Applied Soft Computing 68 (2018) 900–909

Contents lists available at ScienceDirect

Applied Soft Computing

journal homepage: www.elsevier.com/locate/asoc

Strategic capacity planning for smart production: Decision modeling

under demand uncertainty
Chen-Fu Chien a , Runliang Dou b,∗ , Wenhan Fu a
a
Department of Industrial Engineering and Engineering Management, National Tsing Hua University, Taiwan
b
Department of Information Management and Management Science, College of Management and Economics, Tianjin University, China

a r t i c l e i n f o a b s t r a c t

Article history: Semiconductor manufacturing is a capital-intensive industry that capital utilization rate significantly
Received 30 September 2016 affect the capacity effectiveness and final profit. Capacity portfolio planning strategy must coordinate
Received in revised form 24 April 2017 capacity expansion and migration decisions in balance for utility maximization for smart production
Accepted 1 June 2017
and supply chain effectiveness. Manufacturers have to determine capital investments based on various
Available online 6 June 2017
demand forecasts of products in advance for long lead time in manufacturing process. Rapid develop-
ment in semiconductor technology makes it difficult for companies to estimate future tool requirement
Keywords:
especially for new-generation products planning decisions.
Capacity planning
Smart production
This study aims to develop an uncertain multi-objective decision (UMD) strategy framework based
Semiconductor manufacturing on uncertainty theory for capacity expansion and migration problem. The objective of proposed model
Uncertainty theory is to minimize the potential loss of capacity oversupply or shortage under uncertain environment. An
Uncertain programming empirical study was conducted for validation and the results showed practical viability of the proposed
approach. The proposed model performs better than existing approach in minimizing the capacity cost
loss of shortage, surplus, and migration. Therefore, the proposed approach can be employed as embedded
decision support mechanism for smart production solutions for Industry 4.0.
© 2017 Elsevier B.V. All rights reserved.

1. Introduction phases. Wafer fabrication normally requires 100–500 operation

In semiconductor industry, production technology updates
rapidly. Following Moore’s law [1], the number of transistors on
an integrated circuit doubled every 12–24 months during the past
forty years. A new generation of production technology need to
be developed and employed every 12–24 months to maintain the
shrinkage of Integrated Circuit (IC) features. The production tech-
nology determines the scale of circuits on a chip that could be
fabricated on the wafer. Advanced technologies can make more
transistors patterned in the wafer areas. High-tech products are
difficult to be produced as more advanced and expensive tools are
required, with more complex and sophisticated devices enabled.
The total market value of global semiconductor will be about 340
billion dollars with market growth of 3%–7% in 2017.
The process of semiconductor manufacturing is composed of
four primary phases: wafer fabrication, wafer probe, assembly and
packing, and final test [2,3]. Wafer fabrication is the most tech-
nologically complicated and capital-intensive part among the four
∗ Corresponding author.
E-mail address: drl@tju.edu.cn (R. Dou).
steps over a total cycle time of many weeks. A modern 300 mm
wafer fabrication facility costs in excess of US$3 billion with various
tools that worth US$1–13 million [4]. Equipment expense accounts
for more than 60% of the total cost in manufacturing process. Sur-
plus or shortage of products in wafer fabrication procedure will
lead to enormous loss of capacity utilization or sales order owing
to make-to-order business model in IC industry.
Capacity planning problem is the configuration decision to
manage tool capacity and technology demand effectively [5]. Semi-
conductor capacity planning decisions are basically divided into
two parts: capacity expansion and migration. Capacity expansion
is the process that adds new facilities over time into manufactur-
ing process to meet the growing demand [6]. Capacity migration
is the transition between technologies to balance capacity out-
put temporarily. Tools designed for new generation technology
are expected to support the former generations in case of need.
Manufacturers in IC industry with high level of horizontal spe-
cialization must invest in the latest technology to keep their
market competitiveness in today’s globalized world. The lead
time for semiconductor manufacturers from placing tool procure-
ment orders to actual operation is 6–9 months, which causes

