8/3/2019 Celestica - Memory Business Unit
1/53
Celestica Memory Business Unit
Prof. M G Korgaonker
8/3/2019 Celestica - Memory Business Unit
2/53
Celestica Memory Business Unit
Electronics Contract Industry
In 1994, contract manufacturing market approx US $ 18 billion
Contractors located in NA, Europe, East Asia, Japan. Over 1000contract manufacturers
29 with annual revenues over US $ 100 milln each, account for 2/ 3 rds
of the total
8/3/2019 Celestica - Memory Business Unit
3/53
Celestica Memory Business Unit
Electronics Contract Industry
Seven market segments
Computers
Communications
Automotive
Consumer
Industrial
Instrumentation
Military & avionics
8/3/2019 Celestica - Memory Business Unit
4/53
Celestica Memory Business Unit
Electronics Contract Industry
Consumer segment relatively small for contractors
Computer and communications largest and fastest growing segments
Account for 3 / 4 ths of all the work
8/3/2019 Celestica - Memory Business Unit
5/53
Celestica Memory Business Unit
Electronics Contract Industry
These segments important for large manufacturers, account for over
80 % of revenues
Memory products prices rapidly decreased
Rapid growth in units sold, capacity 9 ( megabytes ) and revenues
8/3/2019 Celestica - Memory Business Unit
6/53
Celestica Memory Business Unit
Electronics Contract Industry
In 1999, compounded annual growth rate at 18 % for large players and
7.7 % for small and medium
Large contract manufacturers becoming manufacturing arm of OEMs
Tech advances lead to increased miniaturization, density, efficiency,
throughput, decreased cost in high volume applications
8/3/2019 Celestica - Memory Business Unit
7/53
Celestica Memory Business Unit
Electronics Contract Industry
Reduced product life cycles made contractors flexible and innovative
Contractors becoming increasingly full service providers advanceddesign, development, testing, repair, box build and delivery
8/3/2019 Celestica - Memory Business Unit
8/53
Celestica Memory Business Unit
Rationale For Contract Manufacturing Decision
Allow OEM focus on own core competencies in designing and
marketing new products
Achieve higher level of quality and reduce variability
Get a product faster
8/3/2019 Celestica - Memory Business Unit
9/53
Celestica Memory Business Unit
Rationale For Contract Manufacturing Decision
Reduce costs 10 20 %, through scale economies
Benefit from shared innovation
Communication of manufacturing expectation on design, quality, costand delivery
8/3/2019 Celestica - Memory Business Unit
10/53
Celestica Memory Business Unit
Some Problems Of Contract Manufacturing
Poor responsiveness due to high capacity use and many customers
Long lead times, lack of schedule flexibility and delays
Remote management and reliance on single contractor
8/3/2019 Celestica - Memory Business Unit
11/53
Celestica Memory Business Unit
Memory Modules
Memory Business Unit ( MBU ) focused on memory modulescustomized and own branded products
Most modules DRAMs
11 families with different physical dimensions, memory capacityand data path width
Weighed about 30 gms Memory capacity from 1 to 128 MB
32 72 MB data path width
8/3/2019 Celestica - Memory Business Unit
12/53
Celestica Memory Business Unit
Memory Modules
DRAMs mounted on PCBs in various configurations such as
Single In Line Memory Modules ( SIMMs )
Double In Line Memory Modules ( DIMMs )
8/3/2019 Celestica - Memory Business Unit
13/53
Celestica Memory Business Unit
Celestica
Formed by IBM. Manufactured , assembled and tested computer
electronics such as
Custom memory products, power supplies, PC cards, systemboards
Communication products and Integrated contract manufacturingservices
8/3/2019 Celestica - Memory Business Unit
14/53
Celestica Memory Business Unit
Celestica
In 1995, revenues of US $ 2.85 billion
One of the largest in North America
Selling to OEMs worldwide in computer, communications and relatedindustries
8/3/2019 Celestica - Memory Business Unit
15/53
Celestica Memory Business Unit
Celestica
Expertise in
Design, miniaturization, development, prototyping
Testing, failure analysis, QA, procurement
Supplier management, mfg, warehousing and after sales service
8/3/2019 Celestica - Memory Business Unit
16/53
Celestica Memory Business Unit
Celestica
Organized into
6 customer focused Bus
13 functional units ( Exb 1 )
Earned many prestigious awards
8/3/2019 Celestica - Memory Business Unit
17/53
Celestica Memory Business Unit
Memory Business Unit ( MBU )
Employed 300 people
Operated 24 hrs / day, 7 days / week, produced 200,000 units / week
80 % revenues from higher margin contract services for OEMs andother tech customers
8/3/2019 Celestica - Memory Business Unit
18/53
Celestica Memory Business Unit
Memory Business Unit ( MBU )
Annual revenues US $1.6 billion in 1995
One of the industry leaders
20 % revenues from forecastable, made in batches to stock, brandedline, lower margins products
8/3/2019 Celestica - Memory Business Unit
19/53
Celestica Memory Business Unit
