improvement of master production planning …ieomsociety.org/ieom_2016/pdfs/263.pdf · rough cut...

Proceedings of the 2016 International Conference on Industrial Engineering and Operations Management Kuala Lumpur, Malaysia, March 8-10, 2016

IMPROVEMENT OF MASTER PRODUCTION PLANNING IN A SEMI-CONDUCTOR

MANUFACTURER Waralak Maneefun1 and Parames Chutima1, 2*

1Department of Industrial Engineering, Faculty of Engineering Chulalongkorn University, Bangkok, Thailand 10330

2Regional Centre for Manufacturing Systems Engineering, Faculty of Engineering Chulalongkorn University, Bangkok, Thailand 10330

[email protected], [email protected]

Abstract— The case study company is a semi-conductor manufacturer that produces semi-conductor devices according to customers’ demand. These devices are locally and globally supplied to various industries such as automotive and electrical appliances industries. Master production planning is necessary for the company to realize customer demands in a cost effective manner. By analyzing its historical data, it was revealed that the production amounts in some months were much lower than the capacity of the factory while the master plan of those months established prior to the actual production started at the beginning of the months indicated that the full capacity had already been committed, and vice versa. This inaccurate planning makes the company to substantially loose sales opportunity and profit. In this study, the current planning process of the company was thoroughly analyzed to pinpoint where the main deficiencies were. It was found that planning staff make their own plans and tolerances without considering holistic requirements. As a result, the restructure of the staff involved in planning decisions was necessary. New procedures and work instructions were developed according to the concepts of master production planning and rough-cut capacity planning for achieving centralize planning. Computer software was also employed to facilitate the planning process. The result indicated that the planning process is improved significantly in terms of shortened planning time and much more accuracy. Moreover, the company gained more effective capability to commit to customer’s demand.

Keywords— Master Production Planning; Rough-Cut Capacity Planning; Process Improvement

I. INTRODUCTION Master production planning is necessary for all manufacturers to realize customer demands in a cost effective manner by

considering all consolidate planned operations and parts. Aggregate production planning is a problem of deciding how to vary production capacity, keep stock, and subcontract to satisfy a seasonal demand in the most effective way. It is a medium-term planning whereby its planning horizon is usually from 6 to 18 months [1], [2]. The quantity of outsourcing, subcontracting of items, overtime of labor, numbers of workers to be hired and fired in each period and the amount of inventory to be held in stock and to be backlogged for each period are decided. All of these activities are done within the framework of the company ethics, policies, and long term commitment to the society, community and the country of operation. Aggregate planning has certain prerequisite inputs which are inevitable, i.e. (1) Information about the resources and the facilities available, (2) Demand forecast for the period for which the planning has to be done, and (3) Cost of various alternatives and resources [3].

Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products [4]. It is a challenging task in the semiconductor manufacturing industry. The industry supplies integrated circuit devices to many end-product industries such as automotive, computer, communications, and electronics, which have dynamic market demands themselves. Due to the bullwhip effect of the supply chain [5], the demand as faced by semiconductor manufacturers is very volatile and the industry is plagued with repeating cycles of over- and under- capacity [6]. In this industry, the clean room of the factory are built first and machines are installed gradually over time. Depending on the market condition, it usually takes 2–3 years to build up a factory to its full capacity. Thus, capacity expansion is usually a continuing and dynamic process of small increments. This is quite different from capacity expansion of most other industries, in which expansion projects have a well-planned schedule. It is believed that this continuous nature warrants some rethinking of investment analysis. Capacity planning and investment is a strategic issue in the semiconductor manufacturing industry [7]. Therefore, capacity planner should consider about the machine investment in order to integrate capacity planning with business planning and justify how to provide a suitable solution or alternative plan to response and commit the customers’ demand.