https://doi.org/10.1016/j.asoc.2017.06.001
1568-4946/© 2017 Elsevier B.V. All rights reserved.
 C.-F. Chien et al. / Applied Soft Computing 68 (2018) 900–909
technologies of multiple generations equipped in same wafer fab-
rication to maintain stability of manufacturing plans.
Through a number of surveys, Kahneman and Tversky [7]
showed that human beings usually overvalue uncertain events and
their estimation may result much larger variance than real event
frequency. The predicted demand figures made by domain experts
are based on their concrete market experience instead of enough
observed data. Without enough samples, probability distributions
(ex. normal distribution) will be inaccurate in contrast with true
frequency. Under these circumstances, the fundamental premise
of classic probability theory is invalid and statistical methodologies
developed in this mathematical system become unsuitable. Espe-
cially, for the description of human belief degree, some examples
[8] show that subjective probability and fuzzy theory are inappro-
priate as well.
As a well-defined supplement of classic probability theory,
uncertainty theory without frequency assumption was found by
Liu [9] to model imprecise quantities in uncertain events based
on the normality, duality, subadditivity, and product axioms. The
main difference between uncertainty theory and probability the-
ory is that the product of uncertain measure is the minimum of
uncertain measures of uncertain events while the product prob-
ability measure is the product of probability measures of random
events. Uncertain programming [10] is the mathematical program-
ming technique built on uncertainty theory to solve optimization
problem in uncertain environment. To address the needs in real
problems that imprecise quantities like human’s belief degrees
are unavoidable in business operation, it is vital to establish a
framework based on uncertainty theory considering human inde-
terminacy for semiconductor manufacturers.
This research aims to propose an uncertain multi-objective deci-
sion strategy framework based on uncertainty theory for capacity
expansion and migration to minimize the potential cost loss of
surplus/shortage under uncertain environments. To validate the
model’s effectiveness, an empirical study has been done by using
data from a lead semiconductor company in Taiwan. The proposed
decision framework and process will assist manufacturers in tool
procurement and capacity planning decision-making faced with
historical data deficiency and demand uncertainty.
The structure of the paper is organized as follows. Section 1
introduces the background, significance and motivation of the
research. In Section 2, capacity problem in semiconductor industry,
demand uncertainty in capacity planning and fundamental con-
cepts of uncertainty theory are introduced. Section 3 expounds
the framework of proposed model and decision process. Section
4 presents an empirical example to illustrate the decision model
designed in Section 3. Section 5 concludes with discussions and
Section 6 points out some future research directions.
2. Literature review
Capacity planning, or tool portfolio problems in semiconductor
industry are popular research topics for decades. In this section,
we respectively review the related study, including capacity plan-
ning problems in semiconductor manufacturing domain, demand
uncertainty in capacity planning and fundamentals of uncertainty
theory.
2.1. Capacity planning problems in semiconductor
manufacturing industry
In semiconductor industry, corporations strategically focus on
core competences and outsource other activities to enhance capital
effectiveness [11]. However, it is especially hard for semiconduc-
tor companies to make capacity expansion and migration decision
901
due to several reasons: rapid technology change, complex fabrica-
tion process, long lead time of increment, high cost in equipment,
and demand uncertainties [12]. Each semiconductor manufactur-
ing tool may charge tens of millions of dollars as a high threshold.
Indeed, capacity deviation causes huge difference in capital invest-
ment and business revenue for capital-intensive industry. Besides,
the short life cycles of products make demands impulsive and
cause capacity scarcity or wasting [11,13]. The objective of capac-
ity planning strategy is to maximize fabrication profit through
decision-making process at different time nodes. Based on planning
horizon and decision scope, capacity decision problems are gener-
ally classified into three levels: strategic, tactical and operational
levels.
For strategic thinking, capacity planning focuses on the invest-
ment of productive resources (such as tools, equipment, facilities,
etc.) for expansion. These plans are in the highest management
level and need support of entire company. Strategic planning will
consume up within a longer period (1–2 years) in common. Those
long-term planning decisions are normally based on demand fore-
cast due to long lead time of tool procurement. This study will focus
on strategic planning decision-making connected with demand
uncertainty.
At tactical level, capacity plans convert long-term plans to spe-
cific ones which are relevant to distinct parts of the fabrication.
For instance, product-mix and production planning are popular
problems regarded as mid-term planning that refers to monthly
or quarterly plan to be modified in this level. Once changes occur-
ring in the number of resource like employees, tools and machines,
company can reply as soon as possible.
In semiconductor industry, operational capacity planning aims
to solve capacity disequilibrium problem in a short time [14].
Capacity plans which refer to daily or weekly production schedul-
ing situation, are adjusted frequently to act in concert with actual
production situation. Those decisions are designed for the specific
procedures and processes that occur within the lowest levels of the
organization, such as machine breakdown, urgent orders, and hold
lots.
2.2. Demand uncertainty in semiconductor capacity planning
In semiconductor industry, main sources of uncertainty in long-
term capacity planning problems consist of demand forecast for
technologies and capacity estimations for fabrication facilities [5].
It is critical to obtain accurate demand forecast due to the long
lead time of new fab construction and tool procurement [13]. Some
mathematical methodologies such as time series method for short-
term forecast and diffusion model for long-term prognostication
may handle demand uncertainty through analyzing historical data
[15].
There is a rich literature in capacity planning problem in
semiconductor manufacturing industries as listed in Table 1.
Swaminathan [16] firstly assigned equal chance for different
scenarios and experimented scenarios with other probabilities.
Gerchak, Hassini and Ray [17] applied newsvendor model to
monitor demand uncertainty as random variables in non-linear
programming. Christie and Wu [5] set demand change parame-
ters to generate demand scenarios for analyzing. Hood, Bermon
and Barahona [18] set up three rules-of thumb for scenario prob-
abilities based on empirical experiments. Chou, Cheng, Yang and
Liang [19] introduced a geometric Brownian motion process to
illustrate uncertainty of demand and solve the problem by sim-
ulation. Wu and Chuang [20] described uncertainty by Markov
decision processes and use Monte Carlo simulation to solve multi-
generation capacity portfolio planning problem. Chien and Zheng
[4] proposed a mini–max regret strategy considering both the
risks of capacity shortage and surplus along the time to reduce
902 C.-F. Chien et al. / Applied Soft Computing 68 (2018) 900–909

Table 1
Methods demand uncertainty in semiconductor capacity planning.

