Forward Echelon-Based Inventory Monitoring in a Semiconductor Supply Chain

As the semiconductor industry faces fierce competition, it is essential for the semiconductor supply chain to integrate the front end and the back end to provide better service to customers. However, each member of the supply chain has different levels of power and pursues different goals which results in poor performance and difficulty monitoring it. In order to enhance service levels and to improve the performance of the whole supply chain, front-end members need to lead all of the other members to share information and to synchronize operations. Considering the characteristics of production and the substantial power of the front-end actors, this research develops a forward echelon-based inventory model for a semiconductor supply chain based on the concept of the echelon work in process (WIP) inventory and the CONWIP control method. We first construct the model that minimizes the echelon WIP upper limit under the target service levels. Next, we propose an algorithm for the model and validate the algorithm through a simulation study. Based on the results of the simulation study, we find that: 1) the algorithm derives the WIP upper limit effectively and 2) compared to the traditional stage-based inventory model, the forward echelon-based inventory model obtains a higher service level and a lower inventory level.