Description
This is a presentation explaining about operations theory emphasizing on concepts of theory of constraints, inventory management, causes of inventory pile up.
Theory of Constraints &
Synchronous Manufacturing
Course Overview
? Why Study Operations Management? ? How to approach OM? ? What will we get from this?
? What are the expectations?
? Milestones! ? Questions
Different Views of Operations Mgmt Ability to are your expectations? What describe any System CASES: Strategic significance(inherent) Understanding Operating System Understanding the of Operations Submissions & Presentations Contents (competing through Operations) Two Analysing Operating System conflicts ASSIGNMENTS Methodology ImprovingBusiness paradoxes EXAMS Solving an Operating failures Understanding reasons for System One major Assignment Delivery Management to find soft spots Understanding how of Resources PROJECT Understanding methodology/tools for Group Work Improvement
Course Overview
? Regular Sessions ? 16+4 ? Format ? Readings/ Lecture followed by cases, problems ? Expectations ? Read relevant Chapter and/or Reading ? Prepare cases ; send PPTs wherever necessary ? Do the web exercises, wherever relevant ? Participate in the Class Discussions
Milestones
? Project Due date ? 18 March 2010
Office Hours will be 6.00-7.30 pm on ALL THURSDAYS Phone: 1009
? Case Submission date ? All cases – an 1 page individual write up is expected ? Project Presentations ? 3 hrs (15 min per group) ? Report submission date : ? Additional Sessions (optional)
Moodle Key
302OPM T
Course Map
OM-1 (Recap) New Paradigms in OM Rethinking the way we do Operations A commonsensical approach With simple tools Primary Functions Capacity? Oprtns Secondary Functions Inventory Improvement Philosophies JIT Productivity Improvement
Synchronous Manufacturing
Activity Process System Role of Operations Mgmt Activities under OM
Long Term Capacity Planning Location & layout Annual Operations Plang Forecasting, Agg Planning, MPS Operations Scheduling
Secondary Functions Inventory, JIT
Service Operations Project Management Special Cases Service Ops, Proj Mgmt
Recap (Operations Management-1)
? What did you learn in Operations Mgmt-1? ? Activity & Process ? Common Business Dilemmas
? Operations Management Functions
Relevance of Operations Management
? A company has the gross profit margin of 3% (i.e
when an item is sold for Rs.100 the direct costs accounts for Rs 97). If you are the owner/manager of this company what could be the maximum annual return on investment (ROI) you can make from this company?
Illustration
? Gross profit Margin : 3% (Rs 3) ? Assume other expense of Rs 1, the net margin is Rs 2. ? Assuming a capital apportioning of another Rs 1, the
ROI = 1/99 = 1%
? What is wrong in this argument?
? Wrong assumption
Operations cycle is an year ? Suppose you turns twice? ? 2/99 ? Every month
?
?
12/99 36/99 300/99 600/99
?
Every 10 days?
?
?
?
Every day?
? ?
Every 6 hrs (Toyota)
? What is the learning?
So…What is Operations Management?
? Direction and Control of processes that
transform inputs into finished goods and services
Process?
OPERATIONS MANAGEMENT – I QUIZ 2 : 10 min 1. You are considering a process plant. There are three machines (A, B, C) available each having an average capacity of processing 4000 kg/hr. The sequence (continuous) of operation is A B C. If the output requirement is 30000 kg per day ( operational
constraints force firm not to work more than 8 hours), Do you feel the existing capacities are enough. State the assumptions.
If the capacities are not enough, various options are available like (a) increasing capacity of one or more machines (b) sub contracting activities of one or more machines (c) creating buffers etc, each of which comes with a price tag. Illustrate when will you opt for such decisions. What are the guiding factors. Develop the framework for analysis Raw Finished
Material
.
A
B
C
Good
Raw Material
A
B
C
Finished Good
2500
4000
5500
3750 4000 4250
1500
4000
6500
? Will your answer change?
? Why? ? Managing a process is challenging as synchronising flows
in a multi-tier system is very difficult ? How to Solve?
Synchronizing flows
? Classical solutions ? Inventory Buffers ? Capacity Buffers ? Effect ? Huge Inventory & Wastages
? What is the biggest contributor of loss/failure in
organisations?
• Rs. 1,50,000 Crores of capital is tied up as inventories in industrial sector in India (2006 CMIE report) • Markdowns in retail industry is around 36%, thanks to excess inventory kept throughout the distribution chain
• Boeing had severe stockouts while it was carrying inventory to the tune of 600bn
• During first IRAQ war, US army had carried 6 months of stock, many of the containers came back unreturned. By the second war, army could reduce the levels to 21 days. Surprisingly they had better availability this time…
Effect of Inventory Reduction
Labor Rs.7,00,000 Operating cost elements
Sales Rs.50,00,000 Minus Cost of Goods Sold Rs.38,00,000 (Rs.36,85,000) Plus
Net income Rs.4,00,000 (Rs.5,15,000) Divided by Sales Rs.50,00,000 Profit margin 8% (10.3%)
Materials Rs.23,00,000 (Rs.21,85,000) Overhead Rs.8,00,000
What if we decrease materials cost by 5%? (or Rs.1,15,000)
Other costs Rs.8,00,000
Return on Investments 10.0% (13.0%)
Multiply
Inventories Rs.5,00,000 (Rs.4,75,000) Account receivable Rs.3,00,000 Assets Current assets Rs.11,00,000 (Rs.10,75,000) Plus
Sales Rs.50,00,000 Divided by Total assets Rs.40,00,000 (Rs.39,75,000) Asset turnover rate 1.25 (1.26)
Cash Rs.3,00,000
Fixed assets Rs.29,00,000
BUT HOW TO REDUCE ?
HOW TO REDUCE ?
UNDERSTAND WHY WASTE IS FORMED REMOVE CAUSES RATHER THAN SYMPTOMS BY STARTING FROM FIRST PRINCIPLES BY IMITATION – LOOKING AT WHAT OTHERS DO
What causes Inventory? What are the wastages? Why wastage? How to eliminate?
