In Goldratt’s fictional novel The Goal, he tells a tale of a plant manager and the production problems he faces that causes his plant to lag in sales. The themes and concepts (Theory of Constraints) in The Goal can be applied to many different industries; however, it is easiest to apply the concepts to another manufacturing industry.
History and Background Information
Throughout the last two decades, the general public has been fortunate enough to see rapid advancements in the technologies found in entertainment consumer goods. One of these technologies is the Blu-ray player, found in the PlayStation 3. Sony ran into production problems concerning the Blu-ray diodes that create the shorter wavelength blue-violet laser that can store more information on special discs, increasing capacity from a single layer DVD disc of 4.37 GB to 25 GB of data on a single layer Blu-ray disc. What this essentially translates to is better graphics and sound for games as well as HD content for movies with a compatible television.[1]
Currently, Blu-ray players (not the PlayStation 3) retail for between $800 and $1,500. The PlayStation 3 has two models priced at $499 and $599.[2] Either way, an aficionado of entertainment would be receiving a steal if he/she purchased a PlayStation 3 since the pricing is lower than the dedicated Blu-ray players as well as having many more features than the stand alone players. If an enthusiast wanted to take advantage of these technologies, he/she would have to purchase a television that can take full advantage of 1080p resolution.[3]
The new generation of media formats is reminiscent of the media format war between (interestingly enough) Sony’s Betamax and the JVC and RCA backed VHS format. Now the competition is between Sony and Phillips’ Blu-ray versus Toshiba/Microsoft’s HD DVD.
Application
The bottom line for the industry is to make money. Any production problem that results in a shortage of diodes results in a shortage of Blu-ray players, discs, and PS3’s. The bottlenecks that result in a shortage ultimately affect Sony’s bottom line – its revenues and profits. The purpose of this paper is to identify the various bottlenecks associated with the production of Blu-ray products, primarily the Sony PlayStation 3.
Bottlenecks
The definition of a bottleneck and non-bottleneck in the novel is determined by if “any resource whose capacity is equal to or less than the demand placed upon it” and basically the opposite for a non-bottleneck.
The most crucial bottleneck in the Blu-ray manufacturing process lies within the complicated nature of the Blu-ray diodes themselves. Blu-ray discs are able to store more information on the same size disc as a standard DVD by using a smaller numerical aperture. Standard DVDs have a numerical aperture of 0.6, HD DVDs at 0.65, and Blu-ray at a much smaller 0.85, which allows for data to be written closer together on a disc. The laser is also bent into a cone shape, which allows the blue-violet laser to store more data on a disc. Any error in this numerical aperture compromises the integrity of the disc.[4] Because of this highly sensitive laser, the most miniscule error in the production of the diodes can shut down an entire production line. Any small errors made by the machinery and equipment can result in production lines stopping, thus leading to a smaller throughput of the product. Due to the complex nature of Blu-ray diodes, much higher production flaw rates can occur.
In addition to higher production flaw rates on the Blu-ray diode production line is Sony’s failure to bring its crystalline growing reactors online.[5] Without the crystalline growing reactors, zero diodes can be produced. This failure to ramp up production on these reactors results in a severe bottleneck in that Sony cannot produce the quantity of diodes it needs in order to satisfy all of its customers’ demands globally.
The industry as a whole, not just for the availability of PlayStation 3s, does not have enough Blu-ray diodes. Prior to the launch of the PS3, Sony’s original estimate was to ship 2 million consoles on the initial launch date world wide. However, that number shrank to 500,000, with 400,000 units shipped to the
The lack of available Blu-ray diodes is crucial in the ability to produce PS3 consoles. Since every single PS3 console requires a Blu-ray diode in order to read the material written on the various forms of media (games and movies), the lack of Blu-ray diodes due to production problems restricts the number of PS3 consoles that can be manufactured. In other words, the shortage of diodes is directly responsible for the shortage of PS3’s. With a limited quantity of PS3’s to ship and sale due to the lack of diodes, Sony loses millions in the booming video game industry and cannot keep up with market demand. Sony loses market share in the next-generation console wars since some consumers who cannot find a PS3 may settle for buying the much cheaper Xbox 360 or Nintendo Wii.
