2005 Supply & Demand Chain 100 Case Study  Teradyne / Kinaxis

Profiles in Supply Chain Enablement: Tested by wild demand swings, this equipment manufacturer deployed a new planning tool to tame inventory

Profiles in Supply Chain Enablement: Tested by wild demand swings, this equipment manufacturer deployed a new planning tool to tame inventory

Company: Teradyne (Boston, MA)
Company Size: Large
Company Sector: Manufacturing (Electrical/Appliance/Components)
Area(s) of Enablement: Order/Demand Capture, Sourcing, Procurement, Fulfillment/Logistics, Supply Chain Integration & Infrastructure, Decision Support
Enabler: Kinaxis (Ottawa, Ontario)

SDCE 100 2005Case Study: The Challenge

Teradyne Inc. is a leading supplier of automatic test equipment for testing semiconductors. Teradyne's option-rich systems have as many as 5,000 part numbers and sell for $500,000 to $3 million each.

The semiconductor capital equipment industry is notorious for wild demand swings through the business cycle. In recent years, it has become even harder to predict demand because many of Teradyne's customers are contract test companies with little visibility into their own future.

In periods of increasing demand, Teradyne's challenge is to find the needed parts. When demand drops, the challenge is to avoid carrying too much inventory and avoid having to pay its subcontractors for excess inventory.

The Solution

To meet these challenges, Teradyne deployed RapidResponse, a planning solution from Kinaxis (formerly Webplan), to help with quoting delivery of unplanned demands and to highlight the problems that must be solved to meet demand where the customer delivery date was not an option.

Use of the solution has since expanded to include forecasting inventory and obsolescence, providing metrics to drive cost and lead time reductions and enabling new business processes with subcontractors and suppliers to reduce inventory and liability. RapidResponse is loaded with a weekly snapshot of all the manufacturing resource planning (MRP) data from its subcontractors, which allows Teradyne to see the subcontractor's factories as if they were internal.

RapidResponse is now widely used by many Teradyne employees in a variety of planning and financial functions. It offers the ability to look at data in various manufacturing sites as well as the ability to do what-if planning scenarios.

Next Steps

Teradyne's journey continues with the company's current emphasis on setting up more reduced lead-time agreements with suppliers and implementing demand-pull processes. RapidResponse is a key enabler to these initiatives both in providing data for ongoing execution and metrics to insure the processes are in control. The solution is being rolled out to provide consolidated forecasts to suppliers that include demands from Teradyne and its subcontractors. Teradyne also plans to develop additional tools to monitor and manage its liabilities.

Overall, implementation time for the solution was 12 months, and payback came in the first year.

For more stories of successful supply chain implementations, read the "2005 Supply & Demand Chain Executive 100" article in the June/July 2005 issue of the magazine. Also watch the Today's Headlines section of SDCExec.com every Tuesday and Thursday for more in depth best practices drawn from this year's Supply & Demand Chain Executive 100.