IDEAS home Printed from https://ideas.repec.org/a/inm/orinte/v43y2013i2p130-141.html
   My bibliography  Save this article

IBM Blends Heuristics and Optimization to Plan Its Semiconductor Supply Chain

Author

Listed:
  • Alfred Degbotse

    (IBM Corporation, Essex Junction, Vermont 05452)

  • Brian T. Denton

    (Department of Industrial and Operations Engineering, University of Michigan, Ann Arbor, Michigan 48109)

  • Kenneth Fordyce

    (IBM Corporation, Hurley, New York 12443)

  • R. John Milne

    (School of Business, Clarkson University, Potsdam, New York 13699)

  • Robert Orzell

    (IBM Corporation, Essex Junction, Vermont 05452)

  • Chi-Tai Wang

    (Institute of Industrial Management, National Central University, Jhongli City 32001, Taiwan, Republic of China)

Abstract

IBM uses operations research techniques to plan its enterprise semiconductor supply chain. The scale and complexity of this planning problem make developing robust supply chain optimization tools a challenge. Pure optimization methods are computationally infeasible, and fast heuristic methods alone generate poor results. Consequently, we developed a method that decomposes the problem by dividing the bills of materials product structure horizontally and vertically into complex and simple portions that are based on the major stages in semiconductor manufacturing and the choices of supply chain paths for building parts. The method then solves the complex portions with a mixed-integer program and the simple portions with fast heuristics that contain small embedded linear programs. A unique pegging algorithm, an explosion heuristic, and an implosion linear program enable coordination among these portions. The result is a unified production, shipping, and distribution plan with no evidence of the original decomposition. This method has helped IBM to improve its asset utilization, customer service, and inventory levels.

