Over the role of purchasing within supply chain has

Over the  last fifty years the role of purchasing has
evolved from a non-strategic into a strategic function. Over this period organizations
have realized the strategic significance of purchasing in increasing their
performance 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 current
purchasing and supply chain function within ASML. The aim of this paper is to conduct
and analyse the “As-IS” situation of P&SM 1function
within ASML, look for gaps if they exist and provide suggestions to fill gaps
within P&SM function. The scope of this paper is limited to product related
direct spending.

The paper is structured
as follows: Section 1 Introduces ASML and discusses the importance of P&SM
function within ASML. Section 2 analyses product related spending for business
line EUV. Section 3 Contains a portfolio analysis that has been conducted using
a Kraljic matrix. Section 4 discusses the role of sustainability with ASML’s
P function. Section 5 highlights the strengths and weaknesses within the
P function of  ASML, Section 6 identifies
improvements 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.

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1.      
Introduction to ASML &
Importance of P&SM function within ASML

ASML is an original equipment manufacturer
of lithography systems. These systems are used for producing  chips, which are used in electronic devices. A
lithography 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&SM
plays a very important role within ASML (text adapted from ASML,n.d). As ASML
is a high-tech company which provides unique “litho” tools to the  market, a major concern is its purchasing and
supply strategy (Weele, A.2014) . To ensure that ASML can develop high class
products the organization’s strategy focuses on long term relationships as well
as close cooperation with its suppliers. P plays an important role
within ASML, as the company sources its components from more than 600
suppliers, around 87-89 % of the system costs are generated by suppliers, which
are located across the world. Not only sourcing parts from suppliers is
important but securing flawless delivery of parts is also important. For ASML
innovation and supply come first; then price and cost factors are taken into
consideration (Weele,A.2014).

To ensure the performance and development of
its product related suppliers, ASML applies QLTCS 2management
approach. ASML needs excellent supply partners, who will ensure that suppliers
perform according to ASML standards their performance is measured in five core
areas namely


Quality: to ensure top quality
of all parts and components sourced


Logistics: to ensure continuity
and flexibility of supply over entire product life cycle


Technology: to be able to
access and share technology know-how


Cost: to ensure competitive
cost throughout the supply chain


Sustainability: to ensure a
sustainable supply chain and reduce the risk of incorporating conflict
materials in ASML’s supply chain.

(text adapted from ASML, supplier
profile,2018, unpublished internal document)

2.      
Product related spend analysis within
ASML

ASML has grown successfully over the years,
today it has 80-85 % market share in “litho” technology. ASML has an ambition
to become €10-11 billion company by 2010, to reach this ambition ASML needs to
step up and drive continuous improvement in its sourcing organization
(ASML,n.d.). Subsequently  procurement
and supply management function within ASML has developed into a function which
has strategic relevance (Weele,A.2014).  As ASMLs business is growing rapidly and will
continue to grow due to upcoming chip demand from different sectors primarily
from automotive and electronics. The increase in growth in ASML will bring
increase in spending and complexity within the supply chain.

Category related spending analysis helps
ASML in understanding and mitigating key risks of each phase of the product
lifecycle. Category management connects all important activities during the product
development phase.

What is category management within ASML? At
highest level for  product related
strategic product family team (SPFT) and product family team (PFT),product
related spending is organized into categories which are managed by SPFT. A
spending profile on category or sub- category level helps to guide priorities
and the scope of the work.  The Example
in Illustration 1 is given below demonstrates each category for example (large
frames, racks and cabinets ) consist of products from a common supply base.

1 Purchasing and Supply Management

2 Quality, Logistics, Technology, Cost and Sustainability