Business Enterprise
Wastage
Manufacturing/ Service Operations
Eliminating wastage
Business Enterprise
Manufacturing/ Service Operations
Wastage
Rs
SERVICE/ MANUFACTURING ENTERPRISE
What else causes pile up of Inventory?
? Inventory is the only insurance against
uncertainty
Danger Zone (stockout)
Root Causes of Inventory
2%
33% 37% Supply Variance Demand Variance Minimum St ock Process variance
28%
Exploding the Myth
? Better customer service can be obtained by lower
inventory levels
? How to reduce variability
Danger zone (stockout)
Recap (Day 1)
? Operations as a transformation Process ? Wastage ? Lack of synchronisation of activities ? Performance Measures ? Cost ? Time ? VARIABILITY ? What causes variability?
Reasons for variability
? Natural causes ? Artificial causes (perceived causes)
Lead time variability is more dangerous than long lead times ? Uncertain short deliveries leads to more inventory than known long deliveries ? A plant with very high (and equal) asset utilisation will have more variability and inventory ? How to solve? ? Treat Variability as the most important performance measure ? Develop systems that minimise variability
?
What are the other causes of Variability
? Changing Customer Expectations ? Changes in the technological domains ? Internal polices and practices
Customer Expectations
Cost
service time
High to Low variety
cost
Varieties Slow to Quick A Few to Many
Responsiveness How to satisfy?
Challenges
? Relentless pressure on Cost Reduction
?
Distributed Manufacturing Base
Customers Shippers
information Network
? SKU Proliferation
?
?
Large number of variants Production & Distribution Problems
? Shrinking Life Cycles
?
High level of Obsolescence
Design Center Materials Supplier
? Accelerating Clock Speeds
?
Customer Responsiveness
? Technology Push
?
Information Explosion
? Standards Quagmire
?
EDI, Procurement Standards
World Class Manufacturing (Operations)
? No trade off between Cost, Quality, Speed of delivery
and flexibility
?
Order qualifiers
? Role of operations changes from ? Internally Neutral to Externally Supportive ? Available for service to World Class Service delivery
? Introduction of Best Practice Tools ? TQM, JIT, CIM, TPM, SRM etc. ? Broader use of Use of Technology
?
From production to delivery and post delivery support
Dimensions of Wastage : Beyond the Organisation
Raw Material (Estates) Blending Warehouse Logistics Provider
Logistics Provider
Tea Factory
Lead Time, Rs,
• Performance Measures
• Stochastic Models • Optimization
...
• Partnership Design
OEM Supplier
Operations Management : Tools & Techniques
Materials Management Maintenance Management
Process Design
Quality Management
Facility Design
Resources (Internal) Management
Product/ Service Design
Operations Strategy
Resources (External) Management
Operations Management Functions
Plant Location Equipment Selection
Product, Market Charachteristics Govt. support, Resource availability
Plant Layout
Engineering Analysis Product-Process Matching Flow synchronisation Break Even Analysis Type of production philosophy Geographical constraints
Inbound Logistics
In Plant Logistics
Warehouses Transportation
Material Handling Devices
Outbound Logistics
Distribution Channel Stock points
Facilities Creation & Mgmt
Operations Management Functions
Production Plng. Resources Allocation
Demand Forecasting, Aggregate Planning, Work Planning
Job Scheduling Machine routing Worker allocation Capital allocation Subcontracting
Allocating jobs to machines Performance parameters
Inventory Mgmt. Maintenance Mgmt Quality Norms, Points Control Mgmt.
Procurement Equipment control Inspection, TPM SQC,TQM, Quality Measures & Mgmt
Operational Functions
Synchronous Manufacturing and Theory of Constraints
Recap
? Changing Role of Operations Management
Changing Customer Expectations : conflicting objectives ? New methodologies for management ? Increased focus on Cost Reduction ? But ? The inventory levels-markdowns- are increasing
?
SKU proliferation ? Faster responsiveness (higher service levels : larger SS)
?
Stockouts are also increasing ? Solutions ? Introduce newer and more aggressive methodologies
?
?
Operational
?
Rethinking the way we manage our operations
Theory of Constraints : Motivation
The significant problems we face today cannot be resolved at the same level of thinking we were at when we created them : A.Einstein
Problems : Revisited….
? Backlogs ? Inventory ? Capacity utilization ? Absenteeism
LOSSES / REDUCED PROFIT
TOC : Rethinking the way we manage
? Process Approach & Systems Approach ? Focus on the goal : ? If every part is efficient will the process be efficient? ? Capacity and Flow Balancing?
TOC- Introduction
? What do you see in this picture? ? Why? ? What will be the output in 8 hours? ? If we have to improve what should we do?
Source: http://www.tocca.com.au/Services/demomanufacturing.htm
Theory of Constraints
? A system improvement philosophy ? Organizations live or die as systems, not as
processes ? Success or failure is a function of how well different component processes interact with one another
? Simple but radical philosophy proposed by Eliyahu
Goldratt
?
The GOAL
History of TOC
? Started as a Operations Improvement Technique ? Optimised Production Technology (OPT®) ? Extended to Entire business ? An overall theory for running the organisation ? Focus of managerial policy constraints ? TOC Thinking Process (TPs) ? Thinking Tools
TOC: Components
Theory of Constraints
Philosophy
Logistical Paradigm
Performance measures
Generic Approach
Evaporating Cloud
Current Reality Tree Future Reality Tree
DBR
TP
Pre-requisite Tree Transition Tree
Philosophy of TOC
? Systems are analogous to chains, or networks of
chains ? Like a chain, a system’s performance is limited by the performance of its weakest link
? The weakest link is the system’s Constraint
Basic Concept
? Every system has at least one constraint ? Constraint is anything that limits systems from achieving higher performance versus its goal ? Existence of Constraints represents opportunities for
improvement
Bottlenecks & CCR
? Lowest capacity resource? ? How many bottlenecks? ? Can there be no bottleneck? ? CCR : Utilization close to capacity ? How to find?
