RFID ROI: Executive Summary

Transcription

1 RFID ROI: Executive Summary by John Dirk Kinley MBA Kellogg School of Management, Northwestern University, 2000 Submitted to the MIT Engineering Systems Division in Partial Fulfillment of the Requirements for the Degree of Master of Engineering in Logistics at the Massachusetts Institute of Technology June John Dirk Kinley. All rights reserved. The author hereby grants to MIT permission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part.

2 Introduction This thesis investigates financial results from RFID integration at product level in semiconductor manufacturing. The thesis explores how the technology might act in concert with other significant logistics tools to create return on investment. In this case, the use of RFID, along with postponement and Kanban practices, may help a manufacturer better align supply with central processing unit () demand. The resulting economic benefits are explored through yield scenarios. It is important to note that the thesis explores this topic without the benefit of empirical data. Consequently, a number of assumptions were made; these assumptions may affect the validity of the observations. Nonetheless, the study demonstrates an innovative approach that may contribute to new models of creative problem solving. Background and Motivation In 1888 Heinrich Hertz proved the existence of electromagnetic radiation. Key to his proof was a radio frequency (RF) device he built which transmitted radio waves. In 1942, the Allied Forces used large RF systems in England to identify (ID) returning Allied bombers and distinguish them from raiding German warplanes. Thus, RFID technology has been in existence for several years. However, it was not until recently that it attracted significant attention. In the past there were significant adoption barriers, including overly large and expensive tags and readers, and inadequate back end data management systems. However, recent advances have decreased costs, improved form factors, and introduced functional data management systems. Recently, the consumer packaged goods companies Gillette and Rockport have committed to RFID pilots. Moreover, TESCO, Wal-Mart and other firms have committed to specific timelines for more comprehensive pallet/case level integration with supply chain partners. These organizations and others are trying to understand how best to leverage the technology for economic gain. The anticipated benefits of utilizing this technology are numerous and include: non-line of sight (NLOS) functionality, product or unit level traceability (ULT), and location based asset tracking. RFID provides NLOS tracking by virtue of radio frequency transmission. For example, in this transmission a warehouse manager could track various packages stacked together without having to move packages around to look for the important bar codes. Additionally, by providing an extensive numbering format, RFID offers the possibility of identifying each item or unit with unique numbering which makes ULT possible. ULT could become important in tracking individual products through a supply chain to perform reverse logistics, or with material sourcing issues such as tracking poor quality raw materials by associating units with their production batches. Another potential benefit is asset tracking. Generally, RFID achieves asset tracking through use of source association. With this method, distinct radio wave emitting sources are set up at various points in a supply chain where they consistently monitor an asset s movements through various areas. These areas are generally confined spaces, thus providing for fairly accurate asset location information. RFID has attracted attention outside the arena of consumer packaged goods for asset tracking. The Department of Defense (DOD) has begun field use of RFID for ULT tracking of specific equipment and resources. In an example referred to in the thesis, the DOD is using RFID to track fuel containers through their internal supply chain, from purchase to use. The semiconductor industry may stand to gain from RFID use on the unit level considering the high value-to-size ratio of the product (chips), the complicated nature of the manufacturing

3 process, and the need for product information while maintaining high process speed (velocity). With this in mind, the study will consider a section of the semiconductor manufacturing process, focusing first on one key benefit of ULT use; second, briefly considering other potential effects within manufacturing; and, finally, highlighting some potential concerns. The hope is that this study will provide a foundation of analysis for others to learn from, and build upon. Research Question The specific research question on which this study focuses is: What is the return on investment from implementing RFID in concert with postponement and Kanban practices to better align output with demand in a semiconductor manufacturing facility? This question is of particular interest because it presents RFID as an enabling technology in an environment, manufacturing, where this has not previously been a focus. When considering who will benefit from RFID, the focus has been on distribution centers (DCs) and retailers. Research in this area often implies that the manufacturer will assume the majority of costs, such as tags and tagging labor, while accruing less benefit from its investment in this technology than its supply chain partners. 1 This study is concerned with a particular product, the central processing unit or. At the beginning of manufacturing, in the fabrication plant, the silicon is first shaped into discs, or wafers, from raw silicon. Precision equipment is used throughout manufacturing; part of the early stage process includes applying a thin, roughly ten atom thick layer of gallium arsenide (GaAs) to the wafers. Through manufacturing, each wafer is sectioned into 100 to 500+ rectangular blocks, or dies. Generally dies are assembled with three basic elements. First the active components are added. These might include transistors or memory cells. Second an insulating layer is added to cover the active components. Finally holes are etched into the insulation and conductive metal traces are added. The process becomes increasingly complicated as it is repeated five or six times to add more and more components to each die. 2 Once components are added to the dies, the dies have functionality and are referred to as s. It is important to understand that in semiconductor manufacturing each wafer is unique and each area of each wafer has different characteristics. The result is that each die is different from the next, even though they have the same components and have gone through the same manufacturing steps. Due to this fact the dies need to be tested and understood for their individual performance properties. Although testing occurs at multiple different points, the final test step is where the ultimate performance determination is made and the s are usually locked and marked into a specific performance. This step occurs in a separate facility from the fab called Assembly -Test. After lock and mark and final test in the Assembly-Test, the s are delivered to a finished goods inventory (FGI) warehouse. They are held at the FGI warehouse and shipped to meet demand. 1 Byrnes J. Who Will Profit From Auto-ID? Harvard Business School: Working Knowledge. September 1, Dunn, P. Semiconductor Manufacturing Process. FACSNET Science & Technology. September 27, 2000.