Study Methodology Uncertainty description

Swaminathan [12]
Gerchak, Hassini and Ray [17]
Christie and Wu [5]
Hood, Bermon and Barahona [18]
Chou, Cheng, Yang and Liang [19]
Wu and Chuang [20]
Chien and Zheng [4]
Chien, Wu and Chiang [21]
Chou, Sung, Lin and Jahn [22]
Chou, Yang and Chen [23]
Stochastic planning approach
Non-linear programming
Scenarios analysis
Stochastic optimization
Simulation analysis
Monte Carlo simulation
Mathematical programming
Dynamic optimization
Simulation
Simulation
Equal chance for scenarios first and then experimented with other probabilities
Newsvendor model
Demand change parameters
Three rules-of thumb for scenario probabilities
Geometric Brownian motion process
Markov decision processes
Mini-max regret
Markov decision process
Geometric Brownian motion process
Geometric Brownian motion processes

overall risk and improve capacity utilization. Chien, Wu and Chiang where k are arbitrarily chosen events from Lk for k = 1, 2, · · ·,
[21] represented demand uncertainty by a Markov chain of market respectively.
states through transition probability matrix between two decision An uncertain variable ␰ is a measurable function from an uncer-
epochs. Chou, Sung, Lin and Jahn [22] compared a canonical timing tainty space (, L, M) to the set of real numbers. The uncertainty
and a canonical sizing models by simulation and formulate uncer- distribution  of an uncertain variable ␰ is defined by ˚(x) = M{ ≤
tainty as geometric Brownian motion process. Chou, Yang and Chen x}for any real number x. The expected value of ␰ is defined by
[23] generalized demand shocks for uncertain demand and com-
pare VC model which is Brownian motion of volatility and SC model 
+∞ 0
which is simple model of shock by simulation. E[] = M{ ≥ x}dx − M{ ≤ x}dx
According to the literature review, the methods focusing on the
capacity planning problem can be generally separated into two 0 −∞

categories: mathematical programming and simulation. Demand

uncertainty in capacity planning is usually modeled by three types:
scenarios, random variables, and stochastic processes. Indeed,
domain experts in semiconductor manufacturing companies may
analyze demand uncertainty through some mathematical tech-
nique but still should judge the scenario partition by domain
experience, human’s subjectivity causes more uncertainty of their
The inverse function −1 (˛) is called the inverse uncertainty
distribution of . Moreover, if the expected value is available, then
the expected value can be presented as:
0

E  = ˚−1 (˛) d˛
demand forecast results than theoretical probabilities owing to
−∞
rapid change of diverse impact factors.

An uncertain variable ␰ is called normal if it has a normal

2.3. Uncertainty theory −1
uncertain distribution ˚(x) = (1 + exp( (e−x)
√ )) , −∞ < x
∞,
0
3

Uncertainty theory was founded by Liu [9] to measure and devoted by N (e,
).
√
The inverse uncertainty distribution of N (e,
)
model uncertainty in human’s belief degree. It has been applied is ˚−1 (x) = e +
3 ln 1−x
x

in some optimization problems such as machine scheduling [24],   programming model

Liu [30] proposed the following uncertain
vehicle routing [25], facility location-allocation [26], railway trans- with uncertain objective function f x,  , uncertain constraints
 
portation planning [27] and solid transportation problem [28,29]. gj x,  ≤ 0, and confidence levels ␣j ,
All these applications were based on numerical experiments and
no prior work at practical manufacturing industry still now. In this ⎧  