Theory of Constraints
INPUT
Step A
Step B
Step C
Step D
Step E
OUTPUT
Market Demand: 15
10 units/d
20 units/d
6 units/d
8 units/d
9 units/d
How many units can be produced per day?
What is the constraint?
Theory of Constraints
INPUT
Step A
Step B
Step C
Step D
Step E
OUTPUT
Market Demand: 15
19 units/d
20 units/d
18 units/d
23 units/d
17 units/d
Now how many units can be produced per day?
What is the constraint?
Improvement: 5 focusing steps
1. 2.
3.
4.
5.
Identify System’s constraint ? Physical or Managerial Decide how to exploit the systems constraints ? Elevating the bottleneck ? An hour added in bottleneck is an hour for the system Subordinate everything else to decision in step 2 ? Every other component must be adjusted to support maximum effectiveness of the constraint ? An hour added in the non-bottleneck is a mirage Elevate the system’s constraint ? Rigorous improvement efforts on constraints to improve their performance If a constraint is broken go back to step 1 and NOT LET inertia become the next constraint
TOC Improvement Cycle
Source: Rahman (1998) Theory of Constraints : A Review of Philosophy & Applications, IJOPM, 18, 4, pg 341
Subordination (for non constrained resources)
? Work or Stop ? In a system where everybody works every time need not be an efficient system ? Use “stop time” productively ? Changes in Performance measures ? Measure everyone’s performance based on constraints performance to schedule
?
Joint performance measures
?
Efficiency and utilisation is relevant only in Bottlenecks
Performance Measures
? What are the common performance measures? ? Return on Investment ? Net Profit ? Cash Flow
? Which is more important? ? All should be used together
Performance Measures
? How to measure system’s performance ? Are you using right measurements: Jonah ? Throughput ? Number of units produced? ? Rate at which an organisation generates money through sales ? Inventory ? Stock of goods: RM,WIP &FG ? Money that system spends on things it intends to turn into throughput : (Valued only on Materials it contains as against value added method)
Performance Measures
? Operating Expense ? Variable cost of production (indirect?) ? All the money system spends to turn inventory into throughput ? Productivity ? Factor Productivity
utput per labour hour
?
But will it make money?
? ?
All actions that bring a company closer to its goals T/OE and T/I
How to prioritise
? TOC philosophy focuses on growth ? Throughput World Thinking as against Cost World Thinking ? ROI = (T-OE)/I : Focus on numerator
Throughput world theory
? T is unquestionably #1 because it has the potential
impact on top and bottomlines
? Reducing I is #2 because excess WIP and finished
goods jeopardize throughput
? Decreasing OE is only #3 as significant reductions-
especially workforce- can jeopardise future T
Cost World Theory
? Decrease OE as the first priority as we have to control
our expenses ? T is important but it is number 2… after all T depends on our customers ? I ? Well it is a necessary evil
Subordination
? Maintain protective capacity on non-bottlenecks but
use it judiciously
? Use buffer management as a method for sticking to
schedules and for improvement
?
Buffer management meeting
Elevate the Constraint
? Relax the constraint ? How to do it? ? Adding capacity
Removing non-value adding time ? SMED; Restaurant example
?
?
Marketing efforts
?
Beware of flying bottlenecks
Implementation : DBR Technique
? Control Point : Drum ? Buffer : Ensures Drum beats always ? Rope : Communication from Drum to upstream
Drum, Buffer, Rope
60
70
40
60
Constraint (Drum)
© 2007 Superfactory™. All Rights Reserved.
Drum, Buffer, Rope
Buffer
60 Rope
70
40 Constraint (Drum)
60
If Market demand is less
A
B
C
D
E
Demand 15
20
25
16
23
18
CCR
Capacity Constrained Resource
Now how many units can be produced per day?
What is the constraint?
DBR in case of CCR
A
B
C
Buffer 16
D
E
Demand 15
Buffer
20
25
23
18
CCR
DBR Technique :CCR
? No Drum ? Buffers : front of CCR, finished goods ? Ropes : Communication from CCR to material release
point ; communication between finished good to CCR
DBR Basic Principles
? Balance Flow NOT Capacity ? Level of utilisation of a non-bottleneck is not
? ? ?
?
determined by its own potential but by some other constraint in the system An hour lost in bottleneck is an hour lost for the entire system An hour saved in non-bottleneck is a mirage Bottleneck governs both throughput and inventories The performance measures should be designed constraints into account
Debottlenecking
? Problem: In a sequence M1-M2-M3 manufacturing a
product it is found that the capacities are 200, 180,160 per hour respectively. If unit capacity addition, cost 1500,1100, 2200 should we increase the capacity. where ? How much ? The value addition happening to the product in each of the machines are as follows M1 : $1600 M2 : $1200 M3 : $ 400
Solution
? M3 is the bottleneck ? However an hour saved in bottleneck is hour for the entire
? ? ? ?
?
system. So if we add capacity of M3 by 1, an additional product can come out Cost for adding capacity in M3 : $2200 Benefit : Total value addition (as full product can be made) : 1600+1200+400 = $3200 As benefit is more than the cost add capacity in M3. When 20 such additions are made both M2 and m3 will become bottleneck. For any more output capacity of both m2 and M3 have to be added, which cost $3300 ($2200+$1100). As benefit is only $3200 do nt add any more Solution Add 20 units of capacity to M3
Identification of Constraint
? Low Capacity Resource ? Storm in a Tea Cup ? Highly fluctuating resource ? Is capacity of a resource is fixed? ? “Flying” bottlenecks
Tata Tea Ltd : Storm in a Teacup
? The assumptions
? ? ?
The tea arrival pattern The tea loading pattern The shift structure
?
