Potentials and Impacts of Lead-Time Based Pricing in Semiconductor Supply Chains

Due to a significant increase in demand fluctuations in the semiconductor industry, triggered by the bullwhip effect, global supply chains are experiencing unprecedented difficulties. The industry's specific characteristics of short product life cycles, long lead times, and a highly competitive market environment are further decreasing flexibility, all while a robust and adjustable supply chain is required.

In order to enable greater flexibility, this study investigates the hypothesis that revenue management is better able to fulfil customer expectations while also increasing revenue in the semiconductor industry.

Using AnyLogic as supply chain management software, researchers tested this hypothesis in a discrete-event simulation. The work is based on a case study from a semiconductor company and underlines the possible beneficial effects of implementing lead-time based pricing.

Revenue management was defined as the “control and management of reservations inventory in a way that increases company profitability”. Thus, it guides allocation decisions of undifferentiated units of capacity in a way that maximizes revenue or profit.

This paper provides an overview of revenue management characteristics and methods and present its application in different industries in order to enable greater customer satisfaction and supply chain flexibility while increasing revenue.

The study indicates that global supply chains use revenue management methods in order to increase their revenue by 10% to 19% as well as to improve flexibility and customer satisfaction.

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