The effect of labor force reduction on work in process inventory, product cycle time, and product throughput in flexible job shops
Neureuther, Brian D.
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The semiconductor industry, even though a vital aspect of several other industries, has not undergone much research effort in terms of industrial engineering and operations research techniques until the last decade. With competition in the semiconductor industry becoming more and more prevalent, operations research techniques are being seen as ways in which competitive advantages can be formed. With the recent decline in the Asian market, many U.S. based semiconductor firms are undergoing a drastic decline in sales. Factors such as slower orders, inventory corrections, overcapacity, and reduced revenue expectations are causing much lower earnings per unit output than expected. Because of the direct impact on the bottom line, management must immediately consider ways to offset this drop in earnings. The most common way to do this is to reduce the direct labor costs within the facility. Thus, the importance of developing a simulation model that can be used to study the effects of reduced labor on operator utilization, product throughput, product cycle time, and WIP inventory levels becomes clear. In order to explore the effect that labor reduction has on specific performance measures, a discrete event simulation was developed using production data from a local semiconductor firm. The model was then validated and data were collected in terms of total product throughput, average product cycle time, operator utilization, total WIP inventory levels, average queue length, and average queue wait time. These data were then analyzed by statistical hypothesis testing to determine if these performance measures differed significantiy from the current performance measures under the existing system as the labor staff was reduced. Also examined was the magnitude of labor reduction that could occur before these performance measures significantly changed with respect to the current system, and the interaction effect on specific levels of release rates, fab control mechanisms, queue disciplines, and lot sizes with respect to changes in staffing levels.