The withering limitations
? Quality considerations :leaf mixing
? Holidays and other interruptions
? Inventory management & maintenance
Exploitation of Constraint
? Treating as a precious resource ? Never let bottleneck starve…
?
Protect : Buffers: material,time
? Never waste bottleneck time
Inspection ? Maintenance
?
? “Protection of the weakest”
Effect of failure
? Problem : In a manufacturing plant that
manufactures a product that sells for Rs 1000 (cost Rs 500), a machine in the upstream generally produce a bad product in every 100 units it produce which is rejected subsequently. If the cost incurred upto the rejection is Rs 300 and the repair cost works out to be Rs 2,00,000 for every 50000 units produced, should we undertake the repair
Analysis
No.of Rejects : 500 Cost(loss) due to rejection : 300*500 : 1,50,000
Cost of Repair : Rs 2,00,000
so do not repair !
But is this correct?
Subordination (for non constrained resources)
? Work or Stop ? In a system where everybody works every time need not be an efficient system ? Use “stop time” productively ? Changes in Performance measures ? Measure everyone’s performance based on constraints performance to schedule
?
Joint performance measures
?
Efficiency and utilisation is relevant only in Bottlenecks
Subordination
? Maintain protective capacity on non-bottlenecks but
use it judiciously
? Use buffer management as a method for sticking to
schedules and for improvement
?
Buffer management meeting
Elevate the Constraint
? Relax the constraint ? How to do it? ? Adding capacity
Removing non-value adding time ? SMED; Restaurant example
?
?
Marketing efforts
?
Be awre of flying bottlenecks
Fundamental Principles
? Do not balance capacity- balance flow ? Level of utilisation of non bottleneck is not determined by its ? ? ? ? ? ? ?
own potential but by some other constraint in the system Utilisation and activation of a resource are not the same An hour lost in bottleneck is an hour lost for the entire system An hour saved in a non-bottleneck is a mirage Bottleneck govern both throughput and inventory in the system Transfer batch may not and many a times should not be equal to the process batch A process should be variable both along its route and time Priorities can be set only by examining the system’s constraints. Lead time is a derivative of the schedule
STC Company: PCB Division
What is the competitive advantage of STCPCB?
? Fast-responsive, reliable supplier of small orders
? External Environment
?
Fragmented structure of PCB Market
? Internal Environment
? ? ?
Complex workflows & scheduling Equipment Flexibility Worker skills
STC :Current Situation
? Impressive Growth ? A few production issues ? Chasing the order is very effective? ? Is there any problem(s) with STC’s operations strategy ? What are the operational decisions?
Process Flow Diagram
Artwork
Manual Drill (7)
Punch tooling Holes
Inspect& Shear
Metalize
CNC (1)
Panel Prep
Laminate
Develop
Electroplate
Strip DFPR
Etch & Tin Strip
Punch Press Soldermask Solder Dip
CNC Router Inspect,Test Pack Rework ship
Process Flow Diagram
29 /0 15 /40b
Artwork
20 /0.5 10 /0.5 Punch tooling Holes
Manual Drill (7)
10 /0.75
Inspect& Shear
Metalize
240 /16pa
CNC (1)
5 /0.2
20 /2
20 /0.2
25 /8.5
Electroplate 50 /1 b
5 /0.2
Panel Prep
Laminate
Develop
Strip DFPR
10 /0.2 Etch & Tin Strip
Punch Press
45 /1.5 30 /0.5
Soldermask
Solder Dip
150 /0.5 b CNC Router
45 /1.5 Inspect,Test Pack
Rework
ship
? Process Design
? ? ?
Design Decisions
?
Equipment selection :degree of automation Flexibility with product ranges Capacity of operating system as a whole Information flow designs
? Operating Decisions
? ?
Order selection Loading and scheduling
? ? ?
When to send an order to shop floor To rush an order Tukker and work allotment
? Technology Choice
Technology Choice
? Drill : Manual Vs CNC
15+40 B ? 240 + 2 B ? B= 5.975 ? CNC Router vs Punch Press ? 150 + 0.5 B ? 50 + B
?
Time
? Minimum of 10 boards in CNC drill
?
? Minimum 200 boards in Router
? What should be the shop floor policy and why? ? IS CNC Drill a Botteleneck? ? What is the capacity utilisation
Board/order
Capacity and Product Mix
Dry Film Photoresist
? What is the Capacity?
? ?
Capacity dependent on order size? Calculate the capacity if order size is 1 board?
?
What will be the capacity, if order size is 10 boards or 100 boards
Panel Prep
Laminate
Develop
? Dry Film Photoresist
Capacity and Product Mix
Panel Prep
Laminate
Develop
Order size Lam& Exp Daily Capacity Daily Capacity Boards Time in orders in Boards 1 10 100 22 40 220 21.8 12 2.18 21.8 120 218
•Capacity is not an absolute number. It is a result of product mix decisions
Labour Time ? Calculate total labour time (per board basis) ? Order size of 1 board ? Order size of 8 boards ? Order size of 40,200 and 800 boards
Order size Technology Setup Boards Choice Time Run Time Total Time per order Time per Board 396.55 90.05 39.29 36.47 33.81
1 MD/PP 339 57.55 396.55 10 CNC/PP 564 336.5 900.5 100 CNC/PP 564 3365 3929 200 CNC/CR 664 6630 7294 1000 CNC/CR 664 33150 33814 MD : Manual Drill,CNC: CNC Drill, PP
unch Press,CR: CNC Router
•How will we price the boards?
How is STC’s PCB Division Doing?
? What are the problems? Why?
? What are the information flows
?
Customer order-to-delivery
? How to address these problems?
Is Financial Performance Satisfactory?
Financial Performance August Gross Profit 27.2 Net Profit 14.8
September 15.8 3.1
? Why such dismal performance?
? ? ? ?
