Operational Strategies for Managing Supply Chain Disruptions: Simulation of External Factor Impact on a Semiconductor Industry

Introduction

Semiconductor manufacturing and distribution are complex, interrelated units with worldwide locations and long production times. Disruptions on the line may come from different sources: pandemics, extreme weather, geopolitical tensions, etc. Any external factor may pose significant risks, causing a bullwhip effect that can greatly harm the entire supply chain. Given these challenges, developing and implementing strong operational strategies for managing supply chain disruptions is crucial.

Solution

The study uses system dynamics to model the semiconductor supply chain to address the weaknesses. The engineers aimed to understand how external disruptions impact the distribution network. They used the model to test different operational strategies for managing supply chain disruptions and to see the possible outcomes.

The team employed AnyLogic software to develop a simplified system dynamics model of a typical semiconductor manufacturing supply chain. This model included key components of the supply chain: frontend manufacturing, Diebank, backend manufacturing for available-to-promise (ATP) generation, and distribution centers.

The simulation model analyzed different "what if" scenarios for managing supply chain disruptions. It helped to understand how different emergencies could affect the supply chain workflow. The model looked at their impact on:

• capacity;
• workforce;
• transportation;
• customer orders;
• changes in stock levels and monetary value.

The study identified four main types of risks, based on the nature of the disruptions, to see how they influenced the supply chain.

Results

The simulation in AnyLogic provided insights into operational strategies for managing supply chain disruptions in the semiconductor industry. The results showed the supply chain's vulnerability to unforeseen circumstances. They demonstrated how these impacts can spread and worsen through a ripple effect.

Changes in customer orders, revenue, and DC stock when applying the operational strategies for managing supply chain disruptions (click to enlarge)

Key findings included:

1. Impact of external disruptions: The simulation showed how problems at one end of the supply chain can spread and cause big operational and financial issues. For example, political problems or natural disasters in one area could lead to delays and changes in inventory all over the network.
2. Resilience strategies: The study identified key operational strategies for managing supply chain disruptions. They include increasing visibility, speed, and flexibility in the supply chain. Additionally, redesigning the supply chain structure and sourcing strategies was found to be key to reducing the negative effects.
3. Proactive measures: The simulation highlighted the importance of proactive planning and adaptability for managing supply chain disruptions. To handle disruptions better, plan by using strategies like sourcing from multiple suppliers, diversifying your suppliers, and maintaining sufficient inventory. Quick and effective recovery from disruptions is also crucial for a resilient supply chain.

Overall, the study demonstrated that system dynamics simulation is a powerful tool for managing supply chain disruptions in semiconductor manufacturing and distribution. By pointing at weak spots and testing resilience strategies, the model provided actionable insights for making the supply chain more stable and effective in the face of unexpected events.