The architecture of the Blu-ray disc is also another bottleneck for Sony and other companies supporting the new high-def technology. Currently, HD DVD discs cost much less to produce than Blu-ray discs, primarily because the production process and programming architecture is similar to that of standard DVDs.[8] Blu-ray discs require completely different components and machinery. A lack of this sophisticated machinery (or the unavailability as previously mentioned), as well as pauses in the production line for adjustments, restricts the number of discs that can be manufactured, thus limiting the producer’s throughput. The programming architecture of HD DVD discs almost mirror the architecture of standard DVDs. The relative ease of producing HD DVDs gives the manufacturers of HD DVDs a competitive advantage since it allows for lower production costs and larger quantities of discs compared to Blu-ray. Issues stemming from the inability to manufacture large quantities of discs result in fewer sales and unsatisfied customers. This inevitably hurts Sony in its goal to produce a quality product that is profitable.
Hard-coating technology is another step in the production process that presents a bottleneck in Blu-ray production. In order to store such a massive amount of information, the laser writes the data onto the disc much closer to the surface than standard DVDs. In order to prevent corrosion of the disc and data integrity, a coating must be applied to each disc. Adding any additional materials or labor to the production of the discs is obviously going to increase the cost per unit. Additional machinery and equipment is needed in order to utilize the hard-coating technology. The lack of machines on the market is a capacity constraint for the Blu-ray industry. Without the proper skilled workers and equipment to manufacture their goods, Sony and other Blu-ray supporters run into issues of not being able to produce the quantities of Blu-ray discs for other companies to use for production.
The final bottleneck concerning Blu-ray production is the problems of Blu-ray disc copy protection technology. Due to these various problems, Sony announced that it would release all of its consoles in the Japanese, American, and European markets at the same time (actually Europe did not receive any shipments of PS3’s until March of 2007 versus November of 2006).[9] Because of the disc copy protection issues Sony faced, this further delayed production of Blu-ray discs, which again, leads to lost revenues for Sony.[10]
Suggestions
In order for Sony to meet global demands for Blu-ray diodes, they must eliminate the bottlenecks in the production of this new technology. Sony and its partners should research alternative methods regarding the hard-coating technology. Either eliminate it all together or find a cheaper method to hard-coat the discs. Another suggestion would be to place various Quality Control stations throughout the Blu-ray production line, which may be costly, but could save Sony millions if it enables them to produce better quality, fail-safe diodes. Quality Control can allow Sony to avoid problems in both the diode and disc production. Periodically halting the production lines for adjustments of the machinery and equipment can help in producing fewer damaged goods. Eliminating production problems before they arise can result in the increased availability of Blu-ray diodes, allowing Sony to increase its throughput and satisfy global demands.
[1] Standard DVD resolution is 480p whereas both Blu-ray and HD DVDs can support up to 1080p.
[2] The $499 model has a smaller hard drive than the $599 model (before Jul/Aug 2007 price drop)
[3] Most televisions on the market are 720p, with very few models to choose from that support a full 1080p. The 1080p television sets cost anywhere from $1700 to beyond $5000, depending on size and style (LCD vs plasma).
[4] Dobbins, Aaron. "HD DVD: Blu-ray Has Problems." Jan 7, 2006.http://www.betanews.com/article/HD_DVD_Bluray_Has_Problems/1136673259 (accessed
[5] Hara, Yoshiko. "Blue laser glitch forces another delay for Sony PS3." Sept 7, 2006.http://www.eetimes.com/showArticle.jhtml?articleID=192600057 (accessed
6Jiji Press. "Sharp to Launch Mass Production of Blue-Violet Laser Diode in May."
[7] Lewis, Leo. "Sharp Breaks the Blue Laser Duopoly." Dec 20, 2006.http://proquest.umi.com/pqdweb?did=1183697751&sid=2&Fmt=3&cl ientId=69636&RQT=309&VName=PQD (accessed
[8] Sweeting, Paul. "Blu-ray Ups Production Abilities." May 30, 2005.http://proquest.umi.com/pqdweb?did=1232667091&sid=6&Fmt=3&clientId=69636&RQT=309&VName=PQD (accessed
[9] "PlayStation 3 Euro launch delayed." Sept 6, 2006.http://news.bbc.co.uk/1/hi/technology/5319190.stm (accessed
[10] One article estimated that Sony would lose as much as $1.6 billion from these production issues.
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