We develop an inventory allocation model for the use in the semiconductor industry. The model allows for multi-echelon, multi-item optimization. The objective is to maximize the system-wide serviceability subject to constraints on inventory holding cost, allowing consideration of both build-to-order and build-to-stock finished good items. The key components of the model are an approximate method for performance evaluation and a two-phased optimization algorithm, combining heuristics with nonlinear optimization. The model allows for fast decisions when applied to supply networks of upwards of one thousand stocking locations. Results from implementation at Xilinx, Inc., show dramatic improvements in performance over current inventory policies.
By: Alexander O. Brown, Markus Ettl, Grace Y. Lin, Raja Petrakian
Published in: RC21509 in 1999
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