Designing a strategic sourcing process for low volume, high technology products

Abstract

Axcelis Technologies, Inc. is a capital equipment manufacturer for the semiconductor industry. The semiconductor industry is evidenced by a volatile business cycle that follows the traditional bullwhip effect - that is, companies further up the supply chain see greater demand variability. As an equipment provider, Axcelis is positioned relatively far up the supply chain and therefore, managing these business cycles is an important initiative. Strategic sourcing helps companies manage the cyclical industry by focusing on core competencies, leveraging the expertise of industry leaders, reducing the bullwhip effect, and reducing the number of individual purchased parts. For companies to execute a sourcing initiative, strategic concepts need to be translated into tactical tools. To develop these tactical tools, this thesis presents a generic four-phase framework: define the overall sourcing process, develop the process objectives, design the required tools, and implement the procedure. Using a case study approach, this four-phase sourcing methodology is compared to a pre-existing process that was more informal and undocumented. The case study shows that the recommended sourcing process reduces the time to outsource a product by 16%. Finally, this work also highlights the importance of incorporating supply chain decisions into new product development and provides an initial framework from which future research may be conducted.