Suggested Citation

  • Alfred Degbotse & Brian T. Denton & Kenneth Fordyce & R. John Milne & Robert Orzell & Chi-Tai Wang, 2013. "IBM Blends Heuristics and Optimization to Plan Its Semiconductor Supply Chain," Interfaces, INFORMS, vol. 43(2), pages 130-141, April.
    • Handle: RePEc:inm:orinte:v:43:y:2013:i:2:p:130-141
    DOI: 10.1287/inte.1120.0642
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/inte.1120.0642
    Download Restriction: no
    File URL: https://libkey.io/10.1287/inte.1120.0642?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Grace Lin & Markus Ettl & Steve Buckley & Sugato Bagchi & David D. Yao & Bret L. Naccarato & Rob Allan & Kerry Kim & Lisa Koenig, 2000. "Extended-Enterprise Supply-Chain Management at IBM Personal Systems Group and Other Divisions," Interfaces, INFORMS, vol. 30(1), pages 7-25, February.
    2. Brian T. Denton & John Forrest & R. John Milne, 2006. "IBM Solves a Mixed-Integer Program to Optimize Its Semiconductor Supply Chain," Interfaces, INFORMS, vol. 36(5), pages 386-399, October.
    3. Robert C. Leachman & Robert F. Benson & Chihwei Liu & Dale J. Raar, 1996. "IMPReSS: An Automated Production-Planning and Delivery-Quotation System at Harris Corporation—Semiconductor Sector," Interfaces, INFORMS, vol. 26(1), pages 6-37, February.
    4. Frederix, Florent, 2001. "An extended enterprise planning methodology for the discrete manufacturing industry," European Journal of Operational Research, Elsevier, vol. 129(2), pages 317-325, March.
    5. Peter Lyon & R. John Milne & Robert Orzell & Robert Rice, 2001. "Matching Assets with Demand in Supply-Chain Management at IBM Microelectronics," Interfaces, INFORMS, vol. 31(1), pages 108-124, February.
    6. Steven M. Brown & Thomas Hanschke & Ingo Meents & Benjamin R. Wheeler & Horst Zisgen, 2010. "Queueing Model Improves IBM's Semiconductor Capacity and Lead-Time Management," Interfaces, INFORMS, vol. 40(5), pages 397-407, October.
    7. Gerald Sullivan & Kenneth Fordyce, 1990. "IBM Burlington's Logistics Management System," Interfaces, INFORMS, vol. 20(1), pages 43-64, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Weskamp, Christoph & Koberstein, Achim & Schwartz, Frank & Suhl, Leena & Voß, Stefan, 2019. "A two-stage stochastic programming approach for identifying optimal postponement strategies in supply chains with uncertain demand," Omega, Elsevier, vol. 83(C), pages 123-138.
    2. Andreas Fink & Natalia Kliewer & Dirk Mattfeld & Lars Mönch & Franz Rothlauf & Guido Schryen & Leena Suhl & Stefan Voß, 2014. "Model-Based Decision Support in Manufacturing and Service Networks," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 6(1), pages 17-24, February.
    3. Amy David & David Farr & Ross Januszyk & Urmila Diwekar, 2015. "USG Uses Stochastic Optimization to Lower Distribution Costs," Interfaces, INFORMS, vol. 45(3), pages 216-227, June.
    4. Darvish, Maryam & Coelho, Leandro C., 2018. "Sequential versus integrated optimization: Production, location, inventory control, and distribution," European Journal of Operational Research, Elsevier, vol. 268(1), pages 203-214.
    5. Uday Venkatadri & Shentao Wang & Ashok Srinivasan, 2021. "A Model for Demand Planning in Supply Chains with Congestion Effects," Logistics, MDPI, vol. 5(1), pages 1-24, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peter C. Bell & Chris K. Anderson, 2002. "In Search of Strategic Operations Research/Management Science," Interfaces, INFORMS, vol. 32(2), pages 28-40, April.
    2. Ying-Ju Chen & Brian Tomlin & Yimin Wang, 2017. "Dual Coproduct Technologies: Implications for Process Development and Adoption," Manufacturing & Service Operations Management, INFORMS, vol. 19(4), pages 692-712, October.
    3. Peter C. Bell & Chris K. Anderson & Stephen P. Kaiser, 2003. "Strategic Operations Research and the Edelman Prize Finalist Applications 1989--1998," Operations Research, INFORMS, vol. 51(1), pages 17-31, February.
    4. Brian T. Denton & John Forrest & R. John Milne, 2006. "IBM Solves a Mixed-Integer Program to Optimize Its Semiconductor Supply Chain," Interfaces, INFORMS, vol. 36(5), pages 386-399, October.
    5. Lin, James T. & Chen, Tzu-Li & Lin, Yen-Ting, 2009. "Critical material planning for TFT-LCD production industry," International Journal of Production Economics, Elsevier, vol. 122(2), pages 639-655, December.
    6. Amy David & David Farr & Ross Januszyk & Urmila Diwekar, 2015. "USG Uses Stochastic Optimization to Lower Distribution Costs," Interfaces, INFORMS, vol. 45(3), pages 216-227, June.
    7. Raphael Herding & Lars Mönch, 2024. "A rolling horizon planning approach for short-term demand supply matching," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 32(3), pages 865-896, September.
    8. S Eom & E Kim, 2006. "A survey of decision support system applications (1995–2001)," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(11), pages 1264-1278, November.
    9. Anindya Ghose & Tridas Mukhopadhyay & Uday Rajan, 2007. "The Impact of Internet Referral Services on a Supply Chain," Information Systems Research, INFORMS, vol. 18(3), pages 300-319, September.
    10. Mustapha Ouhimmou & Sophie D'Amours & Robert Beauregard & Daoud Ait-Kadi & Satyaveer Singh Chauhan, 2009. "Optimization Helps Shermag Gain Competitive Edge," Interfaces, INFORMS, vol. 39(4), pages 329-345, August.
    11. Jacobs, F. Robert & Bendoly, Elliot, 2003. "Enterprise resource planning: Developments and directions for operations management research," European Journal of Operational Research, Elsevier, vol. 146(2), pages 233-240, April.
    12. Pinar Keskinocak & Shidhar Tayur, 2001. "Quantitative Analysis for Internet-Enabled Supply Chains," Interfaces, INFORMS, vol. 31(2), pages 70-89, April.
    13. Corey Billington & Gianpaolo Callioni & Barrett Crane & John D. Ruark & Julie Unruh Rapp & Trace White & Sean P. Willems, 2004. "Accelerating the Profitability of Hewlett-Packard's Supply Chains," Interfaces, INFORMS, vol. 34(1), pages 59-72, February.
    14. S. K. Samanta & R. Nandi, 2021. "Queue-Length, Waiting-Time and Service Batch Size Analysis for the Discrete-Time GI/D-MSP (a,b) / 1 / ∞ $^{\text {(a,b)}}/1/\infty $ Queueing System," Methodology and Computing in Applied Probability, Springer, vol. 23(4), pages 1461-1488, December.
    15. Wang, Chi-Tai & Chiu, Chui-Sheng, 2014. "Competitive strategies for Taiwan's semiconductor industry in a new world economy," Technology in Society, Elsevier, vol. 36(C), pages 60-73.
    16. Daniel E. O'Leary, 2023. "Digitization, digitalization, and digital transformation in accounting, electronic commerce, and supply chains," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 30(2), pages 101-110, April.
    17. Salal Humair & Sean P. Willems, 2006. "Optimizing Strategic Safety Stock Placement in Supply Chains with Clusters of Commonality," Operations Research, INFORMS, vol. 54(4), pages 725-742, August.
    18. Peter C. Bell & Jing Chen, 2017. "Close integration of pricing and supply chain decisions has strategic as well as operations level benefits," Annals of Operations Research, Springer, vol. 257(1), pages 77-93, October.
    19. Sujit Kumar Samanta & Kousik Das, 2023. "Detailed Analytical and Computational Studies of D-BMAP/D-BMSP/1 Queueing System," Methodology and Computing in Applied Probability, Springer, vol. 25(1), pages 1-37, March.
    20. de Kok, Ton & Grob, Christopher & Laumanns, Marco & Minner, Stefan & Rambau, Jörg & Schade, Konrad, 2018. "A typology and literature review on stochastic multi-echelon inventory models," European Journal of Operational Research, Elsevier, vol. 269(3), pages 955-983.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:orinte:v:43:y:2013:i:2:p:130-141. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.