The Impact of Endogenous Demand on Push-Pull Production Systems: Supplement

This supplement provides a detailed description and supporting documentation for a system dynamics model used to analyze the impact of endogenous demand on a semiconductor manufacturer hybrid push-pull production system. The model is based on the experience with Intel Corporation, a major semiconductor manufacturer located in Santa Clara California. This supplement should be used in conjunction with Gonçalves, Hines and Sterman (2005). The paper provides motivation for the study, background information about the research, a few main formulas, model results, analyses and policy recommendations. This supplement provides a detailed description of the formulas used in the model as well as the rationale for their use. Additional materials available on the web site include the working model, command scripts, optimization controls and graph definitions used to generate the results in the paper. The model structure consists of two major flows: the flow of materials through the semiconductor company’s supply chain and the flow of information and managers’ decision rules, governing material flows. Materials flow thought the company’s supply chain from wafer starts through assembly according to the manufacturing process. Information flows control the flow of materials (e.g. wafer starts, assembly starts, assembly completion rate, and shipments) through the company’s supply chain. The model is run in continuous time and implemented in Vensim® and formulated as a system of nonlinear ordinary differential equations. The first section provides an overview of semiconductor manufacturing. Section 2 provides a description of the production and inventory control and section 3 describes distribution and logistics.