Regarding the costs for the increased demand, the costs should be calculated based upon the increased capacity levels of the tools. If we look at the case exhibits then it could be seen that the capacity utilization for a wafer demand of 33000 and 22600, would be 89% and 100% for N65 and N90 tools. This is problematic,therefore, LC needs to install new equipment in order to accommodate for the increased capacity in future however, for now the recommendation is stated at the end of the memo.
The costs could be calculated depending upon the alternative chosen;however the total costs would most probably include equipment costs if purchased, opportunity costs if any, depreciation and other costs.
There are also certain recommendations for LC and the senior management of TSCM
In times of highly variable demand, the senior management should see to improve and encourage interdepartmental communication so that manipulation of demand could be achieved. For instance, a consistent flow of communication needs to be maintained between the production department and the sales/marketing department of TSCM.
Secondly, the management needs to adopt an agile approach with regard to the emergency orders that are received. A hierarchy should be created from the most important customers to the least important customers for the company.
The management should adopt different levels of flexibility and more stress and importance should be placed upon the accommodation of the emergency orders. The management also needs to place certain standard operating procedures (SOP) for the emergency or rush orders received and specific sections of fab should be dedicated to these rush orders.
For instance, the online system (EOS) of the company could be implemented rather than paper based processes, book all the emergency orders and allocate the work effectively. More sophisticated procedures should be sued for estimating the utilization of process tools
. Lastly the management should also increase the shipping costs for customers if all the current standing order of TSCM at emergency demand points are broken into much smaller batches.By incorporating all of these assumptions, it is recommended for LC to exchange capacity between N65 and N90 and pull forward in order to utilize some spare capacity. ……………..
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