This case introduces the reader to the highly complex semiconductor industry, which is characterised by its well known “boom-n-bust” cycles: periods of high demand and worldwide allocation, followed by periods of low demand, excess capacity, and high stocks. The key challenges for supply chain management are described, including the volatile semiconductor market; the high cost of capital leading to “fabless” companies outsourcing wafer production and contract manufacturers for assembly; long production cycle times; and communication in a global organisation. The proliferation of products, very steep product ramps and short product lifecycles add to the complexity. The television tuner market, described as a price-sensitive commodity market, is specifically challenging. The goal of the case is to develop a six-month inventory plan for three tuner products, using the information provided in the case to balance the inventory levels with the customer demand and the factory capacity utilisation.
By the end of this lesson, the student should be able to explain the use of a rolling forecasting cycle in supply chain planning. They would understand the conflicts between marketing and operations in an organisation when making planning decisions. Moreover, they would be in a position to evaluate the trade- off between SCOR-based performance metrics: stock reach versus capacity utilisation, and explain the issues involved in planning in a highly volatile market and in a global organisation.
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