IBM Blends Heuristics and Optimization to Plan Its Semiconductor Supply Chain

Alfred Degbotse (), Brian T. Denton (), Kenneth Fordyce (), R. John Milne (), Robert Orzell () and Chi-Tai Wang ()
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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

Interfaces, 2013, vol. 43, issue 2, 130-141

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.

Keywords: industries; computer; electronic; information systems; management; decision support systems; production; scheduling; planning; programming; linear; integer (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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