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THEORY OF CONSTRAINTS (TOC) PRACTICES OF A
SEMICONDUCTOR COMPANY
Peter Yek Nai Yuh
This project is submitted in partial fulfillment of the requirement for the Degree of Bachelor Of Engineering (I Ions. )
(Mechanical Engineering and Manufacturing System) Faculty of Engineering
UNIVERSITY MALAYSIA SARAWAK 2005
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To My Beloved Parents with thanks...
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ACKNOWLADGEMENT
I wish to express sincere thank and gratitude to Mdrn. Magdalene Andrew IN-1unW
for her supervision, valuable advice and unceasing patience in conduct this ;; tmiy.
Without her immeasurable guidance, I would not be able to enhance and improvc on
thesis.
With this opportunity, I would to thanks Mr. Tan Kong Kiong and Mr. I. ins. ' K, ih
Wei who are willing to share the information during the personnel interview. Rlc, ildes
that, thanks also to the workers who are willing to spend their time for answcrin+' my
questionnaire. 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 tiar»c, ik
and all the individuals that help me directly or indirectly for conducting this swdh.
Ill
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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\c
of this study is to identify more superior factors for bottleneck recognition. i'hen the
second 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 is
data collection instrument for the mail survey and the personal interview respectively.
Data collected was separated into two groups, the Manufacturing Group and the
Engineering group. The data for each group was analyzed by Microsoft Excel. 'I he
respondents for the Manufacturing and Engineering Group were 12 persons : rul R
persons 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<i , ir ,.
more equipment can be used to exploit and elevate the bottleneck respectively. ß. ast d t. n
data given by Engineering Group, increasing the numbers of staff can yield
response toward machine break down for exploiting the bottleneck. Moreover.
improving the theoretical machines rate can elevate the bottleneck. Burn In Sc It' Test iý;
recommended to reduce the machine processing time. Proper time management and
effective shift changing are important to minimize the idle time. Continuous nuonitorinl;
and maintenance at the suitable time can also prevent the longer machine break do,, y n.
Increasing the speed and capacity of machine can elevate the bottleneck.
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ABSTRAK
Objektif utama penyelidikan ini ialah mengkaji strategi penggunaan "Theory of
Constraints" di dalam sebuah syarikat semikonduktor yang terletak di kawasan Kuchinc,
Sarawak. Objektif pertama ialah menentukan faktor utama bagi mengenali hah<<<, i, ill
yang kritikal. Seterusnya, objektif kedua and ketiga ialah memperkenalkan cara-cmra
bagi penggunaan sepenuh dan meningkatkan kemampuan bahagian yang kritikal.
Borang soal selidik dan senarai semakan telah digunakan dalam survei secara pos dan
sesi temuramah. Data yang dikumpul telah dibahagikan kepada 2 kumpulan iaitii
Kumpulan Pembuatan dan Kumpulan Kejuruteraan. 20 maklumbalas telah diterirºna, l: _
daripada Kumpulan Pembuatan dan 8 daripada Kumpulan Kejuruteraan. Data bagi sctiap
kumpulan dianalisis dengan menggunakan Microsoft Excel. Data analisis triah
menunjukkan bahawa pertimbangan masa untuk mesin beroperasi merupakan Itlktor
yang lebih berkesan jika dibandingkan dengan masa kerosakan mesin. Kumpulan
pembuatan menyatakan bahawa pengurangan masa pembaziran dan pemhelian mcsin
baru membolehkan penggunaan sepenuhnya dan meningkatkan kemampuan haha-,, 41n
yang kritikal. Sebaliknya kumpulan kejuruteraan menyatakan bilangan pekei_j.. i 1-;,, O u
ditambah demi mempercepatkan pembaikian mesin yang rosak. Peningkatkan kecekapan
mesin dari segi teori juga mampu meningkatkan kemampuan bahagian yang kritikal.
Gabungan di antara proses pengujian eletrik dan haha dapat menjimatkan nr, tsa.
Pengurusan masa yang berkesan dan pemerhatian mampu menggelakan kerosakan mcsica
yang teruk dan juga peningkatan kepantasan dan kemampuan mesin dapat meningk. atan
kemampuan bahagian yang kritikal.
