Evaluation of capacity planning practices for the semiconductor industry

We perform four experiments to evaluate several features of capacity planning approaches used in practice and make concrete suggestions for practitioners. We use an optimal capacity planning technique (FIFEX) with industrial demand and capacity data for realistic conclusions. The first experiment studies the cost effects of allowing for capacity expansion only at special times such as at the beginning of each month or each quarter. We find that these effects are not great if there is at least one capacity expansion opportunity about every six months. The second experiment determines the cost implications of capacity planning heuristics. We demonstrate that FIFEX delivers solutions which cost 5-10% less than heuristic solutions. The third experiment examines the sensitivity of costs against the frequency of forecasting and planning. Our experiments indicate that costs can be decreased by 2%-7% by doubling forecasting and planning frequency. We suggest that practitioners forecast and plan at least once every quarter. The final experiment compares joint optimization of tool and floor-shell expansions with sequential optimization. 3%-9% of costs can be saved by using the joint optimization technique FIFEX instead of sequential optimization. We note that although cost savings are relatively small in percentages, they correspond to tens of million dollars.