4 Methodology This study entailed using a methodology that had six (6) steps: 1. Literature review. This provided a foundation on Semiconductor Manufacturing, Postponement, Kanban, Tracking & Tracing Goods, and RFID. 2. Process Selection. This entailed choosing an appropriate process to focus the work on, and the process of manufacturing inventory yield management was selected based on real industry concern. This process spans from the Assembly-Test to the Finished Goods Warehouse in a typical semiconductor manufacturer and is defined in greater detail later. 3. Process Definition. This entailed identifying the likely process steps for the new manufacturing inventory yield management process. This is an estimated flow based on study of semiconductor manufacturing processes as well as field visits to various semiconductor manufacturing facilities. The processes do not however represent any one specific company s process flow. 4. Yield data. This entailed identifying production yields and inefficiencies created due to the lock and mark processes. 5. Yield analysis. This entailed applying bucket analysis which is based on the framework and methods developed by Subirana [describe the process in detail] resulting in data that would potentially identify process improvement opportunities. Proposed process modification. The entailed developing a modified process that would take advantage of the process improvement opportunities that surfaced in the prior step. Current Process Fab Produces Dies on Wafer Receive, Assemble & Other Processes Assembly-Test Lock Final and Test Mark Trays in Sealed Box Receive FGI Warehouse Storage Full Boxes Partial FGI Boxes FGI Processing Partial Handling Partial Return Proposed Process Fab Produces Dies on Wafer Assembly-Test Receive, RFID Final Assemble Test Trays & Other Sort Shipped Processes Machine Receive FGI Warehouse SFGI Trays FGI Trays (Kanban) & Boxes Lock and Mark Processing Pick exact quantity No partial return At the highest level, the methodology used begins with understanding the background of key tools and concepts used. This includes understanding postponement, Kanban, RFID, economic modeling and semiconductor manufacturing. The steps taken include investigation through literature into the key tools and concepts; field visits to a semiconductor manufacturing facility with process observation; and interviews with semiconductor professionals. The field visits surfaced several issues regarding inventory management in FGI warehouses. Further investigation and discussion led to considering product flows through Assembly-Test to Finished Goods Inventory Warehouse. These became the focus of the RFID study with managing inventory to demand as a desired improvement or something like this. General understandings of these steps along with what is believed to be a root issue, inventory management to demand, led to building a new process.

5 The analysis begins by considering the current process, a series of steps in semiconductor manufacturing, with their accompanying requirements. The requirements refer to the valueadded at each step. SUMMARY The recent adoption by consumer-packaged-goods companies and retailers in general, has brought much attention to RFID and its potential applications. Further investigation into the costs and benefits of these applications is incipient. While most of the interest has focused on the end of the supply chain with retailing giants such as WalMart, TESCO, and others, this thesis introduced an innovative way of thinking about cost and benefits in a manufacturing setting. This different manner of thinking includes using RFID in conjunction with postponement and Kanban practices. The complementary nature of these logistics tools may create potential for aligning output with demand as shown in the semi-conductor manufacturing facility observed in this thesis. RFID technology offers a great platform for supply-chain visibility. Postponement builds on this platform by using visibility provided by RFID to enhance its effects. Postponement offers greatest advantage when demand has a degree of variability, product values are high, and lifecycles are short, as is the case in the semi-conductor industry. Kanban, which is a proven means of signaling replenishment for production materials, requires real-time inventory data. RFID, once again, provides a great platform technology by offering a mechanism for obtaining real-time inventory data. When these technologies are combined in semi-conductor manufacturing, observations indicate a fairly dramatic impact on yield. Although this is not the only significant outcome, implementation of the proposed process may result in considerable yield improvements and other desirable outcomes. Through the consideration of various yield scenarios, the manufacturing data indicates yield improvement with additional price differentiation. This observation was explored in some detail in this thesis. Finally, other considerations and observations indicate that there are a plethora of additional costs-benefits including potential decreases in cycle time, increases in quality, and decreases in labor costs. Since this is a process specific change which may have much greater systemic effects, there are many other potential cost-benefits that need to be considered. Although the ROI results are significant, they are based on a hypothetical process and the integration of this hypothetical process with several assumptions. This study is an initial assessment. The purpose of this thesis is not to create a one-size-fits-all summary of how to measure RFID ROI. Rather, it reviews the RFID ROI for a specific application in a semiconductor environment. In the process of assessing RFID ROI as noted, a potentially useful method was considered and proposed which ultimately may encourage innovative thinking about RFID ROI measurement. The paper introduces this method, but does not validate it. As such, this topic is an area that might benefit a great deal from further study and validation.