Flexibility as an Enabler for Carbon Dioxide Reduction in a Global Supply Chain: a Case Study From the Semiconductor Industry

The semiconductor market is volatile and unpredictable. Therefore, the ability to forecast customer demand is limited and, in turn, the results of business operations are negatively impacted (Chou et al. 2007). Thus, semiconductor companies seek to optimize the production capacities at their in-house manufacturing sites in order to cope with these challenges (Bong and Potoradi 2000). It is well known in semiconductor manufacturing that building additional capacity incurs high capital cost, usually in the order of several billion US dollars (Brown and Linden 2005). However, flexibility is often the choice to improve the productivity of expensive equipment without further increasing capital spending. Because of the nature of the semiconductor industry, airfreight is the preferred method of transportation due to short transportation times and high value product density (Rajan and Srivastava 2007). Yet, the question that needs to be answered is whether this choice of flexibility, in the case of capacity shortage due to volatility, is beneficial from an ecological point of view.

The central research question of this paper is how the flexibility of a global SC enabled by a global production network could be a driver for the CO2 reduction.

Simulation is a way to find solutions for complex problems of real-world systems. In this study, AnyLogic Software is used to conduct the experiments of the discrete-event simulation. The model is built based on the details from the original system in order to mimic the real-life phenomenon. After building the model, it is run for 441 times and analyzed to find the optimal solution.

Semiconductor supply chain simulation model

Semiconductor supply chain simulation model