DRAM Supply Chain Highlights

Optimization of supply-chain strategy for purchase and inventory of DRAM in the server manufacturing industry.

Issues

• Naïve purchase strategy ignored losses associated with potential supply shortages.
• No agility for changing purchase strategy in the face of changing DRAM prices.
• Analyst estimated several weeks for analysis in Excel, without including supply-shock effects.
• Analyst was making arbitrary choices of which data and statistical model to use in his analysis.

Provisdom's Solution

• Required only 1 week for complete analysis, including several extensions of the original problem (e.g., including uncertainty for DRAM utilization).
• Decreased seven-week cost of shortages and buying and storing DRAM in terms of shareholder value by 35%.
• Included all information deemed relevant by the client, such as possibility of supply shocks.
• Proper utilization of all available DRAM price data.

Results

• Seven-week shareholder value for DRAM purchase and usage increased from -$1.77 million to -$1.15 million.
• Time required: 1 week + 2 hours of client time.