Supply Chain Planning Blog

Why Lot Release is So Important in Semiconductor Manufacturing

Posted by Cyrus Hadavi on Thu, Jun 08, 2017

If I arrive on-time or early at the airport but there is a problem with the airplane and a long delay in the scheduled takeoff time, does it get me to my destination on time? Clearly the answer is No! Is it better for me to stay in the comfort of my home and go when I know the plane is ready to take off? Or even better, find another flight to my destination so that I get there on time. By going to the airport at the “wrong time” and waiting I am only increasing “WIP” or waiting time and I am also contributing to airport congestion which adds to the traffic and boarding of other flights possibly causing others to miss their flights.  Such problems can be avoided by an intelligent planner or, release strategy, that can figure out exactly what the right time is for me to leave home given the traffic situation, the speed of cars, the parking time and time it takes to go through security. This kind of predictive planning is ideal for releasing lots in a semiconductor manufacturing line where depending on the mix of products, availability of resources and masks as well as WIP, it can decide which lots should be released and which ones should be held back so that we meet the following three objectives optimally:

  • Cycle time
  • Equipment utilization
  • Delivery performance

The following diagram shows the relationship between these three parameters and how they change with WIP increase. In a high mix environment, increase in WIP does not necessarily imply additional wait times or delay in delivery because of multiple routes and balance of allocation of jobs by the system. The grey shaded area represents optimal region of operation where the desired objectives can be achieved.

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In environments where there is a high mix of products, such as foundries, we can increase the number of lots released without increasing their waiting time by ensuring that they are balanced across different bottleneck equipment such as lithography equipment. Given the complexity of such environments where each process has 400-600 steps using hundreds of equipment requiring anything from 10 minutes to 10 hours with highly sensitive set up times (implanters) or batching requirements (ovens), one has to intelligently look ahead and look behind to ensure proper balance of lots re-entering the process and or entering the process with different priorities.

Unfortunately, sequencing engines with simplistic rules have been given too much attention in order to solve such a complex problem. Through years of R&D, we have concluded that unless a proper release strategy is deployed, sequencing would not be of much value. It is a reactive engine not a preventive one. But more importantly, in the presence of an adequate release strategy, sequencing can be a liability in the sense that it would try to resolve issues locally not being aware of the potential issues it might be causing 50 steps later! Can you imagine being at the gate, and the airline personnel try to sequence your entry into the plane when the plane is not even at the gate or being fixed!

One other myth is the use of simulation tools to plan fabs! Simulation tools look nice and show movement. It is like a video game, we all enjoy watching it. However, they DO NOT PROVIDE a strategy. They only show you where the problem might lie ahead without telling you how to avoid it. How could they? They do not look ahead; by definition simulation is one sequence at a time!

As in our opening example, a good release strategy is aware of the right mix of products in the fab as well as the work load of each equipment, now and future, and is constantly trying to balance what needs to go next such that the bottlenecks, as they are changing, will be fully utilized and at the same time keeping in mind which lots need to be ready and when for on-time delivery. In fact, our research shows that in the presence of a good release strategy, a simple FIFO is the best sequence for the resources. In the context of our airport example, if you left your home at the right time, as you approach your gate, without much waiting, you will show your boarding pass and get into your seat for takeoff.  No need to be sequenced!

Topics: Supply Chain, Supply Chain Planning, Supply Chain Performance Management, Manufacturing Software, Manufacturing Planning, Inventory Optimization, Semiconductor, Factory Planning, Fabrication planning

Spreadsheets and Planning

Posted by Cyrus Hadavi on Wed, Apr 06, 2016

Givspreadsheet.jpgen that more than 90% of the enterprises in the world use spreadsheets in one form or another, one may conclude that spreadsheets are the most desirable and successful enterprise software in the world! So, why would you want tospend so much money and effort to invest in planning software? The justifications to use spreadsheets are that they are simple, easy to manipulate and they “do the job!”  There are a number of reasons, discussed below, that make spreadsheets inadequate for planning purposes. Mostly the fact that just an ad hoc plan can be far inferior to other more optimized plans; and in the absence of suitable systems and algorithms, one cannot tell one from the other. I am sure you have heard of the expression: good is the enemy of great! In case of spreadsheets, it is merely the perception of good that is preventing companies to do something exceptional and distance themselves from their competition! It is amazing that companies invest hundreds of millions of dollars in people and equipment and then rely on a simple spreadsheet to run their business and make use of the resources that they have so heavily invested in. Every one percent improvement in plan can translate into millions, if not tens of millions, of dollars in inventory savings and higher utilization of resources. In fact, it is more than just savings that need to be considered; it is more relevant to know that there are opportunities for increasing revenue and market share, by deploying adequate planning systems. More recently companies have been investing more heavily in supply chain execution systems such as warehouse management and logistics or even shop floor sequencing. The problem is that executing without a good plan results in a more efficient way of doing the wrong thing! What is the point of building and delivering the wrong goods to the wrong place in an “efficient” manner? Planning prevents making costly mistakes, it makes companies more responsive, it shows where to spend money before it is spent and it creates opportunities to expand market share by having the right product at the right place at the right time. A multinational CPG customer of Adexa with over 100distribution centers reduced inventory by 33%, reduced material cost by 5% and improved delivery performance by deploying planning systems that enable optimization and improve visibility of the entire supply chain. ROI for the project was over 2100% realized within half a month! The point is that before deploying Adexa, they were running a successful and profitable business but could not see the hidden potential of their supply chain and opportunities that could be exploited using a more sophisticated system.

