Yek Peter Nai Yuh

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THEORY OF CONSTRAINTS TOC) PRACTICES OF ASEMICONDUCTOR COMPANY

Peter Yek Nai Yuh

This project is submitted in partial fulfillment ofthe requirement for the Degree of Bachelor Of Engineering I Ions. )Mechanical Engineering and Manufacturing System)Faculty of EngineeringUNIVERSITY MALAYSIA SARAWAK2005


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To My Beloved Parentswith thanks

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ACKNOWLADGEMENT

I wish to express sincere thank and gratitude to Mdrn. Magdalene Andrew IN-1unWfor her supervision, valuable advice and unceasing patience in conduct this ;; miy.Without her immeasurable guidance, I would not be able to enhance and improvc onthesis.

With this opportunity, I would to thanks Mr. Tan Kong Kiong and Mr. I. ns. K,ihWei who are willing to share the information during the personnel interview. Rlc,ildesthat, thanks also to the workers who are willing to spend their time for answcrin+ myquestionnaire. Without their responses, I would not be able to complete this study.

I would like to wish my appreciation to the staff of University Malaysia tiarc, ikand all the individuals that help me directly or indirectly for conducting this swdh.

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ABSTRACT

The main objective of this study is to investigate The Theory of Constraints (TO( )Practices in a Semiconductor Company located in Kuching, Sarawak. The first ohjccti\cof this study is to identify more superior factors for bottleneck recognition. i hen thesecond objective is to develop a method to exploit the bottleneck. The third objective is

to develop a method to elevate the bottleneck. Questionnaire and checklist were used isdata collection instrument for the mail survey and the personal interview respectively.Data collected was separated into two groups, the Manufacturing Group and theEngineering group. The data for each group was analyzed by Microsoft Excel. I herespondents for the Manufacturing and Engineering Group were 12 persons : ul Rpersons respectively. The result from the data analysis shows that machine procesrsin,time is a more superior factor than machine down time for bottleneck recognition.According to the Manufacturing Group, minimization of the idle time and hurc;h


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ABSTRAK

Objektif utama penyelidikan ini ialah mengkaji strategi penggunaan Theory ofConstraints di dalam sebuah syarikat semikonduktor yang terletak di kawasan Kuchinc,Sarawak. Objektif pertama ialah menentukan faktor utama bagi mengenali hah


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TABLE OF CONTENTS

DEDICATIONACKNOWLEDGEMENTABSTRACTABSTRAKTABLE OF CONTENTSLIST OF TABLESLIST OF FIGURESLIST OF ABREVIATIONS

Chapter 1: Introduction1.0 Global Competition in Semiconductor Industry

1.1 Theory of Constraints TOC)1.2 Problem Statements1.3 Objective of Study1.4 Scopes of Study

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Chapter 2: Literature Reviews2.0 Global Competition in Semiconductor ndustry2.1 Theory of Constraints TOC)2.2 The conceptof TOC2.3 The Implementation methodology of TOC

2.3.1 Three Question of TOC pre- implementation2.3.2 Thinking Process

2.3.3 Five step of TOC implementation2.4 Cycle Time Module

2.4.1 Element of the Cycle Time2.4.2 Cycle Time Reduction Implementation

2.5 Wafer Fabrication Process2.5.1 Pre-packagingstage2.5.2 Post-packagingstage

2.6 Semiconductor Production Improvement2.7 Effectiveness of TOC to maximize the throughputs

Chapter 3: Methodology3.0 Overview3.1 Company Profile3.2 Data Collection Instrument

3.3 Scaling of Responses

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192223242931313335

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3 4 Data Collection Method3 4 1 Personal Interview3 4 2 Mail Survey

3 5 Data Collection Procedures3 5 1 Personal interview3 5 2 Mail Survey

3 6 Received of Questionnaire3 7 Data Analysis Program

Chapter 4: Results and Discussions4 0 Introduction4 1 Survey Administration and Response Rate4 2 Missing Responses4 3 Theory of Constraints Practices

4 3 1 Bottleneck Identification4 3 2 Exploit the Bottleneck4 3 3 Elevate the Bottleneck

Chapter 5: Conclusions and Recommendations5 0 Conclusions5 1 Recommendations

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REFERENCESAPPENDICES

Appendix A:Appendix B:Appendix C:Appendix D:Appendix E:Appendix F:

