Over the last fifty years the role of purchasing hasevolved from a non-strategic into a strategic function. Over this period organizationshave realized the strategic significance of purchasing in increasing theirperformance and profits. Due to increased outsourcing amongst organizations,the role of purchasing within supply chain has become increasingly important(Trent and Monczka,2005, Rudiger, 2015).
This paper investigates the currentpurchasing and supply chain function within ASML. The aim of this paper is to conductand analyse the “As-IS” situation of P&SM 1functionwithin ASML, look for gaps if they exist and provide suggestions to fill gapswithin P&SM function. The scope of this paper is limited to product relateddirect spending.The paper is structuredas follows: Section 1 Introduces ASML and discusses the importance of P&SMfunction within ASML. Section 2 analyses product related spending for businessline EUV. Section 3 Contains a portfolio analysis that has been conducted usinga Kraljic matrix. Section 4 discusses the role of sustainability with ASML’sP function. Section 5 highlights the strengths and weaknesses within theP function of ASML, Section 6 identifiesimprovements that can be implemented to improve the overall P function,and provides KPI’s that can be tracked in order to assess the impact of any improvements.
Finally section 7 concludes this paper.1. Introduction to ASML &Importance of P&SM function within ASMLASML is an original equipment manufacturerof lithography systems. These systems are used for producing chips, which are used in electronic devices. Alithography tool is a very complex machine which contains thousands of parts.These parts are sourced from suppliers from all over the world. Approximately 80-85%parts that are used in the system are sourced from suppliers, therefore P&SMplays a very important role within ASML (text adapted from ASML,n.
d). As ASMLis a high-tech company which provides unique “litho” tools to the market, a major concern is its purchasing andsupply strategy (Weele, A.2014) . To ensure that ASML can develop high classproducts the organization’s strategy focuses on long term relationships as wellas close cooperation with its suppliers. P plays an important rolewithin ASML, as the company sources its components from more than 600suppliers, around 87-89 % of the system costs are generated by suppliers, whichare located across the world. Not only sourcing parts from suppliers isimportant but securing flawless delivery of parts is also important. For ASMLinnovation and supply come first; then price and cost factors are taken intoconsideration (Weele,A.
2014).To ensure the performance and development ofits product related suppliers, ASML applies QLTCS 2managementapproach. ASML needs excellent supply partners, who will ensure that suppliersperform according to ASML standards their performance is measured in five coreareas namelyv Quality: to ensure top qualityof all parts and components sourcedv Logistics: to ensure continuityand flexibility of supply over entire product life cyclev Technology: to be able toaccess and share technology know-howv Cost: to ensure competitivecost throughout the supply chainv Sustainability: to ensure asustainable supply chain and reduce the risk of incorporating conflictmaterials in ASML’s supply chain.(text adapted from ASML, supplierprofile,2018, unpublished internal document)2. Product related spend analysis withinASMLASML has grown successfully over the years,today it has 80-85 % market share in “litho” technology. ASML has an ambitionto become €10-11 billion company by 2010, to reach this ambition ASML needs tostep up and drive continuous improvement in its sourcing organization(ASML,n.d.).
Subsequently procurementand supply management function within ASML has developed into a function whichhas strategic relevance (Weele,A.2014). As ASMLs business is growing rapidly and willcontinue to grow due to upcoming chip demand from different sectors primarilyfrom automotive and electronics. The increase in growth in ASML will bringincrease in spending and complexity within the supply chain.
Category related spending analysis helpsASML in understanding and mitigating key risks of each phase of the productlifecycle. Category management connects all important activities during the productdevelopment phase.What is category management within ASML? Athighest level for product relatedstrategic product family team (SPFT) and product family team (PFT),productrelated spending is organized into categories which are managed by SPFT. Aspending profile on category or sub- category level helps to guide prioritiesand the scope of the work. The Examplein Illustration 1 is given below demonstrates each category for example (largeframes, racks and cabinets ) consist of products from a common supply base.
1 Purchasing and Supply Management2 Quality, Logistics, Technology, Cost and Sustainability