Applied Materials uses operations research to design its service and parts network

Date
2010
Authors
Şen, A.
Bhatia, D.
Doǧan, K.
Advisor
Instructor
Source Title
Interfaces
Print ISSN
1359-0820
Electronic ISSN
Publisher
Institute for Operations Research and the Management Sciences (INFORMS)
Volume
40
Issue
4
Pages
253 - 266
Language
English
Type
Article
Journal Title
Journal ISSN
Volume Title
Abstract

Applied Materials Inc. is the global leader in nanomanufacturing technology solutions. It has a broad portfolio of innovative equipment, service, and software products and supports its customers worldwide with an extensive service and parts network with more than 100 locations. At the end of 2006, Applied Materials decided to evaluate and rationalize the design of its North American network. It set up a detailed optimization model (including 50,000 parts) to develop a network and distribution strategy. To our knowledge, this is the first large-scale multiechelon network-design model that incorporates safety stock inventory costs while considering the effects of lead time and risk pooling. The company used the model's recommendations to reduce costs while maintaining or improving its service to customers. The recommendations included simplifying the distribution network by consolidating depot locations for specific customers and skipping an echelon for others, thus leading to a projected inventory reduction of $10 million. The company is currently implementing these recommendations and has already eliminated five depots. Applied Materials estimates that during the first year of implementation, inventory reductions of $5.24 million and total savings of $1.1 million can be attributed to these network changes.

Course
Other identifiers
Book Title
Keywords
Facilities-equipment planning, Industries, Location, Semiconductor, Service
Citation
Published Version (Please cite this version)