J Intell Manuf (2011) 22:447–457 DOI 10.1007/s10845-009-0302-x Measuring relative performance of wafer fabrication operations: a case study Wen-Chih Chen · Chen-Fu Chien Received: 4 July 2008 / Accepted: 6 July 2009 / Published online: 25 July 2009 © Springer Science+Business Media, LLC 2009 Abstract This paper was motivated by a request to review relative operations performance for various fabrication facili- ties within a leading Taiwanese semiconductor manufacturer. Performance evaluation is important but often controversial. To dispel the controversy, we propose a two-stage fabrication process model to systematically analyze metrics currently adopted, and show that the commonly used wafer-based indi- ces are biased for operations performance. Instead, they should be decomposed into productivity, representing true operations performance, and manufacturability. We suggest the use of data envelopment analysis because of its confirmed linkages to other widely used productivity measures and its overall performance via relative comparisons. The case study illustrates how the two-stage model evaluates and analyzes real-world operations, and the empirical results show the drawbacks of conventional methods. Keywords Performance evaluation · Fab operations · Semiconductor manufacturing · DEA Introduction Since the global semiconductor industry is highly compet- itive, properly utilizing resources to provide products and services is essential for maintaining firms’ competitive edges and survival. Various types of businesses regard relative W.-C. Chen (B ) Department of Industrial Engineering and Management, National Chiao Tung University, 30010 Hsinchu, Taiwan e-mail: wenchih@faculty.nctu.edu.tw C.-F. Chien Department of Industrial Engineering and Engineering Management, National Tsing Hua University, 30013 Hsinchu, Taiwan performance analysis as a foundational tool for monitoring, diagnosing and improving activities and processes, determin- ing future strategies and suggesting improvements. The per- formance comparison can be inter- or intra-firm. Inter-firm analyses compare different organizations which are not con- trolled or planned by a central decision-maker. In contrast, intra-firm comparison compares units within an organization and the results are monitored and used by the central decision makers. Particularly, intra-firm comparison is used for peri- odic review in the sense of competition and directly related to rewards including future promotion and compensation. Units under evaluation are thus very sensitive to the performance evaluation rules and methods; controversies often arise in response to the poor performance. This paper was motivated by a request in real setting to evaluate (compare) the operations performance for various wafer fabrication facilities (fabs) within a leading Taiwanese semiconductor manufacturer. The evaluation is an intra-firm comparison, and is directly related to fab managers’ reputa- tions and compensations. This paper uses the term fab oper- ations to refer to all activities in a fab that involve consuming resources to provide outputs such as products or services, and excluding finance, sales and technology development. Indeed, fab operations performance significantly interacts with capacity and resource/product allocations; these factors can influence the performance and evaluation result supplies feedback about past decisions. Although the operations per- formance evaluation is important, as addressed, it is contro- versial. Indeed, fab managers often refuse to accept the poor performance evaluation result and question the method. How to conduct a practically proper and convincing performance evaluation is the major challenge. Performance evaluation processes include defining met- rics and concluding the performance. A performance evalu- ation method should consider: (1) Inclusiveness—it should 123