Applying a MEIO approach to manage Intel's VMI Hub Supply

Abstract

To improve customer service levels, Intel implemented Vendor Managed Inventory (VMI) hub process for its Central Processing Unit (CPU) Finished Good (FG) inventory, which allows Intel's customers to pull inventory directly from the hubs. However, this process change resulted in increased inventory in Intel's overall supply chain and thus increased inventory costs. This work investigates reducing inventory cost by applying a Multi Echelon Inventory Optimization (MEIO) approach to manage Intel's VMI Hub Supply Chain. The goal is to evaluate the hypothesis that an MEIO approach for inventory management and replenishment will result in a more efficient use of FG inventory. To assess the hypothesis, we developed a three-step modeling framework. In each step, we conducted several experiments, applying the MEIO model approach, to determine the optimal CPU FG inventory stocking levels needed to meet customer service level goals for different products and locations. The study was concluded with quantitative and qualitative business impact of implementing an MEIO approach for Intel CPU FG Supply Chain. The MEIO modeling result shows significant inventory reduction opportunities and were presented to the Senior Management team of Intel Supply Chain.