subsection, some necessary preliminaries of uncertainty theory are

⎪
⎨ minE f x, 
x
introduced. subjectto : (1)
Let  be a nonempty set, and L be a ␴-algebra over . Each
⎪
⎩ M g x,  ≤ 0 ≥ ˛ , j = 1, 2, ..., p
j j
element  L is called an event. Liu [9] present a set function M
from L to [0,1] which is called an uncertain measure if it satisfies
Let ␰1 , ␰2 ,..., ␰n be independent uncertain variables with reg-
the following axioms:
ular uncertainty distributions 1 , 2 ·· · n , respectively.
 If f is a
Axiom 1 (Normality Axiom) M{ } = 1 for the universal set ;
C strictly increasing function, then = f 1 , 2 , ..., n is an uncer-
Axiom 2 (Duality Axiom) M{ } + M{ } = 1 for any event ;
Axiom 3 (Subadditivity Axiom) For every sequence of events  variable −1
tain 
with an inverse uncertainty distribution ˚−1 (˛) =
{ i ∈ L}, we have f ˚−1 1 (˛) , ˚2 (˛) , ..., ˚−1
n (˛)
If f is also strictly decreasing with respect to ␰k+1 , ␰k+2 ,· · ·, ␰n .
∞ 
∞
gj is strictly increasing with respect to ␰1 , ␰2 , · · ·, ␰kj , and strictly
M{ ∪ i } ≤ M{i }
i=1 decreasing with respect to ␰kj +1 , ␰kj +2 , · · ·, ␰n for j = 1, 2, · · · , p. Then
i=1
the uncertain programming model (1) is equivalent to the following
Axiom 4 (Product Axiom) Let ( k , Lk , Mk ) be uncertain space crisp model,
for k = 1, 2,..., Then the product uncertain measure M is an uncertain
measure satisfying
⎧ 1
⎪
⎪  
∞  ⎪
⎨ min f x, ˚−1 (˛) , · · ·, ˚−1 (˛) , ˚−1 (˛) , · · ·, ˚−1
n (1 − ˛) d˛

1 k k+1
k=1   x
(2)
M k = ∧ Mk k ⎪ 0
∞ ⎪
⎪ subjectto :
k=1 ⎩  
gj x, ˚−1
1
(˛) , · · ·, ˚−1
k
(˛) , ˚−1
k+1
(˛) , · · ·, ˚−1
k
(1 − ˛) ≤ 0, j = 1, 2, · · ·, p
 C.-F. Chien et al. / Applied Soft Computing 68 (2018) 900–909 903

For decision problems with multiple objectives, uncertain pro- mii t Capacity migration from product i to product i in time t.
gramming model can be extended to uncertain multi-objective uitt  Upper bound of capacity level with maximum expansion
programming model as follows, speed for product i in period t refer to time t.
⎧  
 
 
litt  Lower bound of capacity level without expansion of product
⎪
⎨ min (E f1 x,  , E f2 x,  , · · ·, E fm x,  ) i in period t refer to time t.
x
subjectto : (3) Dit Actual demand of product i in time t.
⎪
⎩     dit Predicted demand of product i in time t.
M gj x,  ≤ 0 ≥ ˛j , j = 1, 2, · · ·, p
xijt Predicted demand of product i by predictor j in time t.
 
it Uncertain distribution of predicted demand of product i in
where E fi x,  , i = 1, 2, · · ·, m are real-valued objective func-
tions. time t.
A vector x is called a feasible solution to the uncertain multi- −1 it
Inverse uncertainty distribution of it
objective programming model (3) if Ei Maximal total expansion of product i.
␺i Uncertain distribution of maximal expansion of product i.
M{gj (x, ) ≤ 0} ≥ ˛j , j = 1, 2, · · ·, p (4) i−1 Inverse uncertainty distribution of ␺i
Ft Maximal total expansion at time t.
A feasible solution x* is called a Pareto solution to the uncer-
ϑt Uncertain distribution of maximal expansion at time t.
tain multi-objective programming model (4) if there is no feasible
−1 t Inverse uncertainty distribution of ϑ t
solution x such that
 
 
Mi Maximal total migrations of product i.
E fi x∗ ,  ≤ E fi x,  , i = 1, 2, · · ·, m (5) ␻i Uncertain distribution of maximal total migrations of product
 

