How ASML Leverages Supply Chain in Their Phased NPI Process to Shorten the Time to Market Cycle Time with ASML’s Nicole Engelman

Full transcript

Francis Adanza

Welcome to the Down to Freight podcast. I’m your host, Francis Adanza. And with me today, our speaker is Nicole Engelman, Director of Planning and Logistics at ASML. She brings over 20 years of experience in materials management, production planning, master scheduling, inventory control, strategic supplier management, warehouse management as well as customer logistics and configuration management in her role. Nicole, it’s so glad to have you here today.

Nicole Engelman

Thank you. Thanks for inviting me. It’s a pleasure to be here.

Francis Adanza

Awesome. So for those that aren’t as familiar with ASML, could you tell a little bit more about what your company does, your role and how it pertains to supply chain?

Nicole Engelman

Yes, sure. ASML, we’re often called the most important company you don’t know about. A lot of times, that has to do because we are essentially kind of the first phase in the semiconductor industry. So some real talk about the industry right now with the chip shortage being as it is. And of course, that’s what’s driving technology. ASML produces tools, software and services those tools to mass produce patterns on chips. So kind of in layman’s here, we’re enabling microchips to have data enriched with them.

And so our customers are the chipmakers, and they are demanding. And so it’s a very fast-paced industry. It’s constantly changing. But it’s literally our products that are enabling all of the end user products and the chips that you see out there today to be done. And so it’s a really exciting company to be a part of.

We’ve got about 30,000 employees globally. We’re in 16 countries with about 60 different locations, whether they’re service locations. We have 7 clean room factories here in the U.S., in Europe and in Asia. I think we’re waiting for the financials right now. But in 2020, we’re $14 billion, but our growth is projected to get to almost doubling by 2025, and we’re on track to do that.

But the main thing within ALSM, we progressed with Moore’s Law. And Moore’s Law is a theory by Gordon Moore, who is the Co-Founder of Intel. And he basically just started seeing a pattern of the number of transistors that go on and IC doubled almost year-over-year. And so our job is to create tools that enable that. And the basis of that is to be able to get thinner and thinner wavelength light sources in a scanner that can enrich data like that. And so think about it like pencil lead. If you can get a thinner pencil lead, it will write a thinner line on a piece of paper. And of course, that allows you to put more lines on a piece of paper. It’s similar in theory.

So when you look at like the chips that were created years ago back at the beginning, back in the ’80s, I mean, those giant cell phones and the big Apple computers. Those were done with 365-nanometer light sources. And in our latest technology or the chips that you see, for instance, in the new Samsung and iPhones are 7 and 5 nanometers. So it’s impressive to see how far it’s come and how little we are.

To give kind of your listeners in general an idea, a nanometer is a billionth of a meter. And so a cigarette smoke, for example, is 1,500 nanometers. A strand DNA is 2.5 nanometers. So essentially, we’re writing data on a chip almost just doubling what the stratus strand DNA would be. So it’s pretty impressive.

Francis Adanza

Yes. I kind of wonder when is Moore’s Law going to break. I mean it’s so remarkable. How much smaller can you get?

Nicole Engelman

We’ll see, right? I guess that’s definitely a problem that we’d like to have. So that’s what we’re doing year-over-year since late ’80s is when ASML started. They are a scanner manufacturer working with the light source manufacturer called Cymer. In 2012, ASML purchased Cymer essentially for the EUV or extreme ultraviolet technology, and that was to progress Moore’s Law further. So between the late ’80s and I would say, early 2000s, over those 20 years, we got 172 nanometer thickness removal. So we went from 365 nanometers to 193.

But just in 6 years with the newer technology and how you do that, we were able to reduce 180 more nanometers and get to 13 nanometers back in 2010, and that was just in 6 years. So this newer way of doing technology is, of course, a lot. It’s stretching the boundaries of where we take technology. And to work in a company that does that and see the impact, of course, on the world, where you see products become smaller and smaller or they are doing more and more things, that’s really exciting that you could see the direct impact there.

