The encyclopedia · Strategy & Leadership · Strategic decision · 1995
DEC's Global Supply Chain Model picked its worldwide network and saved over $100M
DEC's GSCM — a mixed-integer program spanning plants, vendors, duties and lead times — recommended a worldwide network and saved over $100 million.
Digital Equipment Corporation
the move
Digital Equipment Corporation (DEC) built computers and sold them worldwide, but its manufacturing, distribution and vendor decisions were scattered. Management needed to evaluate global supply-chain alternatives and set a worldwide manufacturing and distribution strategy — choices involving taxes, duties, local-content rules, offset trade, and long lead times.
The Global Supply Chain Model (GSCM) framed the whole network as one large mixed-integer linear program: multiple products and echelons, a global multi-product bill of materials, fixed and variable production charges, inventory, multi-mode distribution, taxes and duty drawback. It minimized cost, weighted cumulative production and distribution times, or both, subject to meeting estimated demand.
GSCM recommended a production, distribution and vendor network. DEC used the model's output to restructure its supply chain, and the restructuring saved over $100 million — the figure reported in the Interfaces paper by the DEC and university team that built the model.
why it works
- Local plant optimizations could not see duty, tax and lead-time trade-offs.
- One model captured every constraint that actually bound the network.
- Management got a single recommended network, not a stack of studies.
- The $100M+ saving came from decisions made once, at network scale.
what transfers
Fix the network, not the silo: one model trading off plants, vendors, duties and lead times beats local fixes, because the binding constraints live at system level.
what came after
GSCM became DEC's standard way to evaluate network changes, and the Interfaces paper became one of the journal's most-cited supply-chain articles, with over 800 citations by OpenAlex's count. DEC later merged into Compaq and then Hewlett-Packard, but the template — global mixed-integer supply-chain design — spread widely through industry.
references
- Global Supply Chain Management at Digital Equipment Corporation
- Global Supply Chain Management at Digital Equipment Corporation
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