i.
and E fk x∗ ,  < E fk x,  for at least one index k
3. Uncertain multi-objective decision framework
This section illustrates the proposed methodology to deal with
the capacity expansion and migration problem under uncertain
environment in high-tech industry like semiconductor fabrication.
Following the UNISON decision framework [31], we proposed a
framework of uncertain multi-objective decision model including
six parts: problem definition, niche identification, influence struc-
ture, model description, overall judgments and decision scheme as
shown in Fig. 1.
The right side in Fig. 1 shows the process to characterize uncer-
tain environment. In this study, demand uncertainty and capacity
uncertainty are uncertain variables. These two types of uncertain-
ties are from prediction subjective by working staff (or domain
experts). The accuracy confident levels of those imprecise pre-
dictions are measured by forecast belief degree in third level. As
mentioned in Section 2, uncertainty theory is appropriate to mea-
sure and compute this kind of human belief degree. Uncertain
variables are used to formulate demand and capacity uncertainty
in multi-objective optimization.
The left column of the framework shows the practical elements
of decision maker. In this study, the decision maker is semicon-
ductor manufacturer. From top to bottom are practical managerial
niche to mathematical parameters step by step. Manufacturer want
to maximize capacity utilization which is inflexible for computing
directly. The key influence in capacity utilization is cost loss of tools
and machines if capacity planning and actual demand are unbal-
anced. To evaluate such cost loss, some information parameters
were set in mathematical model as input constants or criteria.
The middle line consists of mathematical modelling in capac-
ity planning problem. Strategy formulation is our goal which can
serve as guideline for companies to apply into practical manufac-
turing decision-making process. The capacity planning decision in
manufacturing follows a rolling mechanism so it is needed to do
multi-objective optimization at all decision points. Finally, a case
study is conducted to validate the proposed model and get some
result for practical guidelines.
The parameters and decision variables used in the proposed
model are listed as follows:
i, 1, 2,..., n Product number
j, 1, 2,..., m Predictor number
t, 1, 2,..., T Decision time point
eit Capacity expansion for product i in time t
cit Accumulate capacity for product i in time t
−1 Inverse uncertainty distribution of ␻i
i
Wo Cost weight of capacity oversupply loss.
Ws Cost weight of capacity shortage loss.
WM Cost weight of capacity migration loss.
WiP Value weight of product i.
ROit Loss of capacity oversupply of product i in time t.
RSit Loss of capacity shortage of product i in time t.
RMit Loss of capacity migration of product i in time t.
3.1. Problem definition
Strategic capacity planning problem is to find the expansion
and migration plan of capacity resources for different products.
Semiconductor corporations adopt a rolling mechanism to update
estimated prediction of product demand referring to the latest
business information in the market. Suppose the lead time of tool
procurement is 2 quarters, the capacity decision of Quarter 3 should
be confirmed in Quarter 1.
Semiconductor companies usually have demand and capacity
planning forecast made by multiple departments for different prod-
ucts from the beginning of their lifetime to the decision epoch. The
actual demand will be get 2 quarters later from the decision epoch
of corresponding predicted demand. Actual demand and capacity
planning of multiple products will be get at that time.
3.2. Demand uncertainty
Considering insufficient data under uncertain environment for
normal distribution estimation, it is reasonable to generate demand
distribution for different situations.
3.2.1. Expert investigation method for no historical data
For some semiconductor products, especially new advanced
technology with no historical data for quantized prediction,
there are some qualitative prediction through expert investigation
method such as subjective probability, leading indicator method
and Delphi method. However, subjective probability method is
another interpretation of probability different from frequentist
probability or classical probability, which is the theoretical assump-
tion of uncertainty theory. Thus, subjective probability method
cannot be used in this study. Indeed, leading indicator method is
appropriate to be used by domain experts to find out the leading
indicators from economic environment and product market and
make a demand forecast. These demand predictions serve as uncer-
tain information resource for this study to estimate the degree
904
Fig. 1. Multi-objective decision framework under uncertainty.
of uncertainty. Delphi method [32] has been applied to estimate
uncertain distribution in education field.
In our set up, dit is the predicted demand for product i in time
t, which supposed to be monitored by data collected and it is
uncertain distribution of dit .
The expert investigation flowchart based on Delphi method
includes 7 steps as illustrated in Fig. 2.
Step 1. m domain experts are supposed to provide predicted
demand data xijt , i = 1, 2,..., n, j = 1, 2,..., m combined with their
own belief degrees ␣ijt , j = 1, 2,..., ni , based on former prediction
record. For new predictor, ␣ijt is set as 0. The forecasting sequence
of domain experts is
C.-F. Chien et al. / Applied Soft Computing 68 (2018) 900–909
Step 4. it is generated as the uncertain distribution of dit , which
is the predicted demand for product i in time t.
Step 5. Uncertain programming model is constructed and solved
to decide the capacity planning solution.
Step 6. Real demand for predicted product will be attained and
prediction error for difference sources should be updated.
Step 7. An initial dataset is obtained for prediction error method.
Expert investigation method stage is finished.
3.2.2. Prediction error method for small data set
If the raw dataset is given but insufficient, uncertain demand
 
xijt , ˛ijt , i = 1, 2, · · ·, m, j = 1, 2, · · ·, ni
Step 2. The jth domain expert’s uncertainty distribution
function j (x) are generated from the jth expert’s forecast
distribution should be estimated by domain experts’ historical pre-
.
diction errors as their belief degrees in demand forecasting. Each
domain expert or forecasting staff need to make prediction for vari-
  ous products. For product i, let Dit and dit be the actual and predicted
data: (xi1t , ˛i1t ) , (xi2t , ˛i2t ) · · ·, xini t , ˛ini t . Then capacity empiri- demand of product i in time t respectively. Then we define the
cal uncertainty distribution ijt (x) can be formulated as normalized error of prediction from source j as:
⎧
⎪ 0, ifx < xi,1,t
⎪
⎪    Dit − xijt
⎨ ˛i,j+1,t − ˛i,j,t x − xi,j,t errorijt = (7)
xijt
ijt (x) = ˛i,j,t + , ifxi,j,t < x < xi,j+1,t
⎪
⎪ xi,j+1,t − xi,j,t
⎪
⎩
1, ifx > xi,ni ,t Positive prediction error means that predictor is pessimistic
(6) and negative error caused by overestimate of future demands.
According to the relation between prediction errors and forecast
where 1 ≤ j < ni subjectivity, it is reasonable to generate uncertain normal distribu-

m   −1
(ε√ijt −x)
Step 3. Overall forecasting distribution it (x) = ωijt ijt (x) tion ˚ijt (x) = 1 + exp , −∞ < x
∞,
0 devoted by
  3
ijt
1 Nijt εijt ,
ijt for predictor j as prediction error. The inverse uncer-
is generated, where ωj is weight of the jth domain expert undated   √

ijt 3
at the decision point due to last forecasting accuracy. tainty distribution of Nijt εijt ,
ijt is ˚−1 (x) = εijt + x
ln 1−x
 C.-F. Chien et al. / Applied Soft Computing 68 (2018) 900–909 905

