Restructuring inventory location at semiconductor equipment manufacturing plant

Abstract

This thesis tackles the Supermarket (SMKT) material shortage problem at Varian Semiconductor Equipment and Associates (Varian), in a bid to improve the SMKTs On-Time Delivery. The SMKT is a sub-assembly area that creates intermediate assemblies in a multi-stage ion implanter production process. However, many sub- assemblies made in the SMKT are delivered late. When juxtaposed with Varians external suppliers, which have On-Time Delivery records of over 90%, the SMKTs average of 61% pales in comparison. SMKTs poor On-Time Delivery has been tied to production delays and rework downstream on the Flowline. From a large amount of data collected on-site, a SMKT material shortage problem is found to be the root cause of its unsatisfactory On-Time Delivery. Random supply shocks have resulted in material shortages, which in turn lead to late deliveries. The majority (i.e. 64%) of shortages is the result of having two inventory storage locations: SMKT and Varians Warehouse. To resolve the material shortage problem, Varian can consider consolidating its SMKT inventory to one single storage location, such as the Warehouse. This is expected to save Varian $467,488 per annum in labor hours and rent, free up 3,000 ft2 of production floor space for capacity expansion, and decrease cycle time of an oft-late sub-assembly called the Profiler by 11%. This is on top of eliminating the aforementioned 64% of shortages. The consolidation strategy will put Varian in a productive and competitive position to capitalize on the fast-growing semiconductor industry in the years ahead.