Supply Chain Optimization to Mitigate Electronic Components Shortage in Manufacturing of Telecommunications Network Equipment

A typical challenge in supply chain management is to deal with unbalanced demand caused by either a rapid increase in demand or an abrupt decrease in supply. This problem is particularly pertinent to manufacturing of telecommunications network equipment where standard electronic components, that are commonly used across multiple industries, are utilized. High market demand for components increases the risk of delivery gaps which, in turn, might negatively affect manufacturing and products' deliveries. Therefore, this paper proposes an optimal approach based on Integer Linear Programming (ILP) to allocating finished goods to customers and raw materials to products in the presence of real-world constraints, especially raw materials shortage. Two practical use cases are discussed to demonstrate feasibility of the developed approach: 1) verification whether an ad-hoc increase in components supply at a premium cost translates into an increased production output and is thus to commercial benefit; 2) evaluation of commercial implications of prioritizing deliveries to selected customers. The importance of the presented work is exemplified on an anonymized real-world supply, demand, production, and financial data. The proposed optimization algorithm is a key enabler of a systematic supply chain decision-making framework, enabling quick response to challenging supply situations thanks to combining optimization techniques with data-driven business paradigm.