There are many reasons that make spreadsheets less than ideal for planning purposes. Spreadsheets cannot account for mix of products (different mix results in different capacity needs and different lead-times). They assume fixed lead-time whereas in reality lead-times are variable depending on the mix. In addition, they do not take into account availability and synchronization of material and capacity at the same time. Furthermore, there are myriads of other constraints such as tool availability, setup times, batching possibility, process and product attributes etc. that all need to be accounted for that spreadsheets cannot model. Many users are fond of spreadsheets because they can manually manipulate the plan.  The question is why is there a need for manual interaction? The answer lies in the fact that the plan that is being created is not accurate enough to execute therefore requires manual adjustments.  The planning systems create an accurate and near-optimal plans such that little manual effort is needed.  Finally, spreadsheets cannot perform incremental planning, dynamic allocation and ATP/CTP, and the underlying models are static, deviating from reality the more they are used. As an example, one of our clients used to take up to two weeks to figure out delivery dates of orders to respond to its customers. It would take about a week of spreadsheet planning in their HQ in US and another week with their subcontractors in Asia. After they started using Adexa’s planning engine, the commitment dates to their customers have been practically instantaneous and more importantly accurate and reliable.

With the recent innovations in processor speed of computers and advances in programming and Artificial Intelligence, we are now in a position to accurately predict inventory requirements at every level of the supply chain by considering the probability of usage of every part# from raw material to WIP to finished goods. This allows companies to keep the right amount and mix of inventory at different stages of supply chain to maximize responsiveness at lowest cost of inventory. Such disruptive technologies help to save tens of millions of dollars in inventory cost and improving responsiveness dramatically.

When it comes to efficiency, use of spreadsheets to perform planning function is probably as good and efficient as using a bicycle to travel from Los Angeles to New York city! It gets the job done but …

Topics: Supply Chain, Supply Chain Planning, Inventory Planning, Excel, Spreadsheets, WIP, Manufacturing Planning, Inventory Optimization, CPG, Factory Planning, Material Planning, Scheduling, Business Planning, MRP

Inventory Optimization is like Baseball's Moneyball

Posted by kameron hadavi on Wed, Oct 10, 2012

iStock Baseball Money XSmall resized 600

How do the Oakland A’s achieve results like this at a fraction of cost of a team like the Yankee’s?

2002 New York Yankees: Team Salary $126 million; 103 Wins 59 Losses; Division Winner
2002 Oakland Athletics: Team Salary $ 40 million;   103 Wins, 59 Losses; Division Winner
2012 New York Yankees: Team Salary $198 million; 94 Wins 68 Losses; Division Winner
2012 Oakland Athletics: Team Salary $ 55 million;   93 Wins, 69 Losses; Division Winner

You have most likely seen or heard of the story behind the movie “Moneyball”.  In 2002 the Oakland Athletics had a very limited budget to “carry” their team roster through the season, and they still had to compete with topnotch teams in their league.  Some of the teams they had to compete with, like the Yankees, spent up to four times (4x) as much as they did on their “inventory” of ball players (i.e. “products” in baseball).   The A’s turned away from traditional thinking on how to allocate their budget to field a team, which meant relying on the gut feel of managers and buying the highest priced players.  Instead, they started to rely on “Sabermetrics”, the use of statistical analysis to determine the most cost-efficient baseball players based on measure of in-game activity/history.  Hence, based on mathematical models, the A’s figured out how to best optimize the team at every position on the field.  The result was that Oakland won 103 games in 2002, made it to the playoffs, and tied with the Yankees for most wins that season. Again, Yankees spent more than three times (3x) of what Oakland paid for its team, in the same year.

