Semiconductor Equipment Supply Chain Links

This case describes a familiar situation in many manufacturing companies. It includes the breakdown of processes for managing production in periods of peak demand. The author was a manager brought in to solve the problem. His approach included a number of elements described in this book  

The semiconductor equipment industry periodically goes through wide swings in demand. These swings, ranging from 50% drops to 100% increases on the upturn can severely test any supply chain. This case describes the problems encountered by a component supplier in this industry trying to keep up with the expansion phase of one of these cycles. 

At the start of the case, the company was 6 months into the upturn and struggling to keep up. Lead times had drifted out to 6 months and there was a past-due backlog of 2 months. The customers of this company included original equipment manufacturers (OEMs), wafer fabricators, subsidiaries in Europe and Japan that were consuming components, and an internal division that was using finished instruments. This presented a very complex load profile, with each market making distinct demands on the supply chain. 

This was an assemble-to-order environment using common components to build instruments that are calibrated and tested after assembly. The parent company supplied subassemblies and other components to three subsidiaries that also assembled and calibrated instruments. The subsidiaries, in total, assembled a volume equal to the parent company and placed a significant load on the parent. 

This company was primarily an assembler, although it did manufacture the sensor used in the instrument. The product had a large material content and suppliers consisted of machine shops, electronic component suppliers, and a variety of other sources. The company was in the process of implementing a classic MRP system to manage this material flow, and at the start of the case it was using a manual system based on buy cards for the various components. 

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