Information Storage Industry Center

The hard disk drive industry has been under great cost pressures. Manufacturing has achieved very high levels of efficiencies and there is hardly any room for reducing costs any further by improving manufacturing. An area worth exploring is the design of the hard drives to further reduce the costs. Modular design helps in developing designs that will be amenable to cost reductions by identifying those components that could be designed independently of the rest of the product. In this paper we describe how modular design can accommodate technological innovations. We then relate it to the hard drive industry, and examine how hard disk drives have incorporated the technological innovations. We describe a model to determine a component’s and product’s modularity in a quantitative way. The index developed can then be used to allocate design resources in an efficient way.

Many high-tech industries are shifting their focus from minimizing time-to-market to minimizing time-to-volume. This puts the tail end of product development, the production ramp-up, in a critical position. This paper presents a case study of product transfer and production ramp-up in the hard disk drive industry. We provide a detailed description of the ramp-up period. By documenting detailed time-series data of several operational measures, we also shed light on the various forces that allow an organization to increase its production volume. Finally, the setting of our research allows us to study product transfer from development in the US to an off-shore production facility.

Rapid product lifecycles and high development costs pressure manufacturing firms to cut not only their development times (time-to-market), but also the time to reach full capacity utilization (time-to-volume). The period between completion of development and full capacity utilization is known as production ramp-up. During that time, the new production process is ill understood, which causes low yields and low production rates. This paper analyzes the interactions among capacity utilization, yields, and process improvement (learning). We model learning in the form of deliberate experiments, which reduce capacity in the short run. This creates a trade-off between experiments and production. High selling prices during ramp-up raise the opportunity cost of experiments, yet early learning is more valuable than later learning. We formalize the resulting intertemporal trade-off between the short-term opportunity cost of capacity and the long term value of learning as a dynamic program. The paper also examines the tradeoff between production speed and yield/quality, where faster production rates lead to more defects. Finally, we show what happens if managers misunderstand the sources of learning.

The economic performance of many modern production processes is substantially influenced by process yields. Their first effect is on product cost. In some cases low yields can cause costs to double or worse. Yet measuring only costs can substantially underestimate the importance of yield improvement. We show that yields are especially important in periods of constrained capacity, such as new product ramp-up. Our analysis is illustrated with numerical examples taken from hard disk-drive manufacturing. A one percentage point increase in yields can be worth about 6 percent of gross revenue and 17 percent of contribution. In fact, an eight percentage point improvement in process yields can outweigh a $20 per hour increase in direct labor wages. Therefore yields, in addition to or instead of labor costs, should be a focus of attention when making decisions such as new factory siting and type of automation. The paper also provides rules for when to rework, and shows that cost minimization logic can again give wrong answers.

Setups determine downtime, capacity, product quality, and to some extent costs. As much as 50% of effective capacity can be lost to setups in some electronics assembly. In this paper we show that large reductions in setup time are possible for electronics assembly. We use a two-part approach. The first part consists of classic process re-engineering using “Single Minute Exchange of Dies” (SMED) concepts developed by Shigeo Shingo for metal fabrication. The second part uses a sophisticated factory information system, with hand-held wireless computers and barcode scanners, to further reduce setup times and increase setup accuracy. This two-part approach gave a reduction of about 86% in key setup times, plus labor savings, quality improvements and other benefits. One narrow measure of performance gave an order of magnitude improvement. Our results show that SMED is applicable well outside its traditional domains such as stamping and metal-working. We confirm that the seemingly extreme benefits claimed by SMED advocates are achievable, but only with the assistance of modern information technology. In our case the initial investment of $350,000 led to a ten-fold larger net present value.