The Bullwhip Effect

Anylogic Conference Dec 13 2012 Hans Ehm Supply Chain Innovation

09.08.2012 Page 2 Copyright © Infineon Technologies 2011. All rights reserved.

Table of Contents

The Challenge, The Goal, The Idea

Model Description

Results

Impressions & Lessons Learned

09.08.2012 Page 3 Copyright © Infineon Technologies 2011. All rights reserved.

Table of Contents

The Challenge, The Goal, The Idea

Model Description

Results

Impressions & Lessons Learned

Page 4 26.10.2010 Copyright © Infineon Technologies 2012. All rights reserved.

Risk comes from the nonaligned supply chains - the bullwhip effect

Bullwhip Effect

Overshooting in

the value chain

Customer OEM Tier 1 Tier 2 Semicon-

ductor Equipment supplier

Copyright © Infineon Technologies 2012. All rights reserved. 06.12.2012

Page 5 26.10.2010 Copyright © Infineon Technologies 2012. All rights reserved.

Infineon Supplier

SIFO SUBCON

SORT DIE BANK ASSEMBLY FAB TEST Wafer stock DC Consi

Customers

SORT DIE BANK ASSEMBLY FAB TEST Wafer stock DC Consi

Semiconductor Supply Chain - Model Hierarchy; Level 4 Challenge: Bullwhip

06.12.2012

Level 3:

Company SC

Level 2:

Production Site

Level 1: Cluster/Equipment

Level 4:

End-To-End SC

12/18/2012 Page 6 Copyright © Infineon Technologies 2011. All rights reserved.

The Challenge - (Why?)

The bullwhip effect is a well known and studied phenomena of human behavior that effects supply chains in all industries.

It posits that there are larger and larger fluctuations in demand the further back you look in a forecast-driven supply chain.

It is, however, even more important to understand its drivers and impacts in the semiconductor industry, as the long cycle times, high capital costs, and rapid price decline (Moore’s Law) put extreme pressure on supply chains to be as lean and efficient as possible.

12/18/2012 Page 7 Copyright © Infineon Technologies 2011. All rights reserved.

The Goal - (What?)

In order to test the AnyLogic® modeling software package, we wanted to model a well-known and researched, yet ever important topic within the field of semiconductor manufacturing.

We wanted to show what the bullwhip effect looks like in our supply chain and to what extremes it exists.

We also wanted to examine the connection between market demand fluctuation and the fluctuation in demand we receive from our direct customers.

12/18/2012 Page 8 Copyright © Infineon Technologies 2011. All rights reserved.

The Idea – (How?)

We created agents for each of the major players in the supply chain and gave them behavior based on the well known “Beer Game”.

We then retrieved real GDP and Semiconductor market data to use as our input signal.

Finally, we re-created a simplified internal structure for Infineon. The agents, Infineon, and the market were then all linked together using discrete event process simulation methods to combine a hybrid model with a highly realistic structure

For internal use only 27.06.2012 9 Copyright © Infineon Technologies 2012. All rights reserved.

Lean Modeling Approach Start

Which question shall be answered with the project?

What does the Bullwhip Effect look like for semiconductor manufactures?

Which output / answer shall be given? Structure of output?

Graph of demand per “agent” (absolute), Graph of variation per agent (Percent)

What data is needed?

Demand data, Time data (CT, delays, etc.)

Where? Right quality?

Needed data completely on

hand?

Simulation necessary? (Other (faster,

simpler) solutions? Analytic solution?)

Can assumptions be

made? e.g. stochastic distibution, deterministic

values?

yes

no

yes

End

End

What level of detail is needed?

Highly aggregated, non-product specific

The less the better!

The lower the better!

no

Simulation

no

yes

12/18/2012 Page 10 Copyright © Infineon Technologies 2011. All rights reserved.

Table of Contents

The Challenge, The Goal, The Idea

Model Description

Results

Impressions & Lessons Learned

Model description (General)

The supply chain model consists of 5 main agents:

Raw Material Supplier

Infineon Tier One Supplier

Market OEM

Delivers to

Orders from

Delivers to Delivers to Delivers to

Orders from Orders from Orders from

Produces Demands

INFORMATION FLOW

MATERIAL FLOW

Model description (General)

Main view in Anylogic®:

Model description

The Semiconductor Agent consists of

Planning & control – where capacity decisions are taken and where forecasts & orders are made

Base system – where material is flowing and orders are executed

Model description (Planning & Control)

Screenshot from Planning and Control:

Model description (Base System)

Screenshot from Base System:

Model description (General)

The Decoupling point is at the Infineon Die Bank:

Raw Material Supplier

Infineon Tier One Supplier

Market OEM

Delivers to

Orders from

Delivers to Delivers to Delivers to

Orders from Orders from Orders from

Front End

Back End &

DC

Die Bank

Note: Make to stock process based on an average demand forecast by Semiconductor Planning and control agent and a target stock at semiconductor DC agent.

Model description (Agents 1)

Agents outside the Semiconductor manufacturer are modeled identically:

¬ Agents produce generic output (information flow is delayed in the supply chain)

¬ Agents have two states: “Careless” and “Anxious” determined by inventory reach

Agent over-orders when anxious (+ 20 % of demand)

Agent under-orders when Careless (- 50 % of demand)

Model description (Agents 2)

Screenshot from Agent outside Infineon:

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Table of Contents

The Challenge, The Goal, The Idea

Model Description

Results

Impressions & Lessons Learned

Page 20 26.10.2010 Copyright © Infineon Technologies 2012. All rights reserved.

We wanted to show the Bullwhip = Amplification of demand along the supply chain

Bullwhip Effect

Overshooting in

the value chain

Customer OEM Tier 1 Tier 2 Semicon-

ductor Equipment supplier

Copyright © Infineon Technologies 2012. All rights reserved. 06.12.2012

Results show that the bullwhip effect can be seen (1)

Resulting demand fluctuations by SC level:

Set date Copyright © Infineon Technologies 2011. All rights reserved. Page 21

Resulting demand fluctuations:

Set date Copyright © Infineon Technologies 2011. All rights reserved. Page 22

Results show that the bullwhip effect can be seen (2)

12/18/2012 Page 23 Copyright © Infineon Technologies 2011. All rights reserved.

Table of Contents

The Challenge, The Goal, The Idea

Model Description

Results

Impressions & Lessons Learned

Impressions & lessons learned

Easy to use functionality

¬ UI very user-friendly

¬ This applied also without extensive previous knowledge of programming or simulation

Satisfying set of functionalities

¬ Particularly the option to combine discrete & agent-based modeling techniques (as in this model)

¬ Systems dynamics functionality not used although it exists in AnyLogic

Provides visually attractive results

¬ 2D and 3D representation options

© XJ Technolgies

Summary

This model combines discrete event-based simulation with agent-based simulation to represent the bullwhip effect in the supply chain.

Main conclusion is that AnyLogic is easy to use and has good functionality for SC discrete and behavioral simulation.

Especially unique attribute of AnyLogic:

¬ Ability to combine agent-based and discrete modeling techniques (and system dynamics techniques) in one model.

© XJ Technolgies