Triage and treatment of strategic and operational problems in a semiconductor equipment consumables manufacturing company

Abstract

The company studied in this internship project supplies consumable copper components to the semiconductor equipment industry. Growing in this industry has been much more difficult than the company's original 1995 business plan had anticipated. Customers' aversion to change, intolerance for failure, and competitive reactions (some customers are also competitors) have all taken their toll on the company's ability to establish itself in this industry. The business is currently under pressure from corporate management to improve its financial performance, which has not met corporate goals since the company's inception. It has been unable to win production volume orders from customers; thus economies of scale in production have been unachievable. Further, the delivery performance of several suppliers and the aggregate supply chain are very poor. Although the company's technology is still being developed to accommodate some unique wafer fabrication process challenges, the semiconductor industry has little tolerance for product test failures. Several such failures have degraded the company's reputation as a viable solution provider for some fab (semiconductor fabrication facility) processes. There is no systematic process for order fulfillment in place and many important tasks frequently fall between the cracks. The company is also constrained for both personnel and financial resources. A significant portion of the limited personnel resources is spent tending to emergency situations and performing repetitive tasks. Lack of personnel resources, inefficient business processes, and corporate pressures for performance improvements have necessitated a short-term business focus. Thus many strategic and fundamental issues have become secondary. This work took a triage perspective on the problems defined above. The internship began with a problem definition phase. Interviews were scheduled with each of the company's employees to define the internal perspective on the company's situation. Then, the author immersed himself in the company's value chain and took on temporary responsibility for processing several customer orders through the order fulfillment process. The author's perspective was combined with those of the internal players and a list of priority problems was created for further investigation. A common theme throughout all interviews and experiences in the value chain was a lack of understanding of costs. It quickly became clear that the organization did not have an accurate means of calculating either overhead costs or the costs of an anodizing operation across product families. In light of the recent corporate pressures to improve financial performance, this area was chosen early as one on which to focus the author's efforts. Several cost models were developed and iterated to provide insights on several cost issues. In particular, models were developed to predict the effects of demand mix and volume upon product costs, the ability of the company's anodizing facility to produce forecasted or hypothetical volume levels, the impact of reductions in anodizing line downtime downtime, and the implications for cost and relationships of a proposed contract with a new anodizing supplier. Several of these models became tools for the business to utilize in improving the accuracy of the cost estimates it uses in quoting. Other issues were much more ambiguous. In particular, the various members of the company had described the extraordinary test results achieved by their product relative to the product currently available in the market. Yet, in over three years, the company had been unable to penetrate the market with significant volumes in production fab processes. Each employee seemed to have a different opinion as to why the organization had failed to be successful. These inconsistencies drove the author to design and administer a voice-of-the-customer (VOC) survey with several different customers. The goal of the survey was to get all employees on the same page and to provide customer opinions as to what the most critical areas for improvement were. The survey uncovered several large problems. Some of the problems were too technical and lengthy in time commitment to justify further work during this project. One area that was rated as being an important problem by customers was delivery performance. In fact, this problem would become much more of a roadblock as the company got closer to winning contracts to provide consumables to production fab processes, especially given the generally high expectations of this industry and the ongoing fab efforts to reduce inventories. Delivery performance was found to be significantly affected by machining supplier delivery performance, anodizing supplier delivery performance, and internal order processing systems (or lack thereof). Each of these areas was investigated and diagnosed. Supplier discussions and surveys were critical to understanding the root cause of the supplier delivery problems.