*Corresponding author

1007© IEOM Society International


Rough cut capacity planning (RCCP) [8] is used to examine the effects of the proposed master production schedule (MPS) on key work centers, departments and machines. During RCCP, work centers with insufficient capacities are identified. The capacity required at each selected work center is then calculated using the proposed MPS. If the required capacity exceeds the available capacity at one or more work centers, the MPS must be modified. Every time the MPS is amended, its effects on key resources must be re-examined as well. Thus, RCCP is an iterative process for which the computer is well suited. The process ends when the MPS appears to be feasible [9]. Whenever RCCP indicates short-term capacity shortages that render a MPS/MRP infeasible, the plant manager has a number of options to select, e.g. (1) Get more capacity by subcontracting a number of orders, (2) Work longer and/or in more shifts (overtime), (3) Cancel orders, (4) Delay product delivery date, and (5) Re-arrange the production plan to balance the system (if possible) and produce some orders earlier if capacity and storagespace allows [10]. However, there is some restrictions for alternative plans to solve the problem of capacity shortagedepending on the company policy and can be varied from industry to industry. The knowledge of aggregate planning andRCCP can be used to improve the planning process in master production planning in order to response to the changes incustomers’ demand and increase the planning staff’s capability effectively. It is useful for planner to understand the steps ofthinking and capacity production planning, and adopt the concept to integrate and improve the planning process to make itsuitable with the operational procedure of the company.

II. PROBLEM STATEMENT

The case study company is operated from Monday to Saturday as normal working days. Sunday is a holiday and it is considered as an overtime similar to the other official holidays if needed. There are 2 working shifts of full-time workers that some compulsory overtimes in the evening is forced to operate the plant with 24 hours a day. According to the policy and ethics, the company will not fire any workers without any sensible justification but can consider to hire more workers if requested by the management. When the company works as a subcontractor, it is not allow to further subcontract to another company according to the legal contract. Due to the make-to-order production and the principle material is a die which is provided by customers, finished good inventory cannot be made in advance. Thus, all regulations and assumptions to be compromised in analyzing and master production planning are restricted with these conditions. As a result, the only alternative plans that can be applied in master production planning of this company are only to work overtimes and hire more operators.

There are three concerned departments involving in production planning, i.e. (1) Industrial Engineering department providing the machine capacity and alternative plan to increase capacity according to customers’ demand, (2). Material Control department providing the materials required to fulfill the customers’ requirement, and (3) Production Planning and Control department providing the commitment to customer and daily production schedule. All concerned departments make their plans separately with minimum consultation with each other. Manufacturing and Engineering departments are also acted as observant and sometimes give necessary advices about concerned activities to response the customers’ demand.

The production process is quite complicated and various depending on the types of packages and customers’ requirement. Main general process flow starts from grinding the wafer provided by the customers, then inspecting, sawing, die attaching on frame, wire bonding, molding, marking, de flashing, trimming and forming, final inspecting, packing and shipping to the customers. It requires a lot of specified data and information about machine capability and parameters from Engineering department, specific requirement of demand from Sales and Customer Service department, and machine capacity by product by machine from Industrial Engineering department in capacity calculation. The complete data may take a long time to collect since they are scattering in many sources.

Normally, an annual long-term production plan is made for 1-3 years ahead and monthly medium-term plan is made for 6 months rolling in order to foresee and check whether the current capacity is enough to support the customer’s demand or not. Otherwise, alternative plans to achieve more capacity such as adding overtimes, providing new machines, hiring more headcounts, and planning for production expansion, etc. will be considered. The planning process starts from sales getting demand from the customers and keys in the computer system. Customer Service department coordinates and communicates with engineers and customers to convert the customers’ demand into generic manufacturing products. Then, Industrial Engineering department considers the capacity requirement and commit the customers’ demand in terms of capacity concerns and material control considers the material requirement and commit the customers’ demand in terms of material concerns. Finally, the final commitment is conducted by Production Planning and Control department with their own justification by considering the data of capacity and material commitment. However, planning staff do not have enough understanding and knowledge about master production planning. It was found that they make their own plans and tolerances without considering holistic requirements. The current planning procedure and process flow do not comply with the concept of master production planning or aggregate planning. It does only rough cut capacity analysis and material requirement planning but skipping the aggregate capacity planning. In addition, rough cut capacity analysis is done for some operations that may have capacity impacts or being highlighted from the previous cycle without considering the major and special operations that should be really considered. The redundant commitments are also approximated by various concerned departments separately. The process to commit to the customer’s demand is confusing and time consuming causing a highly deviated capacity commitment. Also, the calculation method is complicated and not flexible for any adjustments to the changes in the customers’ demand. The