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TABLE OF CONTENTS
DEDICATION
ACKNOWLEDGEMENT
ABSTRACT
ABSTRAK
TABLE OF CONTENTS
LIST OF TABLES
LIST OF FIGURES
LIST OF ABREVIATIONS
Chapter 1: Introduction
1.0 Global Competition in Semiconductor Industry
1.1 Theory of Constraints (TOC)
1.2 Problem Statements
1.3 Objective of Study
1.4 Scopes of Study
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Chapter 2: Literature Reviews
2.0 Global Competition in Semiconductor Industry
2.1 Theory of Constraints (TOC)
2.2 The concept of TOC
2.3 The Implementation methodology of TOC
2.3.1 Three Question of TOC pre- implementation
2.3.2 Thinking Process
2.3.3 Five step of TOC implementation
2.4 Cycle Time Module
2.4.1 Element of the Cycle Time
2.4.2 Cycle Time Reduction Implementation
2.5 Wafer Fabrication Process
2.5.1 Pre-packaging stage
2.5.2 Post-packaging stage
2.6 Semiconductor Production Improvement
2.7 Effectiveness of TOC to maximize the throughputs
Chapter 3: Methodology
3.0 Overview
3.1 Company Profile
3.2 Data Collection Instrument
3.3 Scaling of Responses
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3.4 Data Collection Method
3.4.1 Personal Interview
3.4.2 Mail Survey
3.5 Data Collection Procedures
3.5.1 Personal interview
3.5.2 Mail Survey
3.6 Received of Questionnaire
3.7 Data Analysis Program
Chapter 4: Results and Discussions
4.0 Introduction
4.1 Survey Administration and Response Rate
4.2 Missing Responses
4.3 Theory of Constraints Practices
4.3.1 Bottleneck Identification
4.3.2 Exploit the Bottleneck
4.3.3 Elevate the Bottleneck
Chapter 5: Conclusions and Recommendations
5.0 Conclusions
5.1 Recommendations
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REFERENCES
APPENDICES
Appendix A:
Appendix B:
Appendix C:
Appendix D:
Appendix E:
Appendix F:
Guarantee Letter
Cover letter
Survey Questionnaire
Organization chart of Company A
Checklist
Reminder Letter
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LIST OF TABLES
Tables Page
4.0 Response Rate 48
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LIST OF FIGURES
Figures Page
1.0 Five step of TOC implementation 5
1.1 Chain Analogy 15
2.1 Cycle time Reduction Program Methodology 24
2.2 Simplified Semiconductor Backend Processes flow 29
2.3 Backend Process in Company A 30
3.0 Methodology of study 37
4.0 Process Bottleneck Identification by Manufacturing Group 49
4.1 Activities causing wastage of time by Manufacturing Group 50
4.2 Process Bottleneck Identification by Engineering Group 51
4.3 Activities causing wastage of time by Engineering Group 52
4.4 Exploit the bottleneck: Responses form Manufacturing Group 53
4.5 Exploit the Bottleneck: Responses from Engineering Group 55
4.6 Elevate the Bottleneck: Responses from Manufacturing Group 57
4.7 Elevate the Bottleneck: Responses from Engineering Group 58
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LIST OF ABBREVIATIONS
1. TOC: Theory of Constrainst
2. CT: Cycle Time
3. ET: Electric Testing
4. BIST: Burn In Self Test
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CHAPTER 1
INTRODUCTION
1.0 Global Competition in Semiconductor Industry
Semiconductors are based on material, such as silicon, that conducts electricity
with less facility than perfect conductors. This makes semiconductor extremely versatile
because their electrical properties can then be customized to create new applications or
improve performance (Mons, 1996). Semiconductors are the basic functional
components of computers and other electronic products (Francisco, 1996).
According to Francisco (1996), the semiconductor industry is composed of firms
that design, manufacture and market semiconductor devices for original equipment
manufacturers. This industry is characterized by rapid technological change, high capital
costs, continual price declines and strict quality standards (Brown 2001). According to
Campbell (2001), these industry characteristics result in high risks and returns to product
innovation and lead to competitive pressures to bring improved products quickly to
market. 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 semiconductor
equipment and materials industry-indeed to survive in the environment of ever changing
technology, the as United State of America invests heavily in research and development
for the next generation of tools. Semiconductor producers are also engaged in a costly,
worldwide race of technology development evident in the continuous flow of advanced
products, high research and development (R&D) expenditures, and expensive fabrication
facilities (Mons and Francisco, 1996). Young (2002), stated out that failure to do so on
their part could also engender a significant loss in competitiveness.
According to Lau (2002), the markets of the Asia Pacific region, particularly
Korea, Taiwan and China, are just beginning to become significant forces within the
semiconductor device making community. Many companies are looking to take
advantage of China's expertise and low manufacturing costs in this segment of the
market (Mobius, 2003). According to Gartner 2002, market in China is expected to
continue growing at a rate of about 20%pa to reach US$3l bn in 2006.
Taiwan Semiconductor Manufacturing Company (TSMC), one of the world's
largest dedicated integrated circuit foundries, constructed its virtual fabrication to
strengthen bonds with customers (Ching and Hsieh, 2002). According to Moris and
Francisco (1993), Taiwan which likes Japan and South Korea, has successfully nurtured
its electronics industry with state funds or government-funded research. This whole
thing is nothing more than a government-supported cartel. The semiconductor industry
has relied on government protection rather than develop international competitive
strategies (Johnson, 1991).
