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Applied Materials Uses Operations Research to Design Its Service and Parts Network

Author

Listed:
  • Alper Şen

    (Department of Industrial Engineering, Bilkent University, Bilkent, Ankara 06800, Turkey)

  • Deepak Bhatia

    (Service Parts Planning, Applied Materials, Santa Clara, California 95050)

  • Koray Doğan

    (Solvoyo Company, Boston, Massachusetts 02110)

Abstract

Applied Materials Inc. is the global leader in nanomanufacturing technology solutions. It has a broad portfolio of innovative equipment, service, and software products and supports its customers worldwide with an extensive service and parts network with more than 100 locations. At the end of 2006, Applied Materials decided to evaluate and rationalize the design of its North American network. It set up a detailed optimization model (including 50,000 parts) to develop a network and distribution strategy. To our knowledge, this is the first large-scale multiechelon network-design model that incorporates safety stock inventory costs while considering the effects of lead time and risk pooling. The company used the model's recommendations to reduce costs while maintaining or improving its service to customers. The recommendations included simplifying the distribution network by consolidating depot locations for specific customers and skipping an echelon for others, thus leading to a projected inventory reduction of $10 million. The company is currently implementing these recommendations and has already eliminated five depots. Applied Materials estimates that during the first year of implementation, inventory reductions of $5.24 million and total savings of $1.1 million can be attributed to these network changes.

Suggested Citation

  • Alper Şen & Deepak Bhatia & Koray Doğan, 2010. "Applied Materials Uses Operations Research to Design Its Service and Parts Network," Interfaces, INFORMS, vol. 40(4), pages 253-266, August.
    • Handle: RePEc:inm:orinte:v:40:y:2010:i:4:p:253-266
    DOI: 10.1287/inte.1100.0493
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    References listed on IDEAS

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    Cited by:

    1. Omar, Yamila M. & Minoufekr, Meysam & Plapper, Peter, 2019. "Business analytics in manufacturing: Current trends, challenges and pathway to market leadership," Operations Research Perspectives, Elsevier, vol. 6(C).
    2. Candas, Mehmet Ferhat & Kutanoglu, Erhan, 2020. "Integrated location and inventory planning in service parts logistics with customer-based service levels," European Journal of Operational Research, Elsevier, vol. 285(1), pages 279-295.
    3. Georgia Perakis & Donald Rosenfield, 2018. "The MIT Leaders for Global Operations Program," Interfaces, INFORMS, vol. 48(3), pages 189-203, June.
    4. Christian Weckenborg & Karsten Kieckhäfer & Thomas S. Spengler & Patricia Bernstein, 2020. "The Volkswagen Pre-Production Center Applies Operations Research to Optimize Capacity Scheduling," Interfaces, INFORMS, vol. 50(2), pages 119-136, March.
    5. van den Berg, D. & van der Heijden, M.C. & Schuur, P.C., 2016. "Allocating service parts in two-echelon networks at a utility company," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 58-67.

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