Inner and outer loop optimization in semiconductor manufacturing supply chain management

Abstract Supply Chain Management (SCM) in semiconductor manufacturing differs from many other SCM applications in that it has to simultaneously consider both long and short time scale stochasticity and nonlinearity. This paper presents a two-level hierarchical structure for SCM motivated by these considerations. Linear Programming (LP)-based Strategic Planning and Inventory Planning modules form the outer loop which makes long timescale decisions on the starts of factories and inventory targets. A Model Predictive Control (MPC) based Tactical Execution module forms the inner loop which generates short timescale decisions on the starts of factories by considering the stochasticity and nonlinearity on both supply side and demand side in semicondutor manufacturing. Four representative case studies are examined under diverse realistic conditions with this integrated framework. It is demonstrated that this hierarchical structure can effectively manage different types of stochasticity and nonlinearity in semiconductor manufacturing SCM with proper tunings to provide better system robustness, performance and profit margins.