Identifying Potentials and Impacts of Lead-Time Based Pricing in Semiconductor Supply Chains with Discrete-Event Simulation

Abstract

Due to a significant increase in demand fluctuations in the semiconductor industry triggered by the bullwhip effect, global supply chains are experiencing an unprecedented pressure. The industry specific characteristics of short product life cycles, long lead times and a highly competitive market environment are further decreasing flexibility, although a robust and adjustable supply chain is required. In order to enable greater flexibility, this study investigates the hypothesis that Revenue Management is able to offer greater fulfilment of customer expectations, while at the same time initiating a revenue increase in the semiconductor industry. We tested this hypothesis in a discrete-event simulation based on a case study obtained from a semiconductor company. The study indicates that global supply chains, such as the ones in the semiconductor industry, should use Revenue Management methods in order to increase their revenue by 10% to 19% as well as to improve flexibility and customer satisfaction.