 
Coming back to the manufacturing world, in the same manner that Sabermetrics can help optimize the baseball players on a team, Multi Echelon Inventory Optimization (MEIO) can optimize your inventory that is deployed throughout your supply chain, in order to achieve target customer service levels, and maximize profit.  There are obvious parallels in taking the Moneyball philosophy to the optimization of inventories.  Instead of the General Manager in baseball using statistics to determine the best players to have on a baseball team, the Supply Chain Manager can use statistics and mathematical models in a MEIO system in order come up with the highest profitable scenarios.  By examining these scenarios, the Supply Chain Manager can decide how to right-size the inventory levels at different locations, and achieve targeted customer service levels, at the highest margins.


Of course, instead of baseball metrics (e.g. RBI’s, on base%, ERA, salary), there are statistical supply chain metrics (e.g. Demand variability, supply variability, BOM, Inventory value, etc.) that can be used to objectively calculate the value of each unit of inventory that you plan to place at a given “position” in your supply chain (e.g. Raw Materials, WIP, Finished Goods, etc.).  This would make it possible to optimize inventory deployment for meeting certain customer service objectives, and squeeze the most profit out of your supply chain, while not exceeding the budget allocated for working capital. 

 
The Oakland A’s are back in the playoffs again this year, with a budget that is one-third of the Bronx Bombers.  Not surprisingly, the use of statistics (i.e. the right system) is helping them get the most out of their small budget.  


Adexa has the equivalent of Moneyball’s Sabermetrics for your Supply Chain, it’s called the Inventory Optimizer to ensure each dollar of inventory is spent in the best possible way.

 

About the Author:  Bill Green is the Vice President of Solutions at Adexa, for more information about him please visit William Green profile link.    

Topics: Multi Echelon Inventory Optimization, Supply Chain Planning, Inventory Planning, MEIO, Inventory Management System, Manufacturing Software, Inventory Optimization, Inventory

Inventory Planning | What Does It Mean To Optimize Inventory?

Posted by Bill Green on Thu, Apr 22, 2010

Inventory Optimization

Many companies say that they want to Optimize Inventory, but they often have different things in mind when they say it. 

 

Of course, they are all looking to make better use of the inventory on-hand, and they all have the goal of keeping customer service high and inventory low.  However, what makes them different is that each company may have a dissimilar root cause as to why they are not doing better with it.

Inventory Planning

There are four main areas of supply chain planning to focus on when trying to get more from your inventory investment.  From top to bottom, and with different time-horizons, each one is critical to get the whole picture right, so it’s important to target them individually:

 

1) Reduce forecast error with better Demand Planning

2) Establish better inventory target levels with Multi-Echelon Inventory Optimization (MEIO)

3) Further synchronize supply flow with better Sales & Operations Planning

4) Improve daily Inventory Management

 

Reducing Forecast Error

The two key factors that will impact the amount of inventory that is required in a supply chain are lead-times and demand uncertainty.  Although, forecasts will always be wrong, there is a great deal that can be done to increase their accuracy with improvements in process and technology.  Remember, you have to do everything possible to be less wrong.  Forecasts and “consensus demand” (i.e. aggregation and agreement on one forecast number, by all departments) are also used to determine forecast error.  So, if a company does not have a strong process in place to facilitate collaboration, they will not be able to do well in any of the other areas. 

 

Demand Planning is a critical component of inventory management.  We have a new ePaper on this topic entitled: Planning Demand for Profit Driven Supply Chains.  Feel free to download it by clicking on the title.

 

Multi Echelon Inventory Optimization

The amount of inventory buffering should increase along with the value of a product, the amount of uncertainty in demand relative to the sales volume, and a company’s response time to deal with supply chain surprises. 

 

Where to place inventory can be very difficult to figure out in an end-to-end supply chain with many products.  There are many ways to rebalance how inventory budgets are allocated, inventory pooling and production postponement strategies can be complex and hard to execute, as planned.  A Multi-echelon Inventory Optimization (MEIO) system will enable a company to consider all of these in deciding where in the supply chain and how much inventory to have.  If your company is using a manual system, and pretty much guessing at how many days of coverage to have for each product, or does not have a good process in place to calculate statistical safety stock values and its “What-if” impact on customer service, then you should be looking into how an MEIO system can help your supply chain. 