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To be one of the most competitive and profitable foundry, Malaysia's
semiconductor industry are committed to total customer satisfaction by continuously
delivering high quality products on-time, consistent manufacturing and application
support. In addition, timely and accurate responses, high quality and reliability, and
shorter cycle times also very important to be competitive in international level (Nelson,
2003). Besides that streamline manufacturing and offer cost effective, high yielding
technologies to the customers also very important to brings the semiconductor industry
to competitive with other (Zainudin, 2003). According to Velaga (2003), facility had
been designed to meet the strict requirements of advance technology process and
incorporated mini-environment design concept to ensure high-yield and quality.
Therefore according to Rippenhagen (1998), the primary challenge in
semiconductor manufacturing is to maximize the throughput of the facility while
responding quickly to customer demands through low cycle times. This statement
supported by Krishnaswamy (1998), he stated out The Theory of Constraints seeks to
maximize system throughput while maintaining the minimum level of inventory yet
TOC also yields the lowest cycle time for the best customer delivery performance.
Therefore theory of constraints can directly addresses this 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. It
turns raw materials into finished products as quickly as possible by focusing on
improving production bottlenecks or constraints operations. It optimizes the material
flow and logistics of the entire system versus focusing on the productivity of individual
segments of the production system.
Constraint define as, anything that prevents the organization from achieving
higher performance versus its goal. There are a few types of constraints, which are
market, policy, capacity, resources, supply, finance, knowledge and so on. In production
planning terms the system's constraint is the bottleneck (Rochman, 2002). According to
Neale (2000), constraint is a sequence of dependent activities that prevent the project
from completing in a short interval.
According to Rand (2000), The TOC consists of a set of focusing procedures for
identifying a bottleneck and managing the production system with respect to this
constraint, while resources are expended to relieve this limitation on the system. When a
bottleneck is relieved, the firm moves to a higher level of goal attainment and one or
more new bottlenecks will be encountered. The cycle of managing the firm with respect
to 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 the
bottleneck 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 thinking
process:
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 on
five steps:
Step I. Identify the system's constraints
Step2. Decide how to exploit the system's constraints
Step3. Subordinate everything else to the above decision
Step4. Elevate the system's constraint(s)
Steps. If constraint has been broken, repeat the process by go back to step 1
I Identify system's constr aint
v Exploit the Bottleneck I
Subordinate other system
r-,
VI-7 Elevate the bottleneck
V--7 Repeat the process
Figure 1.0: Five step of TOC implementation (Goldratt, 1985)
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1.2 Problem Statements
According to Rochman (2002), the valuation of companies managed by theory of
constraints is difficult due to the flexibilities inherent to the system, like the exploration
of new markets, the expansion or shrinkage of production, the modification made in the
products. A significant challenge in implementing the TOC in the semiconductor
industry is the complex and reentrant nature of the manufacturing process. Managing a
constraint or bottleneck in such processes is resultantly complex and is an ongoing topic
of research (Krishnaswamy et al., 1998).
Ted (2002) stated out that every steps of the way through that implementation it
is vital that the analysis is properly and rigorously carried out. It is also important that
the other members of the organization are able to be a part of the implementation. To
that end there are five distinct difficulty of communication within the TOC
implementation. These five distinct difficulty of communication are stated below:
Gaining consensus on the System Constraints
This might seem obvious but some companies do not bother to analyze their
operations in order to identify the constraint that must exist by definition within their
organization. Alternatively they argue that they have so many constraints, and they
change so often, that it is of little importance to spend time doing this (Ted, 2002).
According to Black (2004), this demands that anyone who examines the analysis comes
to the same conclusion. Without such agreement, there are certain to be problems later
if the solution falls to deliver. Failure to gain consensus at this first step only opens
doors that should remain shut. So whatever analysis is carried out, it is not completed
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until the consensus is achieved. Ted (2002), stated out the driving force for this level of
communication 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 contentious
meetings. There is one other aspect to this that is key: in the past there have been many
improvement 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 solution
Note 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 all
concerned agree that the direction is right, that it will be properly addressed the problem
agreed to at the first stage (Core, 2004). This is all about gaining buy-in. If there is no
benefit 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 of
consensus required from each individual (Ted 2002).
Overcome all the reservations
According to Black and Core (2004), these reservations fall into two categories,
the first is a reservation related to what prevents the solution being implemented, what
we call obstacles. There will be many obstacles raised as to why this solution cannot be
successfully implemented. It is vital to capture every obstacle, even those that do not
appear to have any relevance. The second sets of reservations are raised when the
person sees that the solution, in combination with something that already exists within
the 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 types
of reservation must be captured and dealt with properly. The effect of dealing with the
reservations in this way is a substantially enhanced solution, one that has every chance
of being successful.