calculation is considered according to the package group or capacity by operation or by machine model but not analyzed in detail with the product capacity. Therefore, the result is always different dramatically from the product capacity that it should be. Moreover, the measurement unit is not a good representative and commonly cannot describe the difference of resource requirement among the packages. It cannot provides implication and guidance to the planner to decide or know how many capacity or available capacity that company has because each products has its own characteristic in terms of capacity. Also, the calculation software was developed for a long time ago and not up-to-date. Many job functions have to be done with many consequentially steps by manual. It is distinctive by each operations and not in general format and thus calculation cannot be done for all major and special concerned operations. Therefore, planners can overlook some major or special concerned operations and make the decision for customer’s commitment incorrectly. Capacity planning report is separated in parts to see by operations and cannot be viewed in one page report causing the planners cannot see the overall concerned capacity in planning.

From the historical planning data from January 2015 - November 2015, it was found that capacity planning accepted many overtimes that was exceeded the actual requirements. This occurs when the planner do not know the exactly capacity and demands in each cycle leading to the grant of over-provided overtimes. When the calculation is superficial, the customers’ commitment may be incorrect. By analyzing its historical data, it was revealed that the production amounts in some months were much lower than the capacity of the factory while the master plan of those months established prior to the actual production started at the beginning of the months indicated that the full capacity had already been committed, and vice versa. This inaccurate planning makes the company to substantially loose sales opportunity and profit. Also, the capacity cannot be utilized as much as it should be.

III. PROCESS IMPROVEMENT The proposed capacity planning procedure was developed and setup under the agreement in the meeting of all planning

parties consisting of Industrial Engineer, Material Control planner, and Production Planning and Control planner. The meeting was conducted many times to discuss and conclude the effective way of working. The proposed procedure with some examples of capacity planning data are shown and then the proposed capacity planning procedure is developed together. Many concerns and recommendations are highlighted in the meeting for the next improvement. Also, the trial runs with calculation of aggregate capacity planning and rough cut capacity planning or capacity requirement planning were conducted for one cycle of capacity planning to confirm the appropriateness of the procedure. To proceed the steps as proposed in capacity planning procedure of the company, a new work instruction was provided and trained to all concerned departments. The procedure flow of current capacity planning and new proposed improvement are illustrated in Figure 1.

Figure 1. Comparison of current capacity planning procedure and proposed capacity planning procedures

Procedure of Current Capacity Planning Procedure of Proposed Capacity Planning

IE PC MC IE PC MC

No No

Yes YesT1 T1

T2

T2

Yes

Yes

No No

T3 YesYes

No NoT3

T4

T4

No

T5Yes Std T-Duration 1 day if Aggregate is available

Std T-Duratiion 5 days 4 days if Rough-Cut needs to be considered

Demand in RFIS (Cut-off)Rolling 6 months forecast

IE Analysis(Rough-Cut Capacity)

MC AnalysisMRP

IE review CIE/ DM/ Corp FA

Re-Commit/ Confirm Commit

Material CommitCapacity Commit

Final Alternative Plan to support Demand

Review/ Adjustment

Draft Commit

Provide Aggregate Normal Capacity VS Aggregate Max

Demand in RFIS (Cut-off)Rolling 6 months forecast

Discuss Meeting

Priority Analysis (Rough-Cut Capacity)

MC AnalysisMRP

IE review CIE/ DM/ Corp FA Final Alternative Plan to support Demand

Commit

Sales get demand from Cust and key into system

CS match Demand Product with Mfg Product

IT generate the Demand report IT generate the Demand report

Sales get demand from Cust and key into system

CS match Demand Product with Mfg Product

Match with BOM and BOR

Engineer Review, Qual

Match with BOM and BOR

Engineer Review, Qual

Define Bottleneck: Constraint operations

Provide Aggregate Demand and compared with Aggregate Capacity Level

Commit changed from Aggregate ?

Demand <= Capacity ?

Consider Demand vs Capacity by major operations

Re-Discuss Meeting(IE, PC, MC)

Re-Provide Capacity Re-Commit

Consider Demand vs Capacity by major operations

Roughly Consider Demand whether it requires OT or not

Discuss Meeting

Demand <= Capacity ?

Add more OT ?

Re-Provide Capacity Commit

Commit changed from Draft ?



