Semiconductor supply chains face structural boom--bust cycles driven by long and rigid production lead times, demand volatility, and capacity scarcity. To create

planning stability, many manufacturers use Customer Program Vendor-Managed Inventory (CP-VMI) agreements. These contracts specify forecast commitments

(e.g., weeks 1--6 fixed), pacing rules (e.g., 95\% pull requirements), upside flexibility caps, and liability clauses for forecast reductions.

 

These mechanisms aim to stabilize near-term demand signals. However, during boom or bust periods, contractual constraints may cause customers to pad forecasts,

delay downward revisions, or trigger end-period pull spikes. As a result, the manufacturer’s planning signal may diverge from true consumption—especially at market turning points.

 

Problem Statement

CP-VMI is designed for environments with stable demand. Semiconductor boom--bust cycles violate this assumption. It is currently unclear:

• whether CP-VMI mechanisms dampen or amplify planning signal distortion,
• how contract rules interact with cyclical demand regimes,
• and which CP-VMI configurations improve robustness to bust-driven demand collapses and boom-driven surges.

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