Increase in Direct Labour and Manufacturing overhead Is it because of explosive growth? Poorly structured systems? New product introductions
Information Flow Analysis
Normal
Customer Bid Specs
Estimate Sheet
Design Engr Rush Order Manager1
Blue print
Factory Order
Purchasing
Vendors Blue Print Factory Order Raw Material
COO DPR
Factory Supervisor
Sales Manager
Small Orders
Batch #
Shop Floor
Tukker
Information Flow Analysis
Normal
Customer Bid Specs
Estimate Sheet
Design Engr Rush Order Manager1
Blue print
Factory Order
Purchasing
Vendors Blue Print Factory Order Raw Material
COO DPR
Factory Supervisor
Sales Manager
Small Orders
Batch #
Role of Tukker?
Tukker
Shop Floor
? Delivery Performance ? Quality Performance
Performance Measures and Problems
? Productivity
? Financial Performance
? Delivery Target
? ?
Delivery Performance
Actual deliveries are 9 days late WHY? What are the
implications?
?
?
Rush orders : 4 days avg :2-3/month : Are they the real culprit?
What percentage of total orders are rush orders?
? Why Delay?
? ? ? ? ?
Lack of material in stock Shifting of bottlenecks Mistakes Interruptions Poor information flows
Shifting of Bottlenecks ? Degree of variability in orders, routing ? Interruptions due to rush orders ? Tukker & Small rush orders
? Poor information flow
? ? ? ?
Delay in reaching the shop floor Split set ups Spaghetti info flow Ticket number on the top rack only
? Internal Rejects : ? External rejects: ? Total rework : 8.0%
? ?
Quality Performance 7% ? 1.4% total loss & 5.6% rework 1-3% in Sep 0.6% loss and 2.4% rework
Interrupt the work To tack the lot for blueprints will delay the process
? WHY there are quality problems?
?
Deliveries on Sep 29: 44560 (35.694%)
? ?
i.e 21.42 orders or 2056 boards on a day Inspection req : 21.42*45 +1.5*2056 = 4059 min i.e 67.65 labour hours
?
No inspection or inspection by non-experts
? September :
?
Productivity
Total hours worked :1531.7 hrs ? Available : 21 * 22* 8 = 3696 hrs i.e productivity 41.44%
?
Machine utilisation : CNC Drill ? Metalisation?
? Why Low Utilisation?
Realistic standards? Anything for rework? ? Material handling :layout? ? Idleness due to confusion and Tukker factor ? Supervision
?
?
Is Financial Performance Satisfactory?
Financial Performance August Gross Profit 27.2 Net Profit 14.8
September 15.8 3.1
? Why such dismal performance?
? ? ? ?
Increase in Direct Labour and Manufacturing overhead Is it because of explosive growth? Poorly structured systems? New product introductions
What should we do?
Recommendations
? Specific operating Decisions ? Procedural Recommendations ? System Changes ? Strategic decisions
Recommendations: Operating
? Buy one more CNC Drill? ? Shop floor policy on drill and router? ? ??
Recommendations: Procedural ? Change information flow ? How?
? Removing “hockey stick phenomenon”? ? Tukker? ? ??
Recommendations: System Changes ? Scheduling with a “chain” view and change POP
? Modify the standards considering the work pressures? ? Inventory Management ? Achieve synchronisation among operations
Product-Process Matrix Analysis
Process Structure
Project One Of a Kind Low Volume Little Moderate Vol High Volume High Volume Little Standardisation Customised Features Low Variety High Standard High Variety Multiple Products Few Major prdts Commodity
Job Shop (General Eqp Jumbled Flow)
Batch (Disconnected Line Flow Flexible Eqp) Assembly (Connected Line Flow Specialised Eqp) Continuous Process (Dedicated equp Continuous flow)
Any Misalignment for STCPCB?
Recommendations: Strategic
? How to move : Large orders/ Small orders
? Is it necessary?
? Can we have flexibility?
-NCC Case….
doc_913942047.ppt
This is a presentation explaining about operations theory emphasizing on concepts of theory of constraints, inventory management, causes of inventory pile up.
Theory of Constraints &
Synchronous Manufacturing
Course Overview
? Why Study Operations Management? ? How to approach OM? ? What will we get from this?
? What are the expectations?
? Milestones! ? Questions
Different Views of Operations Mgmt Ability to are your expectations? What describe any System CASES: Strategic significance(inherent) Understanding Operating System Understanding the of Operations Submissions & Presentations Contents (competing through Operations) Two Analysing Operating System conflicts ASSIGNMENTS Methodology ImprovingBusiness paradoxes EXAMS Solving an Operating failures Understanding reasons for System One major Assignment Delivery Management to find soft spots Understanding how of Resources PROJECT Understanding methodology/tools for Group Work Improvement
Course Overview
? Regular Sessions ? 16+4 ? Format ? Readings/ Lecture followed by cases, problems ? Expectations ? Read relevant Chapter and/or Reading ? Prepare cases ; send PPTs wherever necessary ? Do the web exercises, wherever relevant ? Participate in the Class Discussions
Milestones
? Project Due date ? 18 March 2010
Office Hours will be 6.00-7.30 pm on ALL THURSDAYS Phone: 1009
? Case Submission date ? All cases – an 1 page individual write up is expected ? Project Presentations ? 3 hrs (15 min per group) ? Report submission date : ? Additional Sessions (optional)
Moodle Key
302OPM T
Course Map
OM-1 (Recap) New Paradigms in OM Rethinking the way we do Operations A commonsensical approach With simple tools Primary Functions Capacity? Oprtns Secondary Functions Inventory Improvement Philosophies JIT Productivity Improvement
Synchronous Manufacturing
Activity Process System Role of Operations Mgmt Activities under OM
Long Term Capacity Planning Location & layout Annual Operations Plang Forecasting, Agg Planning, MPS Operations Scheduling
Secondary Functions Inventory, JIT
Service Operations Project Management Special Cases Service Ops, Proj Mgmt
Recap (Operations Management-1)
? What did you learn in Operations Mgmt-1? ? Activity & Process ? Common Business Dilemmas
? Operations Management Functions
Relevance of Operations Management
? A company has the gross profit margin of 3% (i.e
when an item is sold for Rs.100 the direct costs accounts for Rs 97). If you are the owner/manager of this company what could be the maximum annual return on investment (ROI) you can make from this company?
