Reference no: EM133393651

Learning outcome 1: Critically evaluate different procurement and inventory management strategies, processes, and organizational concepts and their links to further areas of the logistics system.

Learning outcome 2. Appraise and adapt the supplier selection process under different supply chain scenarios within the procurement and inventory management processes.

Learning outcome 3. Implement advanced techniques to calculate adequate stock levels for different stock categories considering logistics and financial aspects

Learning outcome 4. Manage procurement and inventory risks arising from changes in customer markets and their impact on demand and supply along multiple stage of the supply chain.

Assignment Brief

Semiconductor Chips Case Study

‘When chip shortages first shut down automotive production lines in 2021, the semiconductor industry found itself in an unaccustomed spotlight. Suddenly everyone was talking about the tiny chips that enable so many different car functions, from interior lighting to seat control to blind-spot detection. When some high-tech and consumer-electronics companies began to experience chip shortages or voiced concerns about supply chains, the attention intensified. It's now clear to all: We are living in a semiconductor world' (World Economic Forum, 2022).
‘Over the last decade, revenues generated by the global semiconductor industry have steadily increased, surpassing 550 billion U.S. dollars in 2021. In the coming years, semiconductor market revenues are expected to grow further, with predictions suggesting that the market will grow once more in 2022 to more than 600 billion U.S. dollars' (Statista, 2022).

The Covid-19 pandemic brought a multitude of disruptions that heavily affected the semiconductor, or chip, supply chain. Automakers cut their chip orders in early 2020 as vehicles sales fell (Burkacky et al., 2022). However, by the time demand recovered faster than was anticipated in the second half of 2020, the industry had already repositioned its sales to meet demand from other applications (World Economic Forum, 2022).
However, the current chip shortage is unlikely to be resolved soon, partly because of the complexities of the semiconductor production process. Typical lead times can exceed four months for products that are already well established in a manufacturing line (see Figure 2 below, Burkacky, et al., 2022). Increasing capacity by moving a product to another manufacturing site usually adds another six months (even in existing plants). Switching to a different manufacturer typically adds another year or more because the chip's design requires alterations to match the specific manufacturing processes of the new partner. And some chips can contain manufacturer-specific intellectual property that may require alterations or licensing.
‘Many companies that need semiconductors are already reconsidering their long-term procurement strategies. Some, for instance, may shift from a "just-in-time" ordering model, which helps minimize inventory costs, to one in which they order semiconductors far in advance. For their part, many semiconductor companies are adjusting their long-standing strategies to remain strong' (World Economic Forum, 2022).

You have just been hired by one of the leading automotive companies as their Chief Procurement Officer. The company is currently facing considerable delays and stoppage on their production lines due to shortages of semiconductor chips in all electronically controlled components. You have been asked to develop a new procurement strategy and processes for semiconductors, considering the new global market environment.

Q1.Procurement Management
In response to the changing global market for semiconductors, as the Chief Procurement Officer, you are asked re-evaluate the position of semiconductors category within your company. You are also asked to identify your position as a customer in the market in relation to the availability of supply. Develop a new sourcing and supplier relationship management strategy based on the new category positioning.

Q2. Inventory Management
Identify and recommend suitable inventory management tools and control policies that could be implemented to increase resilience across the semiconductor category. Discuss which performance indicators you would apply as a measure of your inventory resilience. (Hint: consider integrating 9-box model, different forecasting techniques, predictive analysis, service level and review level in you answer development).