Modeling order assignment for semiconductor assembly hierarchical outsourcing and developing the decision support system

Outsourcing has become increasingly important in supply chain management. As the semiconductor industry is capital-intensive, semiconductor manufacturing companies focus on wafer fabrication as their core competence and outsource assembly and testing to a number of specialized vendors. The involved decision-making has multiple objectives such as (1) minimizing the number of delayed orders, (2) minimizing the allocation ratio differences, (3) minimizing the assembly cost, and (4) minimizing the product changeover times. To meet these objectives in practice, this study proposes an approach that employs mixed integer linear programming and goal programming to integrate multiple objectives and operational feasibility by considering mass orders, order fulfillment, capacity limits, logistics timetables, and a rolling mechanism in a real setting. Furthermore, we developed an order assignment decision support system embedded with the proposed approach for assigning assembly outsourcing orders and validated the system in a semiconductor company in Taiwan. The results have shown the practical viability of the proposed approach in terms of decision quality and computational efficiency. This study concludes with empirical findings and a discussion of future research directions.