The initiative is the latest installment in a series of internal benchmarking and Best Known Methods programs that CS began in 1998. Since that time, the division has documented substantial cost savings directly linked to its benchmarking efforts. In fact, by the end of 2003, cumulative cost savings from Intel's internal benchmarking programs are expected to exceed more than $240 million.

As Intel's facilities management division, CS employees handle a variety of functions, including facilities operations, corporate real estate, construction, information systems, strategic planning, security, and environmental health and safety. The CS group maintains an annual budget of approximately $2 billion and manages about 41 million sf of space within Intel, which currently employs approximately 80,000 people in more than 45 nations worldwide. The company is a leading manufacturer of chips, boards, systems, software, and various computer, networking and communications equipment.

The Big Kahuna

In 1998, CS launched its first formal benchmarking effort. A tool known as the Big Kahuna was used, which introduced the concept of a centralized database. The program also has served as a springboard for future initiatives, including RAT.com, a Web-based tool for resource allocation, currently in use by CS.

"By today's standards the Big Kahuna was pretty basic since all we really did was consolidate our data into an extremely large Excel-based spreadsheet," says Glenn Hodge, strategic initiatives manager for CS. "As technology improved, we quickly learned that the size of this database was unwieldy and that we weren't able to extract the data the way we needed to."

The database gave CS its first accurate review of all the combined worldwide budgets and introduced the idea of using standard budget line items, a tool that has been integrated into all CS benchmarking efforts.

Centers of Excellence

The Big Kahuna led CS to form benchmarking teams by highlighting the opportunity for cost reduction through benchmarking.

For example, one team was charged with finding ways to save money on how Intel provides plants with purified water to manufacture various electronics components. In one year, that group, known as the Ultra-Pure Water team, reduced the domestic ultra-pure water budget by $6.1 million, approximately 20 percent (or $1.1 million) more than the goal set by the vice president at the onset of the project.

The Ultra-Pure Water team also introduced the budget line tool (BLT), which allows system users to compare budgets at very detailed levels. This process starts with system owners analyzing what drives spending in their particular function and defining these costs as standard budget line items. Once BLTs are defined, they are set as standards across all CS sites so that consistent comparisons can be made from site to site.

"We've since realized that the Ultra-Pure Water team was actually doing the Centers of Excellence concept before we had a name for it," says Hodge.

Today the Centers of Excellence initiative within CS involves small teams of five to 10 experts and facilitators who evaluate business conditions and practices of particular "centers" or functions within Intel. The team works to identify cost savings opportunities and to deploy programs that carry out their recommendations.

"The goal is to have these team members focus on evaluating costs so that site staff are freed up to focus on quality and innovation," says Hodge.

The teams' primary concern is identifying future cost saving opportunities, not necessarily reviewing how business is conducted today.

"The teams are created and disbanded based purely on Intel's changing needs," says Hodge who points to the Labor Team as a current example. The team consisted of one site manager, two facilities experts, a service expert, a finance expert, and a facilitator.

The team developed a "minimum service model" by defining costs and minimum service levels required for a standard 150,000-sf manufacturing space. To do this, they developed a BLT-type template that outlines costs for core competencies within that defined amount of space. The template, which will account for standard parameters such as headcount and materials cost, can then be used as a model so that each site can extrapolate cost drivers to set personalized targets. Using the model, the team identified a $21-million opportunity to change operational models to match the minimum service model.

Resource Allocation Tool

One tool that helps teams within CS to review costs is the Resource Allocation Tool (RAT), introduced in 2000. RAT is a customized relational database aimed at standardizing budget processes and improving data management throughout all worldwide CS locations. 

"After we introduced RAT, it quickly became our system of record since we realized how effective it was at pulling data fragments and helping users interpret data," says Kris Goranson, senior finance analyst of strategic initiatives for Intel. "It allows us to slice and dissect our budgets in a variety of ways to help pinpoint cost reduction opportunities."

Using defined descriptions, budget owners enter up to 90 detailed budget line items into RAT at each of Intel's four planning periods. RAT is also customized to include company-specific references such as normalized area footage (NAF), a metric unique to Intel used to measure space. For the allocation of costs, NAF uses a weighting factor for each site depending on the type of space being measured. Since 2000, overall NAF has grown by 48 percent or 44.3 million sf.

Building on the success of RAT, in 2001 CS launched RAT.com, a Web-based query tool for resource allocation located on Intel's intranet. RAT.com is a Microsoft Access-type database that uses defined budget line type descriptions.

"Compared to the initial RAT effort, RAT.com has added even more budget details and layers of explanation," says Goranson. "Anybody throughout CS can access information with just a few clicks of the mouse and they can quickly benchmark themselves against their worldwide peers at very detailed parameter levels.

"RAT.com also helped us recently complete a 'should-cost' model that highlights what we call golden regions," he continues. "The golden regions are really the best performers in certain parameters that other regions can use as benchmarks. It helps us analyze why some regions perform better than others and to determine what needs to be done to help the other regions match that 'golden' level."

Benefits from Benchmarking

"Since CS has focused on benchmarking, we've found that costs are driven down across the company not just at individual sites," says Hodge who adds that CS has successfully reduced its controllable spending by 27.5 percent overall.

Hodge identifies the key benefits of benchmarking as:

• Increasing the accuracy and understanding of data and budgets worldwide
• Helping to drive the search for cost reduction ideas
• Allowing users to quickly slice, dice, and analyze available data
• Driving down controllable spending

"We place a high value in the findings that result from benchmarking studies," says Hodge. "So much so that when formal cost savings recommendations are made to senior management usually 80 percent of what we suggest is deemed 'mandatory,' with 20 percent viewed as optional—that's how much faith we have in benchmarking."

By Amy Cammell

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