GuaranteeLetterCover letterSurvey QuestionnaireOrganization chart of Company AChecklistReminder Letter

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LIST OF FIGURES

Figures Page1 0 Five step of TOC implementation 51 1 Chain Analogy 152 1 Cycle time Reduction Program Methodology 242 2 Simplified Semiconductor Backend Processesflow 292 3 Backend Process in Company A 303 0 Methodology of study 374 0 ProcessBottleneck Identification by Manufacturing Group 494 1 Activities causing wastage of time by Manufacturing Group 504 2 Process Bottleneck Identification by Engineering Group 514 3 Activities causing wastage of time by Engineering Group 524 4 Exploit the bottleneck: Responses form Manufacturing Group 534 5 Exploit the Bottleneck: Responses from Engineering Group 554 6 Elevate the Bottleneck: Responses from Manufacturing Group 574 7 Elevate the Bottleneck: Responses from Engineering Group 58

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LIST OF ABBREVIATIONS

1 TOC: Theory of Constrainst2 CT: Cycle Time3 ET: Electric Testing4 BIST: Burn In Self Test

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CHAPTER 1

INTRODUCTION

1.0 Global Competition in Semiconductor IndustrySemiconductors are based on material, such as silicon, that conducts electricity

with less facility than perfect conductors. This makes semiconductor extremely versatilebecause their electrical properties can then be customized to create new applications orimprove performance Mons, 1996). Semiconductors are the basic functionalcomponents of computers and other electronic products Francisco, 1996).

According to Francisco 1996), the semiconductor industry is composed of firmsthat design, manufacture and market semiconductor devices for original equipmentmanufacturers. This industry is characterized by rapid technological change, high capitalcosts, continual price declines and strict quality standards Brown 2001). According toCampbell 2001), these industry characteristics result in high risks and returns to productinnovation and lead to competitive pressures to bring improved products quickly tomarket. Romanchenko 2003) summarizes the semiconductor industry as a part of the

world economy.

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According to Young (2002), in order to remain competitive in the semiconductorequipment and materials industry-indeed to survive in the environment of ever changingtechnology, the as United State of America invests heavily in research and developmentfor the next generation of tools. Semiconductor producers are also engaged in a costly,worldwide race of technology development evident in the continuous flow of advancedproducts, high research and development (R&D) expenditures, and expensive fabricationfacilities (Mons and Francisco, 1996). Young (2002), stated out that failure to do so ontheir part could also engender a significant loss in competitiveness.

According to Lau (2002), the markets of the Asia Pacific region, particularlyKorea, Taiwan and China, are just beginning to become significant forces within thesemiconductor device making community. Many companies are looking to takeadvantage of China's expertise and low manufacturing costs in this segment of themarket (Mobius, 2003). According to Gartner 2002, market in China is expected tocontinue growing at a rate of about 20%pa to reach US 3l bn in 2006.

Taiwan Semiconductor Manufacturing Company (TSMC), one of the world'slargest dedicated integrated circuit foundries, constructed its virtual fabrication tostrengthen bonds with customers (Ching and Hsieh, 2002). According to Moris andFrancisco (1993), Taiwan which likes Japan and South Korea, has successfully nurturedits electronics industry with state funds or government-funded research. This whole

thing is nothing more than a government-supported cartel. The semiconductor industryhas relied on government protection rather than develop international competitivestrategies (Johnson, 1991).

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To be one of the most competitive and profitable foundry, Malaysia ssemiconductor industry are committed to total customer satisfaction by continuouslydelivering high quality products on-time, consistent manufacturing and applicationsupport. In addition, timely and accurate responses, high quality and reliability, andshorter cycle times also very important to be competitive in international level (Nelson,2003). Besides that streamline manufacturing and offer cost effective, high yieldingtechnologies to the customers also very important to brings the semiconductor industry

to competitive with other (Zainudin, 2003). According to Velaga (2003), facility hadbeen designed to meet the strict requirements of advance technology process andincorporated mini-environment design concept to ensure high-yield and quality.

Therefore according to Rippenhagen (1998), the primary challenge insemiconductor manufacturing is to maximize the throughput of the facility whileresponding quickly to customer demands through low cycle times. This statementsupported by Krishnaswamy (1998), he stated out The Theory of Constraints seeks tomaximize system throughput while maintaining the minimum level of inventory yetTOC also yields the lowest cycle time for the best customer delivery performance.Therefore theory of constraints can directly addresses his challenge.