Francis Adanza

It sounds like, I mean, especially just the importance of what you’re doing. There’s a lot going on right now in the news about the supply chain issues, and that there’s like a huge shortage, especially around semiconductors and the chips needed for all of the products that you mentioned. Care to share anything about what you’re doing to manage that so that everyone can get their iPhones and Ford can get their trucks out the door?

Nicole Engelman

Yes, exactly. We are definitely part of that solution, and that’s just with our chipmakers being able to get more of our systems and tools in there to create more wafers or chips per hour. That has to do with the number of tools that they have from us, but it also has to do with the power that are and how many chips per hour or wafers per hour that our product can produce. And all of these new product lines that we have right now are trying to drive that and improve that to help with that situation.

My group, particularly, like you mentioned at the beginning, I’m a bit of a jack of all trades because I’ve been at this company for 21 years, spending half my life here now, literally growing up here. Being able to see the influence of the technology, but also myself being able to influence how we do that and how we get it out has been a phenomenal experience.

So the way that we run our supply chain and is able to get out new product and reduce that time to market so that we can get tools to our customers faster is through what we call a phased supplier management process. And it really forces you to get your suppliers involved early in the stage of development. So where you’re just starting to kind of talk about with engineers what do we think this product is going to need, what are the specifications from our customers. When we start to do an early selection of suppliers and start to engage our suppliers early, it allows them to be part of that solution early because a lot of times, I think what you see in technology or even in R&D companies is you have a bunch of engineers trying to develop a solution, and then that’s handed off to a supplier.

And the supplier is then trying to conform to that solution. And it could mean that there is technical specifications or even processes or even the types of materials that are called out that could take longer to get or the tolerancing that’s there is not feasible or possible to do quickly or there’s a lot of cost in order to hit that tolerancing, that if you can just loosen it a little bit, you can significantly reduce the cost. And so a lot of times with technology companies, you see them release this technology. The supplier goes and does it, and then it takes a really long time to get and it’s really expensive.

And so if we can involve the supplier earlier, you start to immediately not have to go back into a reengineering process just to drive down cost. But it also allows them to influence some things in the design that will help get things quicker. It will help them be able to manufacture better. And while they’re part of the design, we can start to release requirements that they can go act on before the design is even finished.

And so what I mean by that is think about like if you were building a house, if you know at least you know you’re going to need wood for the framing, so let’s just go buy the wood. And that has a certain lead time, especially now these days, has a certain lead time with it. We’re going to go buy the wood. We’re going to go buy piping even though you don’t know what you’re twisting it to and where it’s going. We’re going to go get those things that we know we need already.

And as we start to develop more on what the house looks like or where the windows need to go, then we can start to have the suppliers, again, act more on that. And what it does is it allows us to cut a lot of that long lead material cycle time out of it so that we can actually have these things on order and even things that you’re machining. For example, they can go buy plates of aluminum and cut things to a basic size and get things going and start tooling and start programming machining. And as we get the design more details, then they can fill in those blanks and it will allow us to reduce the overall cycle time of the parts. And I think that’s what makes us really successful in trying to get this done quickly.

Francis Adanza

It sounds like you have a pretty nimble and agile process in place that allows you to react to some of the changes quickly. Do you have different tools or technology that you use to support that process? How do you manage the logistics of all of those moving parts that like you described between like the forecasting, the supplier management, the inventory control? There’s a lot there. How do you go about managing all of that?

Nicole Engelman

Yes. We obviously use an ERP system and within ASML, and so we either use SAP or Oracle, depending on which factory you’re talking to. And so we try to leverage that as much as possible. A lot of technology companies or people that are trying to do this, everything ends up getting managed on Excel at the end of the day. In some ways, you do that.

But what we try to do is have our configuration management system nimble enough to do that, where we can release a part number, even if you don’t have a drawing, at least we can start to build the structure of what that building material would look like. And as we start to get drawings, we can fill those in and release those out to our suppliers through supplier portals, which allow them to get the documentation a lot faster and see the structure of a building material, not just on a drawing or a piece of paper or a CAD file. So that’s definitely part of it.