1.3 Objective of Study
This 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 recognition
2. Develop a method to exploit the bottleneck.
3. Develop a method to elevate the bottleneck.
1.4 Scopes of Study
Specially, 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. Suggestion of method to exploit the bottleneck.
5. Suggestion of method to elevate the bottleneck.
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CHAPTER 2
LITERATURE REVIEW
2.0 Global Competition in Semiconductor Industry
The level of competition in all market, including engineering products, is
globally increasing (Ted, 2002). Reasons for this are complex, but the main contributors
are used of new technology, larger number of organizations in the same market and
wider appreciation and use of continuous process improvements. These are products
life-cycles of product shortening, the diversity, variety and complexity of products
increasing and the customers become more sophisticated and demanding customized
products more closely targeted to their needs (Syan, 1997).
Semiconductor manufacturing is facing stiff competition as more global capacity
is being added. Intense competition has resulted in semiconductor manufacturer to initial
a program to improve their market responsiveness by reducing the cycle time. More
importance their required a narrow cycle time distribution to achieve greater
repeatability. (Francisco 1996). Besides that, Goldman (2000) points out semiconductors
products have Short product life cycles, which mean that chip makers today have
smaller 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 significant
investment. According to Moris (1996), it is necessary to drive for a higher utilization
stem for capital intensive nature of semiconductor equipment. Few revolutions and
methods have been taken in order to reduce the time to market and to be more
competitive in global market (Brown, 2001).
Concurrent Engineering
According to Syan (1997), concurrent engineering is indispensable to companies
that desire to remain competitive, improve their products and processes continuously
and keep their development ahead of the competition. The reduction of times to market,
which has strategy importance, allows companies to increase their market share and
reduce design changes and design interactions. They are more easily manufacturable,
serviceable and are of higher quality. Once released to manufacturing, production
progresses quickly to full volume because the process is well defined, documented and
controlled (Balamuralikrishna et al, 2000).
Technology Changes
The rise of the equipment industry resulted in improved access to manufacturing
technology, and the development of design software (Brown, 2001). According to Syan
(1997), one way to improve cycle time is to get additional capacity from existing
equipment or purchase new equipment. Creation of overall equipment effectiveness
teams that focus on equipment utilization can play a significant role in improving
available capacity and subsequently cycle time. Technological cooperation in the
semiconductor industry is increasingly essential to meet global competition (Gates,
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2002). In order to be more competitive, joint manufacturing ventures with their
semiconductor suppliers are needed. These joint ventures enable chips to be made with
the latest technology at lower cost and with direct control over product quality and
delivery schedules (Moris and Francisco, 1996).
In order to be parallel with global competition, ongoing technology innovations
and rapidly changing industry trends are much needed. Increasing the engineering
productivity, reduce complexities, speed time-to-market, and more fully utilize existing
computing power (Goldman, 2000). The competitive positions of firms and countries in
the semiconductor industry have undergone dramatic changes. Semiconductor device
manufacturers face many difficult challenges (Meieran, 2000).
For companies to remain and survive competitive in world market, they have to
reduced the product development lead time and shorten the time to market. As the
semiconductor products have a short life time, no time is allowed for the companies to
correct 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 help
manufacturing improve efficiencies and maximize asset utilization is the Theory of
Constraints (Donald 1997).
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2.1 Theory of Constraints (TOC)
Continuously improvement of bottleneck
According to, Verma (1996), TOC can be defined as a management approach
which focuses on Improving bottleneck processes to continuously improve the
performance of manufacturing operations. Research of TOC carried out over the last ten
year are now extensive, covering many different industries. TOC also recognized as a
major driving force for bottom line improvement and charges (Ted, 2002 ). The TOC
asserts that the manufacturing system as a whole can reach optimum efficiency by
identifying and feeding the constraints of the system. These results of this optimization
are to minimize inventory and reduce cycle times and therefore reduce manufacturing
costs and yield more aggressive and accurate customer delivery dates.
Factory management
Grodratt (1984), defined TOC as a set of policies and practices originally
developed in the early 1980's to manage factories. When properly implemented, it has
been exhaustively proven to yield immediate, breakthrough results in the small scale
environment of a factory. TOC practices have been extensively developed and provide a
total solution to managing a factory to optimize on time delivery, inventory and
operating costs (Josh and Luis, 1997).
Project Management techniques
The first application in management techniques is scheduling of a single project
to reduce project duration and simplify project control. TOC approach can also be
applied to areas such as project risk management and project cost management (Mabin,
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