Intel: a case study in capacity planning and strategy

Intel is a company for whom capacity planning is of utmost importance. And Intel are very sophisticated in how they approach capacity planning and can be thought of as being best in class. Let me also say that I'm drawing from the "Operations Strategy" text book of Beckman and Rosenfield in discussing this Intel example. Intel use a 60-month planning horizon so they're planning the future about five years in the future. But they break the planning horizon into three different levels of production build plan looking at from zero to nine months, an extended build plan looking at from nine months to 24 months and a long-range plan looking at from nine months to 16 months, and these different levels are making different decisions. The long-range plan in essence to the strategic capacity plan is looking at the development of new fabrication facilities. So how much capacity? When to build a facility? Where to build a fabrication facility? Same for new assembly and test sites and also for negotiation of outsourcing or subcontracting arrangements. The extended build plan is more tactical in nature and this essentially decides looking at nine to 24 months, what products are going to be built in what facilities and other subcontracting arrangements that have been put in place, what options to exercise from those subcontracting arrangements. In the near term was the production build plan. In essence, how many wafers to start producing per week in terms of production scheduling and the allocation of production to specific facilities and assembly and test routing decisions. Couple of key things here. There's a connection in all these plans. The long-range plan sets constraints on the extended build plan and the extended build plan sets constraints on the production build plan. This creates a connection between all three plans and also trade-offs in all three plans. Importantly, to manage those connections and trade-offs, all three planning teams are part of one overall capacity planning team at Intel to help resolve and manage those trade-offs.