 

If you would like more information on Inventory Management and its "Optimization", I recommend Reading this paper: Demystifying MEIO

 

Sales and Operations Planning

As part of the S&OP process a company needs to determine how to meet the inventory demand that comes from buffer stocks, forecasted demand, and backlog.  Or it may be that capacity or material constraints, or other operating efficiency concerns, drive a company to purchase or build inventory ahead of when it’s actually needed.  Regardless, the supply planning process that feeds a consensus S&OP plan is the place that these decisions are made.  If a company does not have a good S&OP process in place, then it will not be able to make good decisions around inventory.  Furthermore, if the S&OP system in place does not consider the effects of finite capacity, materials, and operating constraints, then control over inventory levels will not be achieved.

For more information about S&OP process, I suggest viewing this recorded webcast: S&OP 101: For all manufacturing executives

 

Inventory Management

Even with a perfect plan, a company cannot keep inventory low and customer service high unless they can execute on moving inventory through the supply chain to meet customer orders.  Better Inventory Management will give improved visibility of inventory through the supply chain and create the orders to move the inventory when required.  Inventory Management gets the target levels from the MEIO system, and then executes as orders and forecasts are received.  If a company does not have good visibility into inventory, forecasts, and orders then an improved Inventory Management system will surely help. 

A last thought, there are many areas of supply chain planning that can have an impact on reducing inventory and improving customer service.  Typically a company will focus on Demand Planning first, and then Inventory Management, while putting in place simple ways to set inventory target levels.  They would then focus on better inventory targets with MEIO systems and better supply side S&OP planning.  Each company is different, and it is important to address each area based on your needs.

 

About the Author:  Bill Green is the Vice President of Solutions at Adexa, for more information about him please visit his profile link.     

 

For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.

 

Topics: Multi Echelon Inventory Optimization, Supply Chain Planning, Inventory Planning, Inventory Management, Inventory Optimization, Sales & Operations Planning, S&OP

Multi Echelon Inventory Planning Demystified!

Posted by Cyrus Hadavi on Fri, Apr 16, 2010
 

Inventory PlanningInventory is a very interesting phenomenon! You never know exactly how much you need until you actually need it or you know you have excess until it is too late! The major problem, or should I say opportunity, is that inventory is a function of both time and randomness. Randomness has to do with your competitors pricing, quality, weather, economy, acts of God, contagious disease, strikes, etc.  All of these factors and many others have an impact on your demand. For example Toyota's quality problems lead to increase in demand for other auto makers, warm weather increases demand on beer, N1H1 outbreak increased the demand for certain type of medication.

So you ask yourself, how often do we have such events and should I care? The answer is Yes! Because the weather maybe more predictable than your competitor and your customers' forecast!  In other words, it is very hard to tell how your competitors are going to change the game and take market share from you, or how your customers can change the demand based on how they feel and market conditions. So it is a constant game of balance between Supply and Demand. If you play the game long enough then you should become an expert.   Just like chess you can develop strategies to make the right move and be prepared no matter what your competitor does or what the changes in demand are. Being prepared is what the science of inventory planning is all about. We refer to this as Inventory Optimization. It allows you to decide how much inventory is enough, where and when. The two factors that you need to be concerned about are Cost and Service Level. On one hand you can have every possible item available in Finished Goods which is inconceivable. Or keep no inventory, another unlikely scenario. People talk about "zero" inventory; I am not sure what this means?  Does it imply that every time I want to buy a note book, somebody needs to go out and chop a small tree down and put it through the paper mill?  But one thing is for sure, your optimized inventory level is some place between those two points.

Inventory planners, like any other type of planners, need to have their slide rule (some of you may not be as old as me to know what these are!) or their calculators, to figure out where and when they should keep inventory up and down the supply chain. This is a very complex problem even without the randomness that we talked about. There are many different products each with their own Bill-of-Material and different production routings and capacity requirements. Shared resources and inventory buffers, as well as raw materials, are needed to build and store intermediate products at different stages of production. Very often subcontractors, distribution centers, consignment locations, and hubs are also part of the equation. I think you all agree that spreadsheets are too simple and rigid to do the job even-though it is of the most widespread tools. Now let's add randomness and seasonality to this. Are we having fun or what?

Here is the good news, an MEIO (Multi echelon Inventory Optimization) system is designed to be the tool that inventory planners need to deal with exactly the kind of problems that we just talked about. It has the capability to model different layers of supply chain, take randomness into account at every stage, look at the cost and service level requirements, and then come up with how much of what needs to be kept at every critical point of the supply chain. And if you don't like what it proposes, you can change the parameters and run it again and it will give you other alternatives so that you can make a wise decision. Think of it like what a structural engineer does when she designs a high-rise. The load at every floor can be different, the structure may have to be resistant to winds of up to 60 miles an hour, and there might be earthquake and fire hazards to consider.  Given all these potential "random" events the structure needs to deliver certain level of safety (i.e. service level) to its residents. The optimization programs that Structural engineers use resembles very much the MEIO system that we described above. It shows you how to build a supply chain that can be resistant to changes at lowest cost. The only difference is that in our building analogy you do it once, hoping that it will last forever.  However, using an MEIO system, you have the opportunity to re-design your inventory plan on weekly or monthly basis so that your supply chain can withstand new conditions. That is the beauty of a system which allows you to have enough flexibility to change with your demand, business conditions, management objectives, and moves of your competitors!

