Samsung Cuts Manufacturing Cycle Time and Inventory to Compete
The Problem
Samsung, the largest manufacturer of digital integrated circuits in the world, faced an impending crisis. In 1995, soaring worldwide demand coupled with tight capacity pushed prices of four megabit dynamic random access memory devices (DRAMs) upwards. As a consequence, DRAM manufacturers invested heavily in new fabrication capacity. Recognizing an impending price collapse in December 1995, the president of Samsung's semiconductor business informed the manufacturing department of the urgent need to reduce cycle time. The huge work-in-process inventory was expected to lose value rapidly. And a survey finding that Samsung's cycle times were noncompetitive implied that customers might be enticed to switch to vendors offering shorter lead times. Addressing this situation required analytics expertise in production scheduling.
The Analytics Solution
Samsung asked consultants Leachman and Associates for assistance in reducing cycle time. A project team from both Leachman and Samsung was formed, and the project was named SLIM (short cycle time and low inventory in manufacturing). SLIM delivered a set of methodologies and scheduling applications for managing cycle time, including:
- Methodology for calculating target cycle times and target work in process levels for individual manufacturing steps;
- Heuristic algorithms for factory floor scheduling; and
- Optimization-based capacity analysis.
The Value
Between 1996 and 1999, Samsung implemented SLIM in all of its semiconductor manufacturing facilities. It reduced manufacturing cycle times to fabricate DRAMs from more than 80 days to less than 30. Considering the decline of DRAM prices, SLIM enabled Samsung to capture an additional $1 billion in sales revenue compared to the revenue it would have realized had cycle times not been reduced.
