tier-two supply chain mapping with suppliers that represent 80% of the company’s spend.
Expanding the mapping exercise to tiers three and four, accounting for the immense increase in suppliers involved.
Investing in a parts catalog capability to better control part proliferation. A shape research feature will identify an existing part that can be repurposed rather than investing in a new design.
Instituting early design collaboration with suppliers for real-time part updates.
Focusing on supplier collaboration for aggregate quantity data rather than single PO (detailed level) output.
Achieving greater collaborative efficiencies in the shipping and receiving areas between the business and suppliers. Capabilities are integrated with Applied Materials’ SAP system, including automation for parts traceability, barcode label printing, etc.

These performance results will continue to provide greater supplier collaboration and transparency for Applied Materials and its partners. The implementation of many of its initiatives will be 50% complete by the end of July and will serve 500 suppliers and 3,000 users.