Margin Based Allocations

Capacity in the semiconductor industry is fungible (i.e., the same resource can be used to make a wide variety of products) and perishable (i.e., an idle machine is one whose capacity is lost forever). In that sense, scarce capacity can be viewed as being similar to seats on an airplane or rooms in a hotel.

The objective of this exercise was to adapt the techniques of Revenue Management (or Yield Management as it was traditionally known) and apply them to the management of allocations at On Semi. Although this exercise was incomplete, the insights gained from this were valuable in shaping thinking about managing allocations in the conventional way.