Illustration
? Gross profit Margin : 3% (Rs 3) ? Assume other expense of Rs 1, the net margin is Rs 2. ? Assuming a capital apportioning of another Rs 1, the
ROI = 1/99 = 1%
? What is wrong in this argument?
? Wrong assumption
Operations cycle is an year ? Suppose you turns twice? ? 2/99 ? Every month
?
?
12/99 36/99 300/99 600/99
?
Every 10 days?
?
?
?
Every day?
? ?
Every 6 hrs (Toyota)
? What is the learning?
So…What is Operations Management?
? Direction and Control of processes that
transform inputs into finished goods and services
Process?
OPERATIONS MANAGEMENT – I QUIZ 2 : 10 min 1. You are considering a process plant. There are three machines (A, B, C) available each having an average capacity of processing 4000 kg/hr. The sequence (continuous) of operation is A B C. If the output requirement is 30000 kg per day ( operational
constraints force firm not to work more than 8 hours), Do you feel the existing capacities are enough. State the assumptions.
If the capacities are not enough, various options are available like (a) increasing capacity of one or more machines (b) sub contracting activities of one or more machines (c) creating buffers etc, each of which comes with a price tag. Illustrate when will you opt for such decisions. What are the guiding factors. Develop the framework for analysis Raw Finished
Material
.
A
B
C
Good
Raw Material
A
B
C
Finished Good
2500
4000
5500
3750 4000 4250
1500
4000
6500
? Will your answer change?
? Why? ? Managing a process is challenging as synchronising flows
in a multi-tier system is very difficult ? How to Solve?
Synchronizing flows
? Classical solutions ? Inventory Buffers ? Capacity Buffers ? Effect ? Huge Inventory & Wastages
? What is the biggest contributor of loss/failure in
organisations?
• Rs. 1,50,000 Crores of capital is tied up as inventories in industrial sector in India (2006 CMIE report) • Markdowns in retail industry is around 36%, thanks to excess inventory kept throughout the distribution chain
• Boeing had severe stockouts while it was carrying inventory to the tune of 600bn
• During first IRAQ war, US army had carried 6 months of stock, many of the containers came back unreturned. By the second war, army could reduce the levels to 21 days. Surprisingly they had better availability this time…
Effect of Inventory Reduction
Labor Rs.7,00,000 Operating cost elements
Sales Rs.50,00,000 Minus Cost of Goods Sold Rs.38,00,000 (Rs.36,85,000) Plus
Net income Rs.4,00,000 (Rs.5,15,000) Divided by Sales Rs.50,00,000 Profit margin 8% (10.3%)
Materials Rs.23,00,000 (Rs.21,85,000) Overhead Rs.8,00,000
What if we decrease materials cost by 5%? (or Rs.1,15,000)
Other costs Rs.8,00,000
Return on Investments 10.0% (13.0%)
Multiply
Inventories Rs.5,00,000 (Rs.4,75,000) Account receivable Rs.3,00,000 Assets Current assets Rs.11,00,000 (Rs.10,75,000) Plus
Sales Rs.50,00,000 Divided by Total assets Rs.40,00,000 (Rs.39,75,000) Asset turnover rate 1.25 (1.26)
Cash Rs.3,00,000
Fixed assets Rs.29,00,000
BUT HOW TO REDUCE ?
HOW TO REDUCE ?
UNDERSTAND WHY WASTE IS FORMED REMOVE CAUSES RATHER THAN SYMPTOMS BY STARTING FROM FIRST PRINCIPLES BY IMITATION – LOOKING AT WHAT OTHERS DO
What causes Inventory? What are the wastages? Why wastage? How to eliminate?
Business Enterprise
Wastage
Manufacturing/ Service Operations
Eliminating wastage
Business Enterprise
Manufacturing/ Service Operations
Wastage
Rs
SERVICE/ MANUFACTURING ENTERPRISE
What else causes pile up of Inventory?
? Inventory is the only insurance against
uncertainty
Danger Zone (stockout)
Root Causes of Inventory
2%
33% 37% Supply Variance Demand Variance Minimum St ock Process variance
28%
Exploding the Myth
? Better customer service can be obtained by lower
inventory levels
? How to reduce variability
Danger zone (stockout)
Recap (Day 1)
? Operations as a transformation Process ? Wastage ? Lack of synchronisation of activities ? Performance Measures ? Cost ? Time ? VARIABILITY ? What causes variability?
Reasons for variability
? Natural causes ? Artificial causes (perceived causes)
Lead time variability is more dangerous than long lead times ? Uncertain short deliveries leads to more inventory than known long deliveries ? A plant with very high (and equal) asset utilisation will have more variability and inventory ? How to solve? ? Treat Variability as the most important performance measure ? Develop systems that minimise variability
?
What are the other causes of Variability
? Changing Customer Expectations ? Changes in the technological domains ? Internal polices and practices
Customer Expectations
Cost
service time
High to Low variety
cost
Varieties Slow to Quick A Few to Many
Responsiveness How to satisfy?
Challenges
? Relentless pressure on Cost Reduction
?
Distributed Manufacturing Base
Customers Shippers
information Network
? SKU Proliferation
?
?
Large number of variants Production & Distribution Problems
? Shrinking Life Cycles
?
High level of Obsolescence
Design Center Materials Supplier
? Accelerating Clock Speeds
?
Customer Responsiveness
? Technology Push
?
Information Explosion
? Standards Quagmire
?
EDI, Procurement Standards
World Class Manufacturing (Operations)
? No trade off between Cost, Quality, Speed of delivery
and flexibility
?
