Tuesday, June 24, 2014

Texas Instruments, Engineering the World

Texas Instruments, Engineering the World
By Anthony Edgecomb and Zhenfei Wu

Originally an Dallas based oil company from 1930-1951, Geophysical Service Inc. invented the reflection seismograph, giving way to a growing manufacturing, research and development sector. To get out from under a name that seemed to restrict the brand to geophysics, the manufacturing and R&D sector became Texas Instruments Inc. (TI) in 1951, founded by Eugene McDermott, Cecil H. Green, J. Erik Jonsson, and Patrick E. Haggerty. In 1958 employee Jack Kilby invented the first integrated circuit – revolutionizing the electronics industry (Texas Instruments Timeline). For the discovery, Kilby won the Nobel Prize in Physics, National Medal of Science, and National Medal in Technology. The industry skyrocketed from $24 billion to $1,175 billion over a span of 40 years.
Today the name is most recognizable to the public as an education technology firm developing calculators and portable learning aids. However, in the manufacturing world the name is synonymous with electronics innovation. TI manufactures over 100,000 products including 10 billion semiconductors each year which are used in an extensive range of devices from wireless phones and gps-watches to cars and computers (TI Innovation). Although in past decades a majority of the company’s electronics chips have been used in computers, in recent years, distribution has been nearly 50% in communication devices while only 30% have been allocated to computers.
The nature of the electronics and technology industries pose some threats to TI. Inventory is a high risk investment in these industries due to the turnover of new products. To reduce the risk of inventory obsolescence, TI maintains inventory levels that would only satisfy 90 days of demand. This low level of safety stock contains its own set of risks. TI’s early semiconductors were produced in a fabrication facility, assembled, tested, and packaged in a second facility, then shipped to their end user. It was a simple process. As the products have evolved the process has gotten exceedingly more complex, often utilizing four to six facilities. According to CSCMP’s Supply Chain Quarterly, there is an eight month lead time from sourcing materials to getting the product to the end user (Delivering the Goods). With an eight month lead time 90 days of inventory leaves very little margin for error, so TI uses a tool called CETRAQ to measure and compare suppliers. CETRAQ is a scorecard that measures: cost, environmental, technology, responsiveness, assurance of supply, and quality. For the past fourteen years, TI has seen great success using CETRAQ to evaluate suppliers every six months to reduce risk to their supply chain (How TI uses CETRAQ).
Managing risk is not the only thing that differentiates Texas Instruments’ supply chain from the competitors. TI also wins with distribution. With more than 3,000 customers worldwide, TI uses a distribution network that connects four main regional distribution hubs to 70 small hubs. While TI owns these distribution centers, they hire specialized third-party logistics providers (3PLS) to manage and operate them. Some product does not move through the DCs, however. A smaller portion of goods are shipped directly from factories to customers or to a warehouse near customers’ factories as consignment.

References:


No comments:

Post a Comment