Memory Business Unit ( MBU )
In the latter, company invested in design and engineering
Manufactured in small to large batches to order
Longer lead times
Capability in Surface Mount Technology ( SMT )
8/3/2019 Celestica - Memory Business Unit
20/53
Celestica Memory Business Unit
Memory Business Unit ( MBU )
Memory upgrade market a potential opportunity for Celestica ( Exb 2 )
OEMs and after markets strongly inter related
Drop in DRAM prices weakens OEM demand and explodes after marketdemand and vice versa
8/3/2019 Celestica - Memory Business Unit
21/53
Celestica Memory Business Unit
Memory Business Unit ( MBU )
In periods of excess demand, focus on flexibility and DRAM bufferinventories
During excess supply
Reduce turnaround time, increase throughput and efficiency
Reduce WIP, increase inventory turns, minimize DRAM inventories,
increase PCB inventories Increase frequency of forecasts
8/3/2019 Celestica - Memory Business Unit
22/53
Celestica Memory Business Unit
Memory Business Unit ( MBU )
Leading competitors exceed industry average growth rates by
Focusing on selected markets
Strengthen relationships with these markets
Erect competitive barriers
8/3/2019 Celestica - Memory Business Unit
23/53
Celestica Memory Business Unit
Production
In 1990 manufacturing process oriented, equipment arranged by typeand mfg organization and space structured into sectors :
Surface mount
Pin through hole
Wave
Inspection
Test
8/3/2019 Celestica - Memory Business Unit
24/53
Celestica Memory Business Unit
Production
Each sector had own staff and operated independently
Products made in batches
Required much material handling
8/3/2019 Celestica - Memory Business Unit
25/53
Celestica Memory Business Unit
Production
Process Layout resulted in
High WIP Slow inefficient and costly material handling
Difficult routing and scheduling
Slow detection of defects
High supervision, attention for product / customer costs
Throughput time of 5 weeks
Protection from equipment breakdown / absenteeism
8/3/2019 Celestica - Memory Business Unit
26/53
Celestica Memory Business Unit
Production
In 1990s, BUs made responsible for specific product families. Plantreorganized into multiple, focused factory within factories ( FWF )based on customer type
MBU - one such FWF, resulting in dramatic improvements in efficiencyand effectiveness
In SIMM products, throughput times dropped from 3 weeks to 2 daysand WIP reduced accordingly
8/3/2019 Celestica - Memory Business Unit
27/53
Celestica Memory Business Unit
Production
Creation of Celestica as separate entity in 1994 led to significantgrowth in revenues
As sectors became bottlenecks, additional capital equipment addednext to existing equipment and so on
Bottlenecks shifted and the plant became de facto functional layoutwithin each focused BU
8/3/2019 Celestica - Memory Business Unit
28/53
Celestica Memory Business Unit
Production
By 1996, MBUs facilities occupied 1500 sq metres on third floor out of
5880 sq metres. Celesticas total plant area was 84000 sq metres
MBU shared some areas like wash rooms, lunch rooms, store rooms,offices, parts kitting, holding and remarket, with other units ( exb 3 )
MBU used additional space on another floor to make workstation
memory controller cards
8/3/2019 Celestica - Memory Business Unit
29/53
Celestica Memory Business Unit
Memory Board Production
Six basic stages of production
Mounting memory chips onto panels
Labeling
Separating into individual memory units or modules
Inspecting visually and mechanically
Electrical testing
Packaging
8/3/2019 Celestica - Memory Business Unit
30/53
Celestica Memory Business Unit
Memory Board Production
Flow between machines jumbled, controlled by scheduler usingpriorities to schedule flow and expedite parts
Typical batch manufacturing, large batches to achieve scaleeconomies
An order occupied complete resources of each sector as it progressed
through the process, remaining in WIP between sectors
8/3/2019 Celestica - Memory Business Unit
31/53
Celestica Memory Business Unit
Memory Board Production
Batches frequently bumped with shifting priorities. Hand carts used toshift batches between sectors
In pin through hole technology, memory chips inserted into holesdrilled through boards, held in place by solder penetrating throughholes
In SMT, electronic devices applied to one or both surfaces of boardand held in place by solder applied to the surface ( Exb 4 )
8/3/2019 Celestica - Memory Business Unit
32/53
Celestica Memory Business Unit
Memory Board Production
Surface devices connected to inner layers by circuits connected toboard surface
To prepare for mounting memory chips, solder paste applied topurchased PCB panels using screening machine with screeningtemplate / stencil
Prepared panels moved by conveyor to the SMT machine for applyingthe required chips
8/3/2019 Celestica - Memory Business Unit
33/53
Celestica Memory Business Unit
Memory Board Production