As the cumulative capacity, cit is equal to the sum of capacity in

the previous decision point, capacity expansion in this period and
net migration of product i at time t.
 
cit = ci(t−1) + eit + mait − mibt (11)
a=
/ i b=
/ i

The upper and lower capacity bounds of product i during time

period from t − 1 to t are formed as:
 
uitt  = cit + t  − t (Ei + Mi ) (12)
 
litt  = cit − t  − t Mi (13)

Define RSit represents capacity shortage loss of product i at

time t. ROit denotes the capacity oversupply loss of product i. RMit
denotes the capacity migration
 loss of product i in time t.
Shortage loss RSit = (it − uitt  ) will emerge if product
t
demand is greater
 than capacity. Otherwise, capacity oversupply
loss ROit = (litt  − it ) will generate when demand is insuf-
t
ficient compared with manufacturing capacity. In addition to
capacityexpansion, migrations between technologies cause loss
RMit = mii t as well. The objectives of the proposed model,
i
total
 loss of 
deficiency,
 surplus
 and migration, are computed by
RSit , ROit and RMit respectively.
i t i t i t

3.4. Model optimization

3.4.1. Model description

Fig. 2. Expert investigation flowchart.
Following the parameters and notions above, the UMD model
The mean and standard deviation formula of prediction error can be formulated as:
are: ⎧       
 ⎪
⎪   
errorijt ⎪
⎪ min E RSit , E ROit , E RMit
εj = t i
(8) ⎪
⎪ x
t ⎪
⎪
 ⎪
⎪
i t i t i t

  2 ⎪
⎪
⎪
⎪
t i
errorijt − εijt ⎨ Subjectto

j = (9)
t−1 eit ≤ Ei
⎪
⎪ 
⎪
⎪
Then the uncertain demand distribution of product i at decision ⎪
⎪ eit ≤ Ft
point t is ⎪
⎪
⎪
⎪  
⎪
⎪
i

m
   ⎪
⎪ mait + mibt ≤ Mi
˚it = ωitj xijt + xijt Nijt εijt ,
ijt (10) ⎩
a=
/ i b=
/ i
j (14)

3.3. Capacity loss

The three constraints imply that capacity expansion and migra-
In semiconductor manufacturing industry, huge cost loss is cre- tion of each product for each time period are limited due to actual
ated every day for disequilibrium between available capacity and restrictions in fabrications. The decision variable of model (14) is

real demand. If stand-by capacity is in shortage status, some orders
cannot be delivered on time, which causes demand fulfillment
problem refer to loss of total revenue and business reputation.
The capacity loss of oversupply lasts for the whole product life-
time while tool lifetime (few years) is much longer than company
financial account report (yearly or quarterly). On contrary, capacity
migration is basically a temporary planning decision approach able
to balance capacity of related products. Therefore, migration need
to be considered and capacity shortage, oversupply and migration
cost loss can be set as basic multiple objectives of the proposed
model.
(eit , mii t ), i = 1, 2, · · ·, i − 1, i + 1, · · ·, n.
In practice, capacity expansion and migration ranges of specified
products estimated by manufacturers are not certain due to irreg-
ular factors. For instance, machines in semiconductor fabrications
usually maintain round-the-clock situation, which is based on sta-
ble continuously electricity supply. Once electricity break happens
in municipal power pipes, diesel generator engine unit is used as
the backup power to ensure an uninterrupted operation of facilities.
Thus, capacity capability estimation for fabrications are uncertain
under complicate manufacturing environment. Uncertain parame-
ters with belief degree should be added to monitor such uncertainty
906 C.-F. Chien et al. / Applied Soft Computing 68 (2018) 900–909

as formulated in model (15).

⎧       
⎪
⎪   
⎪
⎪ min E RSit , E ROit , E RMit 3.4.3. Equivalent crisp model
⎪
⎪ x
⎪
⎪
Uncertainty measure in weighed model (17) is still hard to
⎪
⎪
i t i t i t
be computed directly. According to formula (2), the compromise
⎪
⎪
⎪
⎪ model (17) by uncertain measure can be transformed into inverse
⎪
⎪ 
Subjectto