To comply the procedure and process flow with the production planning concept, a new improvement of master production planning that adopted the aggregate planning and rough cut capacity planning concepts is proposed. The simple approach between current and proposed algorithm of the process flow to do capacity production planning are illustrated in Figure 2. First, bottleneck operation is defined for the proposed approach. The overtime is applied according to customers’ demand and special requirement in some operations instead of maximum overtime as current. Instead of individual consideration about capacity and materials, and calculation of material requirement according to customers’ demand at the beginning phase of production planning, the concept of aggregate production planning is proposed to do first among all concerned persons consisting of industrial engineer, material control and production planning and control staffs in order to make a decision together. It requires to know the bottleneck or constraint operations to provide aggregate capacity both with normal working days and maximum working days with overtimes. Then, the customers’ demand is converted to the same measurement unit as capacity in order to be compared and see whether aggregate capacity can support the customers’ demand or not and how many overtimes are required to serve the requirement. This can provide the primary commitment to the customers with totally agreed from all concerned planning staffs.

Figure 2. Comparison of current approach and proposed approach to do capacity planning



Rough cut capacity planning is also applied to verify and validate the master plan against key and critical resources before using the planning process to generate detailed material requirement plan. If there is anything changed with the primary decision to commit capacity with the customers, the meeting is called upon to inform, discuss, and make a new decision together with the planning team. When the commitment is finalized, the Material Control department plans about material requirements in detail to support the capacity commitment and production plan.

In addition, the computer software for calculation both aggregate capacity planning and rough cut capacity planning is developed for easier to use and understand. It is generic and can cover all necessary requirements for every major concerned or special operations that may have capacity impacts. The report was generated in a one-page format to present the overview plan in the meeting that can include all important information for decision making about capacity planning. Moreover, it was flexible to adjust to any changes in demand or capacity consideration that can show the result in sudden.

IV. RESULTS AND DISCUSSION Having implemented the new proposed procedure in the company, the result indicated that the planning process is

improved significantly in terms of shortened planning time and much more accuracy. The process time of planning can be reduced from five working days to as much as one working day for the basic requirement, or four working days for the special requirement. Also, the newly developed computer software for calculation can support by product consideration in detail instead of product group. As a result, much more accuracy of the calculation and the result can be acquired. The planning time of the Industrial Engineering department is shortened from 16 working hours to only 4-6 working hours. Moreover, the company gained more effective capability to commit to customer’s demand. In terms of cost, the overtime can be granted according to the requirements in overall and specific operations; hence, it can be reduced by 28.5 days per 6-month cycle. As shown in Table 1, the customers’ commitment can be improved by 2.7% or about 44 million units per cycle. Consequently, the company can consider to commit the customer’s demand more than previously and can get more opportunity to take the business and gain more revenue about 2.2 million US$. Also, the result showed that the percentage of capacity utilization can be increased by 5%.

Table 1. Capacity production planning with improvement in % commitment and % utilization

V. CONCLUSION In this study, the concept of master production planning is discussed and adapted among planning staffs. New procedures,

work instructions, and job descriptions of the Industrial Engineering, Material Control, and Production Planning and Control staffs concerning with planning process are re-written and developed according to the new proposed improvement of planning process to achieve centralize planning. The computer software is also employed to facilitate the planning process. It is also developed to be easier to use and adjustable to any changes or additional demands from the customer. It integrates the calculation files of each operation into one calculation software of production planning and can summarize the result of key and critical operations in one page. It is able to re-calculate by putting the customers’ demand in manufacturing products into the provided format and convert it to the required measurement unit of demand similar to the capacity. Following a few steps in developing production planning computer software, the calculation is done and the result can be provided in a short time. This is applicable both in analyzing phase of aggregate capacity and rough cut capacity planning. It is showed in form of general format to understand and capable to see along the all critical process and find out which ones are constraint. Due to special requirements from each customers, the process flow is complicated and this summary can display the special operations obscured from the whole picture of consideration in constraint capacity concerns. Therefore, it can conclude that the company gain more benefits and many advantages from this kind of improvement in production capacity planning. However, the capacity planning procedure and calculation software should be studied further and developed to match and serve with the company requirements in order to get the most advantages in the future.