Order qualifiers
? Role of operations changes from ? Internally Neutral to Externally Supportive ? Available for service to World Class Service delivery
? Introduction of Best Practice Tools ? TQM, JIT, CIM, TPM, SRM etc. ? Broader use of Use of Technology
?
From production to delivery and post delivery support
Dimensions of Wastage : Beyond the Organisation
Raw Material (Estates) Blending Warehouse Logistics Provider
Logistics Provider
Tea Factory
Lead Time, Rs,
• Performance Measures
• Stochastic Models • Optimization
...
• Partnership Design
OEM Supplier
Operations Management : Tools & Techniques
Materials Management Maintenance Management
Process Design
Quality Management
Facility Design
Resources (Internal) Management
Product/ Service Design
Operations Strategy
Resources (External) Management
Operations Management Functions
Plant Location Equipment Selection
Product, Market Charachteristics Govt. support, Resource availability
Plant Layout
Engineering Analysis Product-Process Matching Flow synchronisation Break Even Analysis Type of production philosophy Geographical constraints
Inbound Logistics
In Plant Logistics
Warehouses Transportation
Material Handling Devices
Outbound Logistics
Distribution Channel Stock points
Facilities Creation & Mgmt
Operations Management Functions
Production Plng. Resources Allocation
Demand Forecasting, Aggregate Planning, Work Planning
Job Scheduling Machine routing Worker allocation Capital allocation Subcontracting
Allocating jobs to machines Performance parameters
Inventory Mgmt. Maintenance Mgmt Quality Norms, Points Control Mgmt.
Procurement Equipment control Inspection, TPM SQC,TQM, Quality Measures & Mgmt
Operational Functions
Synchronous Manufacturing and Theory of Constraints
Recap
? Changing Role of Operations Management
Changing Customer Expectations : conflicting objectives ? New methodologies for management ? Increased focus on Cost Reduction ? But ? The inventory levels-markdowns- are increasing
?
SKU proliferation ? Faster responsiveness (higher service levels : larger SS)
?
Stockouts are also increasing ? Solutions ? Introduce newer and more aggressive methodologies
?
?
Operational
?
Rethinking the way we manage our operations
Theory of Constraints : Motivation
The significant problems we face today cannot be resolved at the same level of thinking we were at when we created them : A.Einstein
Problems : Revisited….
? Backlogs ? Inventory ? Capacity utilization ? Absenteeism
LOSSES / REDUCED PROFIT
TOC : Rethinking the way we manage
? Process Approach & Systems Approach ? Focus on the goal : ? If every part is efficient will the process be efficient? ? Capacity and Flow Balancing?
TOC- Introduction
? What do you see in this picture? ? Why? ? What will be the output in 8 hours? ? If we have to improve what should we do?
Source: http://www.tocca.com.au/Services/demomanufacturing.htm
Theory of Constraints
? A system improvement philosophy ? Organizations live or die as systems, not as
processes ? Success or failure is a function of how well different component processes interact with one another
? Simple but radical philosophy proposed by Eliyahu
Goldratt
?
The GOAL
History of TOC
? Started as a Operations Improvement Technique ? Optimised Production Technology (OPT®) ? Extended to Entire business ? An overall theory for running the organisation ? Focus of managerial policy constraints ? TOC Thinking Process (TPs) ? Thinking Tools
TOC: Components
Theory of Constraints
Philosophy
Logistical Paradigm
Performance measures
Generic Approach
Evaporating Cloud
Current Reality Tree Future Reality Tree
DBR
TP
Pre-requisite Tree Transition Tree
Philosophy of TOC
? Systems are analogous to chains, or networks of
chains ? Like a chain, a system’s performance is limited by the performance of its weakest link
? The weakest link is the system’s Constraint
Basic Concept
? Every system has at least one constraint ? Constraint is anything that limits systems from achieving higher performance versus its goal ? Existence of Constraints represents opportunities for
improvement
Bottlenecks & CCR
? Lowest capacity resource? ? How many bottlenecks? ? Can there be no bottleneck? ? CCR : Utilization close to capacity ? How to find?
Theory of Constraints
INPUT
Step A
Step B
Step C
Step D
Step E
OUTPUT
Market Demand: 15
10 units/d
20 units/d
6 units/d
8 units/d
9 units/d
How many units can be produced per day?
What is the constraint?
Theory of Constraints
INPUT
Step A
Step B
Step C
Step D
Step E
OUTPUT
Market Demand: 15
19 units/d
20 units/d
18 units/d
23 units/d
17 units/d
Now how many units can be produced per day?
What is the constraint?
Improvement: 5 focusing steps
1. 2.
3.
4.
5.
Identify System’s constraint ? Physical or Managerial Decide how to exploit the systems constraints ? Elevating the bottleneck ? An hour added in bottleneck is an hour for the system Subordinate everything else to decision in step 2 ? Every other component must be adjusted to support maximum effectiveness of the constraint ? An hour added in the non-bottleneck is a mirage Elevate the system’s constraint ? Rigorous improvement efforts on constraints to improve their performance If a constraint is broken go back to step 1 and NOT LET inertia become the next constraint
TOC Improvement Cycle
Source: Rahman (1998) Theory of Constraints : A Review of Philosophy & Applications, IJOPM, 18, 4, pg 341
Subordination (for non constrained resources)
? Work or Stop ? In a system where everybody works every time need not be an efficient system ? Use “stop time” productively ? Changes in Performance measures ? Measure everyone’s performance based on constraints performance to schedule
?
Joint performance measures
?
Efficiency and utilisation is relevant only in Bottlenecks
Performance Measures
? What are the common performance measures? ? Return on Investment ? Net Profit ? Cash Flow
? Which is more important? ? All should be used together
Performance Measures
? How to measure system’s performance ? Are you using right measurements: Jonah ? Throughput ? Number of units produced? ? Rate at which an organisation generates money through sales ? Inventory ? Stock of goods: RM,WIP &FG ? Money that system spends on things it intends to turn into throughput : (Valued only on Materials it contains as against value added method)
Performance Measures
? Operating Expense ? Variable cost of production (indirect?) ? All the money system spends to turn inventory into throughput ? Productivity ? Factor Productivity
utput per labour hour?