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1.1 Theory of Constraints (TOC)According to Goldratt (1984), The Theory of Constraints (TOC) is a

manufacturing philosophy with the goal to increase throughput with no wasted effort. Itturns raw materials into finished products as quickly as possible by focusing onimproving production bottlenecks or constraints operations. It optimizes the materialflow and logistics of the entire system versus focusing on the productivity of individualsegments of the production system.

Constraint define as, anything that prevents the organization from achievinghigher performance versus its goal. There are a few types of constraints, which aremarket, policy, capacity, resources, supply, finance, knowledge and so on. In productionplanning terms the system s constraint is the bottleneck (Rochman, 2002). According toNeale (2000), constraint is a sequence of dependent activities that prevent the projectfrom completing in a short interval.

According to Rand (2000), The TOC consists of a set of focusing procedures foridentifying a bottleneck and managing the production system with respect to thisconstraint, while resources are expended to relieve this limitation on the system. When abottleneck is relieved, the firm moves to a higher level of goal attainment and one ormore new bottlenecks will be encountered. The cycle of managing the firm with respectto the new bottlenecks is repeated, leading to successive improvements in the firm s

operations and performance. The basics of this theory are to identify the bottleneck,gauge the input into the system by the capacity of the bottleneck, never to let thebottleneck be idle, and then elevate the capacity of the bottleneck (Rippenhagen, 1998).

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According to Rand (2000), TOC requires three questions as tools of thinkingprocess:

1. What to change?2. To what to change?3. How to cause the change?

According to Goldratt (1985), The Theory of Constraints implementation is based onfive steps:StepI. Identify the system s constraintsStep2. Decide how to exploit the system s constraintsStep3. Subordinate everything else to the above decisionStep4. Elevate the system s constraint(s)Steps.If constrainthas been broken, repeat he processby go back to step 1

I Identify system sconstraint

vExploit the Bottleneck ISubordinateother system

r-,

VI-7Elevate he bottleneckV--7Repeat he process

Figure 1.0: Five step of TOC implementation (Goldratt, 1985)

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until the consensus is achieved. Ted 2002), stated out the driving force for this level ofcommunication is the problem set gathered earlier which all will agree with. These

problems have been around for a while, and have been responsible for many contentiousmeetings. There is one other aspect to this that is key: in the past there have been manyimprovement projects, but they have typically addressed the effects and not the causes.This time the intention is to address the causes,and remove the effects once and for all.

Gaining consensus on the direction and benefits of the solutionNote that it is not essential to gain consensus on every part of the solution, which

might not even be possible at this stage, or necessary. What is necessary is that allconcerned agree that the direction is right, that it will be properly addressed the problemagreed to at the first stage Core, 2004). This is all about gaining buy-in. If there is nobenefit to the person, why should he or she work with you to implement the solution?Again this is not about presenting the whole solution, but sufficient to gain the level ofconsensus required from each individual Ted 2002).

Overcome all the reservationsAccording to Black and Core 2004), these reservations fall into two categories,

the first is a reservation related to what prevents the solution being implemented, whatwe call obstacles. There will be many obstacles raised as to why this solution cannot besuccessfully implemented. It is vital to capture every obstacle, even those that do notappear to have any relevance. The second sets of reservations are raised when theperson sees that the solution, in combination with something that already exists withinthe organizational environment, will lead to an even worse situation than at present.

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In other words the cure is likely to be worse than the original illness. Both of these typesof reservation must be captured and dealt with properly. The effect of dealing with thereservations in this way is a substantially enhanced solution one that has every chanceof being successful.

1.3 Objective of StudyThis research is focuses on the of semiconductor fabrication company in the

Kuching Sarawak. The objectives of this study are as followed:1. Identify more superior factors for bottleneck recognition2. Develop a method to exploit the bottleneck.3. Developa methodto elevate he bottleneck.

1.4 Scopesof StudySpecially this study looks into:

1. The procedures to implement the TOC.2. Backend process of semiconductor industry.3. Identify the Bottleneck in backend process.4. Suggestionof methodto exploit the bottleneck.5. Suggestionof methodto elevate he bottleneck.

