Analysis of a high-end memory supply chain : dram vendors to final assembly

Abstract

Compaq Computer Corporation's High Performance Systems Division (HPSD) manufactures servers for mid-range and high-end server markets. It has a complex supply chain that includes the use of supplier hubs, outsourced memory module manufacturers, and stacked memory devices (chips). For this memory module supply chain, Compaq faces two major planning challenges. First, it is very difficult to get an accurate forecast of memory requirements. Second, the cost of memory continues to decline, on the order of 1-4% per month, which results in a high inventory holding cost. A set of standard software tools is developed to assist analysts with determining the supply plan for memory from multiple suppliers. The purpose of these tools is to determine the minimum cost supply plan with an acceptable level of forecast risk. Two separate tools individually address cost and forecast challenges. The Cost Tool can consider up to nine cost categories across the supply chain network upstream from the factory. The tool is flexible, transparent, easily disseminated and easy to use. The Forecast Tool can track current supply activity and can forecast the next week's and next quarter's supply plan. The tool consists of a main menu worksheet and another worksheet for each quarter of the year in Microsoft Excel. It can be used for any commodity. It is flexible, easy to use and easily disseminated. Use of these tools should lead to more expeditious analyses of supply plans and forecasts while yielding estimates of the supply chain costs for a particular supply plan. A conceptual model for decreasing costs by combining supply chain costs with a standard purchasing price-parity point is presented. The purpose of this model is to provide purchasers another point of view based on total supply chain costs, including inventory write-offs due to decreasing memory prices and transportation costs.