⎪
⎨ uncertain distribution expression as shown below:
M eit ≤ ␺i ≥ ␶i
  1 
⎪
⎪   
⎪
⎪ min [ W S RSit + W O ROit + W M RMit ]d˛
⎪
⎪ M eit ≤ ϑt ≥ ␤t
⎪
⎪
x
⎪
⎪ ⎧ i ⎫ 0 i t i t i t
⎪
⎪ ⎨ ⎬ Subject to
⎪
⎪ 
⎪
⎪ M m + m ≤ ␻ ≥ ␥i eit ≤ −1
⎪
⎩ ⎩
ait ibt i
⎭ i
(i )
a=
/ i b=
/ i 
(15) { eit ≤ −1
t (ˇt )

i 
Suppose the maximal total expansion of product i, maximal total mait + mibt ≤ ˝i−1 (i )
expansion of decision point t, and maximal total migrations of prod-

a=
/ i b=
/ i
ucti. migration are uncertain variables ␺i , ϑt and ␻i respectively. WiP = 1
The confidence levels ␶, ␥, and ␤ represent belief degrees of these
i
parameters. The first constraint implies that the total expansion of WS + Wo + WM = 1
product i should be less than its limit capacity at confidence level ␶ (18)
as well as the others.

3.4.2. Weighted compromise model
Some researches have been done on solving uncertain multi-
objective programming problems so far. Zhong, Chen, Zhou and
Liu [33] introduced an interactive satisficing approach for multi-
objective programming with uncertain parameters. Liu and Chen
[34] proposed uncertain goal programming to balance the conflict-
ing objectives.
The objectives in this problem are capital cost loss with same
unit, which means the basic linear weighted sum method is
appropriate for proposed model. For basic model (3), following
compromise model
The deterministic model (18) can be solve by integral opera-
tion of objective function to find Pareto optimal solutions through
mathematical optimization approach.
4. Empirical study
An empirical case was conducted based on real data of a lead-
ing semiconductor company in Taiwan to validate the proposed
model. For proprietary information protection, the history data
have been systematical transformed. This dataset contains two
 
is formulated through weighting the objective sources of demand forecast updated, actual demand and capacity
functions E fi x,  by i . plan in practice. The two sources are sales and marketing depart-
⎧ ments. The sales make prediction based on customer information
⎪ 
q
 

⎪
⎪ min( i E fi x,  )
analysis from different areas while the market focusing on industry
⎪
⎪
⎪
⎪
x long trends and economic cycles. In particular, the capacity config-
⎪
⎪
i=1
ured as two product types in the fabrication can be expanded to
⎨ subjectto :
    fulfill the demand and the lead time for capacity expansion is two
M gj x,  ≤ 0 ≥ ˛j , j = 1, 2, · · ·, p (16)
⎪
⎪ 
quarters for both products. The installed capacity is measured by
⎪
⎪
⎪
⎪ i = 1
monthly wafer output of each product type. Two types of products
⎪
⎪ in different phases of lifetime with distinct demand trend are con-
⎪
⎩ i
sidered as shown in Fig. 3. The installed capacity is measured by
i > 0
monthly wafer output of each technology type.
Let x* be an optimal solution of model (14), then x* is a Pareto Product A is mature technology with stable demand and Product
optimal solution to the model (3) [35]. Therefore, it is reasonable B is a new technology with high speed increase at beginning of this
to transform model (13) to weighted compromise model (17) as cycle and fall down during the final quarter.
follows, According to real manufacturing environment, the cost loss of
   shortage, oversupply and migration is at the ratio of 300, 100, and
   10. Thus, the cost loss ratio weight WS , Wo and WM of three capac-
min E W S RSit + W O ROit + W M RMit
x ity statuses is characterized as 0.732, 0.244 and 0.024 respectively.
i t i t i t
Technology capacity value of product A is 2000 units and 2200 units
Subject to
for B, which can be simplified as W1 :W2 = 1:1.1 to be relatively value
M{eit ≤ i} ≥ i importance ratio between these two kinds of products for valida-
 tion experiments. The uncertain confidence levels of constraints
M{ eit ≤ ϑt } ≥ ˇt
are ␶i = 0.95 ˇt = 0.95, ␥i = 0.9 respectively. Since a history dataset

i  with limited demand data for 2 quarters before forecast duration is
M{ mait + mibt ≤ ˝i } ≥ i available in this case, prediction error method is used to generate
 a=
/ i b=
/ i uncertain demand distribution.
WiP =1 To estimate the validity, the solution of the proposed model
i is compared with the actual capacity planning decisions and the
WS + Wo + WM = 1 average of two forecast by sales and marketing department in the
(17) company.
 C.-F. Chien et al. / Applied Soft Computing 68 (2018) 900–909 907

Product A Product B

900
800
700
600
500
400
300
200
100
0
1 2 3 4 5 6

Fig. 3. Demand trend chart of products.

Demand Plan Average UMD

900

800

700

600

500

400

300

200

100

0
1 2 3 4 5 6

Fig. 4. Capacity decision with respect to real demand for product A.

