Policies for allocating product lots to customer orders in semiconductor manufacturing supply chains

A key decision for semiconductor suppliers is how to allocate available product lots to customer orders when demand exceeds supply. The problem, known as the generalised lot allocation (GLA) problem in semiconductor supply chains, can be formulated as a combinatorial optimisation problem with the objective of minimising total backorder and tardiness penalties as well as total product downgrade and product excess costs. The lot-integrity requirement, a de facto standard in the semiconductor industry, makes the problem non-deterministic polynomial-time (NP)-hard. Different lot allocation decision policies are evaluated and compared using representative data sets. Computational test results indicate composite allocation rule (CAR)-based policies can improve the quality of the solution and reduce the cost of the solution significantly.