Integrated Planning of Production and Engineering Activities in Semiconductor Supply Chains: A Simulation Study

Running engineering lots is crucial to stay competitive in the semiconductor market. But production and engineering lots compete for the same expensive equipment. Therefore, considering them in an integrated way is desirable. In this paper, we propose two production planning formulations based on linear programming (LP) for a simplified semiconductor supply chain. The first planning model is based on reduced capacity for production due to engineering lots, while the second model directly incorporates engineering activities. Additional capacity is considered in the latter model due to learning effects that represent process improvements. Both planning models are based on exogenous lead times that are an integer multiple of the planning period length. We show by means of a simulation study for a simplified semiconductor supply chain that the integrated formulation outperforms the conventional one in a rolling horizon setting with respect to profit.