Dynamic analysis and design of a semiconductor supply chain: a control engineering approach

The combined make-to-stock and make-to-order (MTS-MTO) supply chain is well-recognised in the semiconductor industry in order to find a competitive balance between agility, including customer responsiveness and minimum reasonable inventory, to achieve cost efficiency while maintaining customer service levels. Such a hybrid MTS-MTO supply chain may suffer from the bullwhip effect, but few researchers have attempted to understand the dynamic properties of such a hybrid system. We utilise a model of the Intel supply chain to analytically explore the underlying mechanisms of bullwhip generation and compare its dynamic performance to the well-known Inventory and Order-Based Production Control System (IOBPCS) archetype. Adopting a control engineering approach, we find that the feedforward forecasting compensation in the MTO element plays a major role in the degree of bullwhip and the Customer Order Decoupling Point (CODP) profoundly impacts both the bullwhip effect and the inventory variance in the MTS part. Thus, managers should carefully tune the CODP inventory correction and balance the benefit between CODP inventory and bullwhip costs in hybrid MTS-MTO supply chains.