Month Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5 Cycle 6 Cycle 7 Cycle 8 Cycle 9 Cycle 10 Cycle 11Normal Working day Days 149.00 146.00 147.00 148.00 150.00 151.00 151.00 150.00 149.00 150.00 149.00

Current OT days Days 20.10 24.20 27.60 28.00 30.60 27.80 29.40 15.60 20.20 19.00 18.60 Demand K.units 1,436,401 1,537,154 1,531,262 1,495,489 1,635,410 1,497,924 1,491,271 1,458,202 1,497,288 1,605,292 1,355,538 Capacity K.units 1,549,168 1,587,408 1,567,804 1,548,589 1,591,383 1,533,496 1,584,080 1,513,008 1,537,530 1,565,770 1,521,741 Commit/Roll Over K.units 1,399,438 1,517,489 1,517,604 1,483,789 1,583,150 1,493,469 1,491,271 1,456,489 1,472,057 1,560,213 1,355,538 Total Decommit K.units 36,963 32,552 28,360 11,722 52,260 4,455 - 1,610 25,231 45,270 - % Utilization 90% 96% 97% 96% 99% 97% 94% 96% 96% 100% 89%

Proposed OT days Days 0.27 4.96 3.05 1.46 9.92 - 0.87 0.87 2.96 10.55 - Demand Hrs 775,477 852,582 845,543 837,267 916,201 841,108 856,185 817,091 857,213 917,903 782,377 Capacity Hrs 838,000 864,903 859,697 856,307 916,201 865,119 870,094 870,094 870,598 919,853 853,660 Commit/Roll Over K.units 1,436,122 1,516,955 1,530,536 1,495,489 1,618,240 1,497,924 1,491,271 1,457,427 1,497,288 1,603,749 1,355,359 Total Decommit K.units 279 20,199 726 - 17,170 - - 775 - 1,325 179 % Utilization 93% 97% 98% 98% 99% 97% 98% 94% 98% 100% 92%% Improvement (Util) 2% 2% 2% 2% -1% 0% 5% -2% 3% 0% 3%Improvement in OT days 19.83 19.24 24.55 26.54 20.68 27.80 28.53 14.73 17.24 8.45 18.60 % Decommit (Current) 2.6% 2.1% 1.9% 0.8% 3.2% 0.3% 0.0% 0.1% 1.7% 2.8% 0.0%% Decommit (Proposed) 0.0% 1.3% 0.0% 0.0% 1.0% 0.0% 0.0% 0.1% 0.0% 0.1% 0.0%% Improvement (Decommit) 2.6% 0.8% 1.8% 0.8% 2.1% 0.3% 0.0% 0.1% 1.7% 2.7% 0.0%Decommit (Current) K.units 36,963 32,552 28,360 11,722 52,260 4,455 - 1,610 25,231 45,270 - Decommit (Proposed) K.units 279 20,199 726 - 17,170 - - 775 - 1,325 179 Improvement (Decommit) K.units 36,684 12,354 27,634 11,722 35,090 4,455 - 836 25,231 43,945 (179) Revenue Improvement 0.05 K.$/K.unit 1,834 618 1,382 586 1,754 223 - 42 1,262 2,197 (9)



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BIOGRAPHY Waralak Maneefun is a post graduate student in department of Industrial Engineering at Chulalongkorn University, Bangkok, Thailand. She earned bachelor degree in Industrial Engineering in 2012 from King Mongkut's Institute of Technology Ladkrabang, Bangkok, Thailand and has worked as a Industrial Engineer for a semi-conductor manufacturer in Thailand since Apr’2012. Her main responsibility is to take care about plant production capacity planning. Thus, she interested how to improve the current process of production capacity planning in order to make more efficiently and smoothly. Parames Chutima is a professor in Industrial Engineering at Chulalongkorn University, Bangkok, Thailand. He obtained his B.Eng. degree in electrical engineering from Chulalongkorn University, and the M.Eng. degree in Industrial Engineering and management from Asian Institute of Technology, and Ph.D. degree in manufacturing engineering and operations management from the University of Nottingham. His research interests include production planning and control, operations management, production scheduling and activities scheduling, and operations research. He is now serving as the director of Regional Centre of Manufacturing System Engineering, Faculty of Engineering, Chulalongkorn University. He has published several papers in leading international conferences and journals.


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