Multi Echelon Inventory Optimization systems are fairly new in the market but picking up a lot of momentum by helping to solve a common and complex supply chain problem--as Demand Planning systems did starting a decade ago.  The right MEIO solution can make your supply chain a lot more efficient, save a bunch of money, and most important of all make your customers very happy.

We have a comperhensive ePaper on this topic, just click on: Demystifying MEIO.

 

Cyrus HadaviDr. K. Cyrus Hadavi is the president and CEO of Adexa, for more information about the author please click here.  

 

 

For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.

Topics: Multi Echelon Inventory Optimization, Demand Planning, Inventory Planning, MEIO, Inventory Management System, Finished Goods, Inventory Optimization

Supply Chain Inventory: Good or Evil?

Posted by Cyrus Hadavi on Mon, Mar 15, 2010
Inventory Planning What do all manufacturing companies, regardless of industry, have in common? Inventory! It's the lifeline of every company that sells goods. How can it be evil?

Inventory to a supply chain is like water to people. Too much of it would drown you. Too little makes you dysfunctional. So how much is enough? Just as in people, the real question is how fast are you running? Hence, the amount of inventory you need has to do with how fast you can move it. In addition to knowing how much is needed, you also need to know when and where you need the inventory. The fact is that, just like energy, inventory does not get destroyed but transforms from one type to another. And the decision is yours as when you want to transform it from Raw inventory to Work-in-Progress, to Finished-goods; or to decide when to bring it to your site, or move it to another location. These are tough decisions to make, with potentially big impacts on your supply chain. You see, inventory planning is based on a very large number of potential configurations of product types, locations, and timing based on demand and supply factors. So making good decisions about what to do with your inventory can be very complicated! But wait I am not done yet! On top of all these factors, you also have to worry about Acts-of-God, Mother-Nature and even "luck". Yes, luck! In our customer base, we have a major brewery with demand that swings heavily based on weather during the holiday weekends. We also know of a major food processing company in South Africa that is already planning for spikes in demand for "chicken" during the 2010 World Cup. Other examples, SARS in Asia caused shortages of high-tech semiconductor components, and H1N1 Vaccine was in serious shortage, just recently. .

So back to the question: How much, where and when? Most supply chains have many different layers of inventory or echelons. Examples are raw material, buffers in between sites, WIP, finished-goods, distribution centers, consignment locations and more. At any given time, for each layer of the supply chain, decisions need to be made regarding how much, and what type of inventory is needed to maximize your service levels, and minimize your cost. A simple question like that for even a few products can be complex, for hundreds or thousands of products can be mind-boggling, especially when you bring in chance and probability.

OK, here is the good news: MEIO. Multi Echelon Inventory Optimization is designed to do precisely what we have talked about, i.e. minimize your cost of reaching targeted service levels. MEIO deals with the elements of chance and probability at every layer of the supply chain and keeps a tight-eye on cost factors. It knows that Raw material costs a lot less than Finished-goods and has the potential to transform to what the market needs. In other words, MEIO takes into account postponement strategies and the potential to deliver a certain level of service. As the user specifies higher service levels, the system shows the potential increases in cost and recommends what to get, and where to keep it, in order to protect against surprises. It is really cool. And the good thing is that it will save you a significant amount of money in a short period of time.

So you owe it to your company to ask: Do we have enough of what it takes to deliver what we need? Are we losing money for keeping too much or losing opportunities, and market share, because we don't have enough? If you know the answer to these questions, do nothing and you are in great shape. If not, take a look at what MEIO can do for your company.

Inventory is GOOD only if there is the right amount, in the right place, at the right time! MEIO shows you what the "right" is for you.

Cyrus HadaviDr. K. Cyrus Hadavi is the president and CEO of Adexa, for more information about the author please click here.



For more information about different types of Supply Chain Planning systems visit: Demand Planning, Inventory Planning, or Sales and Operations Planning.


Topics: Multi Echelon Inventory Optimization, Demand Planning, Inventory Planning, MEIO, WIP, Finished Goods, Inventory Optimization