Panels baked in oven at 2100 celcius, 250 higher than the melting pointof solder
Panels moved from insertion area to labeling to apply identifying labelsmanually to individual memory units / modules
Panels moved to depanelization to separate into units. A panelcontained 7 20 units
8/3/2019 Celestica - Memory Business Unit
34/53
Celestica Memory Business Unit
Memory Board Production
Individual units proceed to visual and mechanical inspection
Simple errors corrected by hand
More complex errors such involving many solder joints corrected byautomated repair machine
8/3/2019 Celestica - Memory Business Unit
35/53
Celestica Memory Business Unit
Memory Board Production
Next step is electrical testing of the product. Time required varies by afactor of 15
Scheduling this bottleneck operation is key to efficient utilization ofresources
Inspected product sent to packing for wrapping, boxing and casing fordelivery to customer
8/3/2019 Celestica - Memory Business Unit
36/53
Celestica Memory Business Unit
Memory Board Production
Some problems :
Somewhat cramped, specially in packing, leading to problems inimproper labeling, boxing and packaging
Leave bad impression on customer and image
Two year pay back on investment may not be achieved
8/3/2019 Celestica - Memory Business Unit
37/53
Celestica Memory Business Unit
Memory Board Production
Some problems :
Significant growth expected in DRAM capacity, but decrease in thenumber of units produced will be tight if demand goes up very much
Need to reduce the throughput time from 2 -3 days to 1 day to cut WIP
and give better service to customer
8/3/2019 Celestica - Memory Business Unit
38/53
Celestica Memory Business Unit
The Opportunity To Move
In 1995, Celestica factory reorganized and free space offered to MBU
Although includes some common staff areas, like wash rooms andlunch rooms, still big, over 4100 sq metres, desired due to testequipment
Will worsen with synchronous DRAM memory, requiring not only new
test equipment but also special cooling on a raised floor
8/3/2019 Celestica - Memory Business Unit
39/53
Celestica Memory Business Unit
The Opportunity To Move
Cost approx US $ 3 million / unit, 3 times the value of current testequipment. Needs specially trained people to operate
The new space on ground floor with own receiving and shippingdocks, surrounded by outside walls, more secure. Help marketingefforts, receive customers
However ceiling 20 30 cms lower and will require development ofsome new cooling technique
8/3/2019 Celestica - Memory Business Unit
40/53
Celestica Memory Business Unit
The Opportunity To Move
The total cost of refurbishing the new space likely to be US $ 4.5million, another US $ 0.5 million to move and additional US $ 250,000 /year in extra operating costs
Other options could include
Not moving at all
Divide production, by getting some more space
8/3/2019 Celestica - Memory Business Unit
41/53
Celestica Memory Business Unit
Opportunity To Reorganize
Phase 1 task force 8 people from manufacturing and engineering anda student intern
Task force focus on layout of the new facility and the logistics ofmoving
The proposed layout still very much process layout ( exb 6 )
8/3/2019 Celestica - Memory Business Unit
42/53
Celestica Memory Business Unit
Opportunity To Reorganize
A task force sub group proposed a radical realignment of theproduction flow into cells
A cell involves all necessary equipment and staff to be responsible forthe complete production of a product batch from start to finish
In the current layout, staff responsible only for the processes in their
sector, handing off responsibility once a batch is transferred toanother sector
8/3/2019 Celestica - Memory Business Unit
43/53
8/3/2019 Celestica - Memory Business Unit
44/53
Celestica Memory Business Unit
Opportunity To Reorganize
The advantages of the cellular layout ( exb 7 ) as follows :
Improve quality, produce less scrap and reduce problems inpacking
78 % of quality errors are information driven
With hundreds of product codes and part numbers, 4 differentpacking requirements, shipping good products requires minimalhuman error
8/3/2019 Celestica - Memory Business Unit
45/53
Celestica Memory Business Unit
Opportunity To Reorganize
The advantages of the cellular layout ( exb 7 ) as follows :
Shorter expected throughput times, more proximity of people andaccurate, fast transfer of information
Simulation based on 100 product codes, grouped according to testtimes required. Down time 16 % for lunches, breaks and shift
overlap
98 % products assumed to pass electrical test
8/3/2019 Celestica - Memory Business Unit
46/53
Celestica Memory Business Unit
Some Assumptions In The Model
Problems such as parts shortages, equipment failures,absenteeism, stop build orders ignored in simulation
Main goal of simulation to compare various scenarios, not studyabsolute numbers
8/3/2019 Celestica - Memory Business Unit
47/53
Celestica Memory Business Unit
Key Questions In The Simulation Model
Is the model realistic ?