And we can do that in a phased process too. And how we set that up then allows us to build the maturity of that building materials. And as we build the maturity, that’s how we’re releasing the orders through the ERP system to our suppliers. So I could release an order, for example, for a Toyota Corolla even though they don’t know what’s going to go into it yet. They’re going to get an order. They’ll have a general budget that they can buy to. And as we start to develop all of the things that are going to go into that detailed build, then that’s when we can update the purchase orders and update the lead times and the costs that’s associated to that. And we’re doing it all along and building it up as it goes.

Francis Adanza

Thank you. So when I sit there and I listen to a lot of these earnings calls or read the 10-K reports of a lot of enterprises of your size, the word that comes up time and time again is supply chain resiliency. And it seems like there’s a lot of initiatives around digital transformation to improve that. And it sounds like what you’ve done with your team at ASML is you really have a very lean process. I think as more and more organizations strive to achieve what you’ve done, what are some words of advice or best practices that you would want to give to folks that are thinking about implementing this phased supplier management process? How would they go about getting started or implementing something like this?

Nicole Engelman

Yes. So I think one of the key things is finding suppliers that are willing to deal with the ambiguity, right, because that in and of itself is going to create a certain amount of churn at your supplier. They have to have teams that are set up to know, hey, I’m not going to give you the whole recipe. We’re giving it to you one ingredient at a time.

And they have to be set up to be able to also accept the work that way. That means their programmer might be touching a program more than once, right? Their supply chain team might be having to adjust their schedule more than once or coming back to us on a cost update or lead time update based on the latest requirements or what we’ve done and what we’ve released to them. So while it’s very lean, it also takes a lot of back and forth management and communication to do that. And I think that the most important piece in setting that up with the supplier is making sure that they’re operationally sound to handle that.

In a technology company, we’re often locked into suppliers because of their technical capability. And often with a very high technical capability company, they don’t focus on operations as much as they do on engineering. And so you tend to not get a lot of agility from either their own suppliers management or their own manufacturing yield and quality systems. And so you need to already go in and do those audits almost as you’re doing your supplier selection to inform them, hey, this is what’s going to hit you. Here’s how we recommend that you deal with it or how you structure your teams or how can we get this communication with you.

And you really do form a partnership with your supplier to do that. We have suppliers that let us come in with our own teams and sit there for months side by side with their teams to help build up the operational capability if they lack that initially. Because at the end of the day, we release the design quickly. If they can’t follow through and build it, it doesn’t matter. So that’s equally important to us.

Francis Adanza

Totally. That’s similar to Moore’s Law. That doesn’t seem like it’s ever going to break. It sounds like you’re in that operation of continuous improvement. It doesn’t sound like your job is ever really done. So what’s next for you with this project or any other initiatives that you plan to tackle in the next 18 to 36 months?

Nicole Engelman

I think what your audience will recognize, when you’re in supply chain or logistics, your job is never done, right? You either have not enough of something or too much of something or you need to make it cheaper or quicker. That’s the beauty of this business. That’s why you can never get bored. I tell people when I go lecture at some of the universities, this is an awesome job because it never gets old. You can be an expert or a subject matter expert and expertise, but the ways that you’re doing things, you constantly need to be creative in thinking outside of the box, and you constantly are dealing with new projects or products that are going to challenge you to do that.

And so that’s the beauty of it. ASML is no different. We are constantly trying to cannibalize ourselves and, again, please our chipmakers and you guys as end users in the end, what these products can do. And so we still have our work cut out for us in terms of progressing Moore’s law and getting new products out that can get the wafer per hour count up, that can make that reliable and, of course, that can get the wavelength of the light source down enough to keep making really cool things.

When you look at even just what’s out there today, the chips that are being produced today and a lot of the electronics and things you see, your refrigerator now has a TV screen on it that can tell you recipes and keep track of your grocery list. That’s crazy, right? At least for somebody like me who was born before Google, it’s hard to think of how far we’ve really come in the last 20, 25 years. And this is just going to continue. The end user products that companies are trying to now make with these chips, they’re in their R&D horizon at this point. They’re trying to figure out what to do with this technology and how far they could stretch it.