As illustrated in Fig. 4, for mature product A, the demand stays
in a stable level. UMD model performs better than the other two
methods for product A with stable demand through these 6 time
periods. The average seems to be the worst one that means the sales
and marketing cannot enhance each other.
As shown in Fig. 5, it is difficult to forecast demand and make
capacity decisions for new advanced product B. Product B raises
from quarter 1 to quarter 4, then drops for one season and increases
again during the final period. UMD method in this product planning
changes slowly and slightly. Throughout the whole period, UMD
model is the most robust one in three approaches with no huge
mistake. In the third quarter, average forecast falls to a quite low
number which implies either the sales or marketing made a mis-
take at that time. At the fifth quarter, the average demand is too high
with another fault. The actual plan appears conservative among the
planning approach and its trace is very close to UMD method. How-
ever, the actual plan does not reflect the slight decrease of demand
in quarter 5. The average decision performs well in characterizing
this trend.
For capacity shortage and capacity oversupply loss comparison,
Fig. 6 indicates that the proposed model can effectively minimize
the capacity cost loss of shortage and surplus in sum compared
with actual capacity planning or average forecast planning of two
departments. Since the ratio of weight between capacity shortage
and oversupply is 3:1, the total capacity loss equals to the sum of
three times of capacity shortage plus capacity oversupply.
The left half of Fig. 6 is the result of product A and the right
half is for product B. For mature product A, both actual plan and
UMD perform well. Actual plan controls capacity oversupply better
while UMD seems to be better at shortage control. For new prod-
uct B, UMD’s robust control on capacity shortage saves at least 250
more units than the other two approaches. In this situation, the
proposed decision model saves about 30% cost loss. 30% reduction
in capacity loss will significantly affect the profitability of the com-
pany because of high capital investment and the associated fixed
costs in semiconductor manufacturing.
Since uncertain normal distribution has larger range of fluctua-
tion than normal distribution, it increases rapidly in rising period.
The UMD method performs better at capacity shortage and not so
good for controlling capacity oversupply. However, the weight of
capacity shortage is small, so the proposed model was the least cost
loss decision strategy in this study.
5. Conclusion
To address one of the visions for Industry 4.0 for flexible deci-
sions and smart production, this study proposed an uncertain
multi-objective decision framework and a novel capacity planning
908 C.-F. Chien et al. / Applied Soft Computing 68 (2018) 900–909

Demand Plan Average UMD

800

700

600

500

400

300

200

100

0
1 2 3 4 5 6

Fig. 5. Capacity decision with respect to real demand for product B.

Fig. 6. The loss of capacity oversupply and shortage due to different approaches.

approach based on uncertainty theory to deal with capacity plan- of oversupply or shortage. Therefore, the proposed approach can
ning under uncertain demands in real settings of semiconductor be employed as embedded decision support mechanism for smart
manufacturing that is capital-intensive. The proposed approach production solutions for Industry 4.0.
has considered realistic needs of multiple technologies, capacity
migration, and capacity supply uncertainty. Also, demand uncer-
6. Future research
tainty in capacity planning process was represented as uncertain
distribution generated from various initial predictions.
Further studies should be done to address flexible decisions and
To estimate the validity of the proposed approach, realistic
smart production for various manufacturing systems in real set-
data was employed to compare the efficiency and viability of the
tings to derive useful findings to realize intelligent manufacturing
proposed approach to minimize the total capacity loss including
for Industry 4.0. Also, future research can be done to consider more
oversupply, shortage, and migration over a period. The results of
decision elements and variables such as price fluctuation and price
empirical studies have shown practical viability of this approach to
elasticity, as well as to formulate the present problem from differ-
effectively deal with the uncertainty for semiconductor manufac-
ent strategic perspectives such as revenue management or market
turing capacity planning. Indeed, most of the existing approaches
power. In addition, soft computing and revolutionary algorithms
cannot effectively address the involved decision uncertainty for
such as Particle Swarm Optimization (PSO) or genetic algorithms
capacity planning with long lead time and significant capital risks
(GA) can be incorporated to improve the computing efficiency of the
 C.-F. Chien et al. / Applied Soft Computing 68 (2018) 900–909
proposed approach for multi-objective optimization as the prob-
lem become large in some situations. Furthermore, for resource
integration of demand forecast and planning departments, quanti-
tative forecasting methods such as diffusion model or time series
model can be incorporated to the proposed approach as a system-
atic mechanism if the historical data become abundant for data
analytics.
The study has addressed a new application direction of
uncertainty theory, in which smart production under uncertain
environment actually contains many imprecise quantities to be
solved in order to implement manufacturing intelligence for Indus-
try 4.0. More decision elements for intelligent manufacturing
should be addressed in future studies, including pricing strategies,
demand forecast, demand fulfillment planning, capacity planning,
capital expenditure for capacity expansion, and cost structure
affecting the overall return of a company.
Acknowledgements
This research is supported by Ministry of Science and
Technology, Taiwan (MOST 105-2218-E-007-027; MOST105-2622-
8-007-002-TM1; MOST 103-2218-E-007-023), Hsinchu Science
Park (102A26), and the Toward World Class University Project from
Ministry of Education, Taiwan (105N536CE1).
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