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Who stole my precious semiconductor chips?
Semiconductor chips have been in short supply for quite some time. The tight situation is likely to continue for some more time.
Companies across automobiles and consumer durables sector are managing their semiconductor stocks like precious stones. They would like to utilize each chip in the best possible manner to maximize their revenues and profits.
Management obviously expects that their revenues should match the calculations basis the supply of these chips. However, I have seen several instances where the revenue falls way short of what could be achieved based on chips availability. Why should it be?
The root cause is clearly visible when you visit the stockyard and see many vehicles waiting to be sold. These have been produced since production decided to take up large batches beyond the immediate requirement.
If chips are the system constraint, why should we produce any quantity beyond the immediate requirement? We must exploit the constraint and subordinate everything else to it. Production team’s preference for large batches should yield to the need of using chips only in pending orders of vehicles.
TOC provides an excellent framework for managing operations in such situations.