And it’s just really exciting to see what the outcome of that will be. And we’re just going to keep going and keep making that possible. We’ve got several programs on the horizon. We always do have programs in the pot going. With the revenue that we make, we’re constantly reinvesting about 15% to 20% of our revenues back directly into R&D. And that’s what enables all of this. It’s not just figuring out what new technology we can have, but also that technology that’s been out there for 30 years, how do we make sure that we can keep that going, keep that supply chain sustainable.

When you look at that kind of stuff, the product that we’ve had out in the field now for 30 years, how do we make sure we can still provide spare parts to that? And there’s a lot of scarcity in general in the supply chain because COVID has enabled that. But also because there’s things that just are companies going out of business or companies that are, I would say, dying out just because their ownership is like, we’re not making that anymore. We’re going to end of life this product now and not do it anymore.

And you have to figure out then your strategies and how you’re going to deal with that. Are you going to reengineer that or you can go by 20 years’ worth of stock? Are you going to do both of those things? Those are all still challenges that we have to figure out in parallel to launching all of these new products as well. So yes, we’ve got our work cut out for us. We won’t be bored.

Francis Adanza

Thanks for sharing that, Nicole. So you mentioned that you have plans to double your growth in the next few years. How do you actually plan to accomplish that?

Nicole Engelman

Yes, that’s the big challenge, right? So not only how do we figure it out in the supply chain, but in order to figure it out, we need the people to do that. We’ve already significantly had a huge hiring growth over the last 3 years and people are learning curves there. We’ve had to formalize our onboarding programs and how do you get people up to speed really quick. But it’s also about recruiting and finding the right people for the roles, getting a really diverse workforce. And it helps us remain creative. It helps us remain being able to think about things in a different way.

And that’s really what we’re pushing. Right now, we have a lot of jobs. You can go on our website. We have a lot of jobs worldwide open. If you want to work at the headquarters in the Netherlands, if you want to work here in San Diego or in the Bay Area at ASML Cymer, in Wilton, Connecticut right next to New York. There’s always opportunities and what’s great about a global company and kind of what you can see from my experience.

What’s great about ASML is you don’t have to jump to another company to get more experience or to be able to try a different role. We have people that start in the company. And for instance, my HR business business partner started in procurement in her career and, of course, is now in HR. So it’s a very different swing. Alternatively, you can start in operations and roll into engineering. So I love that about us because I see so many resumes, especially with young people that are trying to grow their career, and you just see this constant job hop.

And that’s one of the great benefits of ASML is we do so many different things, and we’re very much so global that you can get a lot of experience or get what you want out of your career without having to change companies. And so we’re looking for the best and brightest right now, and we’ll continue to do that. But it’s going to be the people and hiring those people, getting them on board and getting those solutions in place that we need them to drive to enable that success.

Francis Adanza

Well, they must be doing something right if they are able to keep someone of your caliber there for 20 years. So it seems like it’s a great company.

Nicole Engelman

It is. Yes, I can’t say enough about it. Of course, it’s all I know. But I hire a lot of people, and so I can see what they’ve had to deal with. I really like the fact that it is so diverse. We have people in the team that are later in their career and more mature. We have people that are right out of college. We have people all in between and all nationalities. So it’s really the company that embraces that kind of cultural diversity and overall diversity.

We have a lot of different affinity groups that we set up. So we have groups that are for driving cultural diversity and change. Our LGBT group, I’m proud of it. ASML does that. We have a women’s group that helps with women. And women in STEM in general is an issue, right? And I think it was a few years ago, even in our own company, we only had 13% of our population was women. And now you start to see that really change and really grow, and it’s exciting to do that. But programs like that, affinity groups like that also help attract that and retain what we can do.

And so it’s cool that not only can you do these cool things with technology and have jobs like that, but you can also then on the side get involved with some of these affinity groups, get involved in a competency center and do these kind of things that will also help your career enrichment, whether you stay at ASML or go to another company. It’s something that you can take with you and build into your war chest to help your career overall.

Francis Adanza

Yes, absolutely. Well, this was awesome. I truly enjoyed learning about this phased supplier management process that you’ve implemented. Thank you so much for your time today and sharing this on the episode.

Nicole Engelman

Yes, my pleasure. Thanks for having me.

Francis Adanza

Absolutely. Thank you.