Better to retain process oriented layout but use generic instead ofproduct specific testers ?
Better to retain process oriented layout but increase SMT and testingcapacity ?
Better to use cells, possibly with some sharing of testing capacityamong cells ?
8/3/2019 Celestica - Memory Business Unit
48/53
Celestica Memory Business Unit
Cellular Layout
Exb 8 gives the model results. Significant advantages with the celllayout. Even with cells laid out in straight lines, 80 % advantagesretained
But cells require people to cross train and be flexible to do all jobs.Might face some resistance particularly when high status job peopleare asked to do low status tasks
Multi skilling everyone could cost US $ 100,000. Will enrich jobs. Betterdescribed as multi tasking
8/3/2019 Celestica - Memory Business Unit
49/53
Celestica Memory Business Unit
Cellular Layout
Multi tasking needs some extra equipment since each cell is acustomer focused factory
Currently 4 sets of SMT equipment, 3 separation lines, 8 visual andmechanical checking stations, 8 electrical testing stations, 6 packingstations
With cells, extra equipment of some types needed
8/3/2019 Celestica - Memory Business Unit
50/53
Celestica Memory Business Unit
Cellular Layout
Cells imply autonomy staff in the cell take responsibility for qualityand productivity
Some Implications to supervisors and managers. For ex, once a celltakes an order, it is up to the cell to get it filled
No room for shutting down or slowing down
8/3/2019 Celestica - Memory Business Unit
51/53
Celestica Memory Business Unit
Sr No Description Run4 vs
Run 3
Run 4 vs
Run 2
Run 4 vs
Run11 Incremental Investment, $ milln 0.3 3.8 3.8
2 Reduction in WIP, $ milln 6.6 -1.3 -0.9
3 Throughput Time Reduction, days 1.2 1 1
4 Increase in Annual capacity, $ milln 2.9 12.7 13.2
5 Saving in Inventory Cost / yr, $ milln 0.66 -0.13 -0.09
6 Additional Contribution / yr, $ milln 0.87 3.81 3.96
7 Total Benefit/ yr, $ milln 1.53 3.68 3.87
8 Payback period, months 2.35 12.39 11.78
Calculation Of Relative Payback Period
C l i M B i U i
8/3/2019 Celestica - Memory Business Unit
52/53
Celestica Memory Business Unit
Sr No Description Run 1 Run 2 Run 3 Run 4
1 Investment, $ milln 6.4 6.4 9.9 10.2
2 WIP, $ milln 12.6 12.2 20.1 13.5
3 Throughput Time, days 2.2 2.2 2.4 1.2
4 Annual capacity, $ milln 15.6 16.1 25.9 28.8
5 Inventory Cost / yr, $ milln 1.26 1.22 2.01 1.35
6 Contribution / yr, $ milln 4.68 4.83 7.77 8.64
7 Total Benefit/ yr, $ milln 3.42 3.61 5.76 7.29
8 Payback period, months 22.46 21.27 20.63 16.79
Calculation Of Absolute Payback Periods
C l i M B i U i
8/3/2019 Celestica - Memory Business Unit
53/53
Celestica Memory Business Unit
Thank You
Top Related