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CHAPTER 2

LITERATURE REVIEW

2.0 Global Competition in Semiconductor IndustryThe level of competition in all market, including engineering products, is

globally increasing Ted, 2002). Reasons for this are complex, but the main contributorsare used of new technology, larger number of organizations in the same market andwider appreciation and use of continuous process improvements. These are productslife-cycles of product shortening, the diversity, variety and complexity of productsincreasing and the customers become more sophisticated and demanding customizedproducts more closely targeted to their needs Syan, 1997).

Semiconductor manufacturing is facing stiff competition as more global capacityis being added. Intense competition has resulted in semiconductor manufacturer to initiala program to improve their market responsiveness by reducing the cycle time. Moreimportance their required a narrow cycle time distribution to achieve greaterrepeatability. Francisco 1996). Besides that, Goldman 2000) points out semiconductorsproducts have Short product life cycles, which mean that chip makers today havesmaller market windows to research, design, test and manufacture new products.

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It is important to achieve competitive prices and an adequate return on the significantinvestment. According to Moris 1996), it is necessary to drive for a higher utilizationstem for capital intensive nature of semiconductor equipment. Few revolutions andmethods have been taken in order to reduce the time to market and to be morecompetitive in global market Brown, 2001).

Concurrent EngineeringAccording to Syan 1997), concurrent engineering is indispensable to companies

that desire to remain competitive, improve their products and processes continuouslyand keep their development ahead of the competition. The reduction of times to market,which has strategy importance, allows companies to increase their market share andreduce design changes and design interactions. They are more easily manufacturable,serviceable and are of higher quality. Once released to manufacturing, productionprogresses quickly to full volume because the process is well defined, documented andcontrolled Balamuralikrishna et al, 2000).

Technology ChangesThe rise of the equipment industry resulted in improved access to manufacturing

technology, and the development of design software Brown, 2001). According to Syan1997), one way to improve cycle time is to get additional capacity from existing

equipment or purchase new equipment. Creation of overall equipment effectivenessteams that focus on equipment utilization can play a significant role in improvingavailable capacity and subsequently cycle time. Technological cooperation in thesemiconductor industry is increasingly essential to meet global competition Gates,

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2002). In order to be more competitive, joint manufacturing ventures with theirsemiconductor suppliers are needed. These joint ventures enable chips to be made withthe latest technology at lower cost and with direct control over product quality anddelivery schedules Moris and Francisco, 1996).

In order to be parallel with global competition, ongoing technology innovationsand rapidly changing industry trends are much needed. Increasing the engineeringproductivity, reduce complexities, speed time-to-market, and more fully utilize existingcomputing power Goldman, 2000). The competitive positions of firms and countries inthe semiconductor industry have undergone dramatic changes. Semiconductor devicemanufacturers face many difficult challenges Meieran, 2000).

For companies to remain and survive competitive in world market, they have toreduced the product development lead time and shorten the time to market. As thesemiconductor products have a short life time, no time is allowed for the companies tocorrect design errors or re-engineer products to a higher quality at lower cost Syan,1997). One of the methodologies developed in the late 1980s by Goldratt to helpmanufacturing improve efficiencies and maximize asset utilization is the Theory ofConstraints Donald 1997).

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2.1 Theory of Constraints (TOC)Continuously improvement of bottleneckAccording to, Verma (1996), TOC can be defined as a management approach

which focuses on Improving bottleneck processes to continuously improve theperformance of manufacturing operations. Research of TOC carried out over the last tenyear are now extensive, covering many different industries. TOC also recognized as amajor driving force for bottom line improvement and charges (Ted, 2002 ). The TOC

asserts that the manufacturing system as a whole can reach optimum efficiency byidentifying and feeding the constraints of the system. These results of this optimizationare to minimize inventory and reduce cycle times and therefore reduce manufacturingcosts and yield more aggressive and accurate customer delivery dates.

Factory managementGrodratt (1984), defined TOC as a set of policies and practices originally

developed in the early 1980 s to manage factories. When properly implemented, it hasbeen exhaustively proven to yield immediate, breakthrough results in the small scaleenvironment of a factory. TOC practices have been extensively developed and provide atotal solution to managing a factory to optimize on time delivery, inventory andoperating costs (Josh and Luis, 1997).

Project Management techniquesThe first application in management techniques is scheduling of a single project

to reduce project duration and simplify project control. TOC approach can also beapplied to areas such as project risk management and project cost management (Mabin,

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