But will it make money?
? ?
All actions that bring a company closer to its goals T/OE and T/I
How to prioritise
? TOC philosophy focuses on growth ? Throughput World Thinking as against Cost World Thinking ? ROI = (T-OE)/I : Focus on numerator
Throughput world theory
? T is unquestionably #1 because it has the potential
impact on top and bottomlines
? Reducing I is #2 because excess WIP and finished
goods jeopardize throughput
? Decreasing OE is only #3 as significant reductions-
especially workforce- can jeopardise future T
Cost World Theory
? Decrease OE as the first priority as we have to control
our expenses ? T is important but it is number 2… after all T depends on our customers ? I ? Well it is a necessary evil
Subordination
? Maintain protective capacity on non-bottlenecks but
use it judiciously
? Use buffer management as a method for sticking to
schedules and for improvement
?
Buffer management meeting
Elevate the Constraint
? Relax the constraint ? How to do it? ? Adding capacity
Removing non-value adding time ? SMED; Restaurant example
?
?
Marketing efforts
?
Beware of flying bottlenecks
Implementation : DBR Technique
? Control Point : Drum ? Buffer : Ensures Drum beats always ? Rope : Communication from Drum to upstream
Drum, Buffer, Rope
60
70
40
60
Constraint (Drum)
© 2007 Superfactory™. All Rights Reserved.
Drum, Buffer, Rope
Buffer
60 Rope
70
40 Constraint (Drum)
60
If Market demand is less
A
B
C
D
E
Demand 15
20
25
16
23
18
CCR
Capacity Constrained Resource
Now how many units can be produced per day?
What is the constraint?
DBR in case of CCR
A
B
C
Buffer 16
D
E
Demand 15
Buffer
20
25
23
18
CCR
DBR Technique :CCR
? No Drum ? Buffers : front of CCR, finished goods ? Ropes : Communication from CCR to material release
point ; communication between finished good to CCR
DBR Basic Principles
? Balance Flow NOT Capacity ? Level of utilisation of a non-bottleneck is not
? ? ?
?
determined by its own potential but by some other constraint in the system An hour lost in bottleneck is an hour lost for the entire system An hour saved in non-bottleneck is a mirage Bottleneck governs both throughput and inventories The performance measures should be designed constraints into account
Debottlenecking
? Problem: In a sequence M1-M2-M3 manufacturing a
product it is found that the capacities are 200, 180,160 per hour respectively. If unit capacity addition, cost 1500,1100, 2200 should we increase the capacity. where ? How much ? The value addition happening to the product in each of the machines are as follows M1 : $1600 M2 : $1200 M3 : $ 400
Solution
? M3 is the bottleneck ? However an hour saved in bottleneck is hour for the entire
? ? ? ?
?
system. So if we add capacity of M3 by 1, an additional product can come out Cost for adding capacity in M3 : $2200 Benefit : Total value addition (as full product can be made) : 1600+1200+400 = $3200 As benefit is more than the cost add capacity in M3. When 20 such additions are made both M2 and m3 will become bottleneck. For any more output capacity of both m2 and M3 have to be added, which cost $3300 ($2200+$1100). As benefit is only $3200 do nt add any more Solution Add 20 units of capacity to M3
Identification of Constraint
? Low Capacity Resource ? Storm in a Tea Cup ? Highly fluctuating resource ? Is capacity of a resource is fixed? ? “Flying” bottlenecks
Tata Tea Ltd : Storm in a Teacup
? The assumptions
? ? ?
The tea arrival pattern The tea loading pattern The shift structure
?
The withering limitations
? Quality considerations :leaf mixing
? Holidays and other interruptions
? Inventory management & maintenance
Exploitation of Constraint
? Treating as a precious resource ? Never let bottleneck starve…
?
Protect : Buffers: material,time
? Never waste bottleneck time
Inspection ? Maintenance
?
? “Protection of the weakest”
Effect of failure
? Problem : In a manufacturing plant that
manufactures a product that sells for Rs 1000 (cost Rs 500), a machine in the upstream generally produce a bad product in every 100 units it produce which is rejected subsequently. If the cost incurred upto the rejection is Rs 300 and the repair cost works out to be Rs 2,00,000 for every 50000 units produced, should we undertake the repair
Analysis
No.of Rejects : 500 Cost(loss) due to rejection : 300*500 : 1,50,000
Cost of Repair : Rs 2,00,000
so do not repair !
But is this correct?
Subordination (for non constrained resources)
? Work or Stop ? In a system where everybody works every time need not be an efficient system ? Use “stop time” productively ? Changes in Performance measures ? Measure everyone’s performance based on constraints performance to schedule
?
Joint performance measures
?
Efficiency and utilisation is relevant only in Bottlenecks
Subordination
? Maintain protective capacity on non-bottlenecks but
use it judiciously
? Use buffer management as a method for sticking to
schedules and for improvement
?
Buffer management meeting
Elevate the Constraint
? Relax the constraint ? How to do it? ? Adding capacity
Removing non-value adding time ? SMED; Restaurant example
?
?
Marketing efforts
?
Be awre of flying bottlenecks
Fundamental Principles
? Do not balance capacity- balance flow ? Level of utilisation of non bottleneck is not determined by its ? ? ? ? ? ? ?
own potential but by some other constraint in the system Utilisation and activation of a resource are not the same An hour lost in bottleneck is an hour lost for the entire system An hour saved in a non-bottleneck is a mirage Bottleneck govern both throughput and inventory in the system Transfer batch may not and many a times should not be equal to the process batch A process should be variable both along its route and time Priorities can be set only by examining the system’s constraints. Lead time is a derivative of the schedule
STC Company: PCB Division
What is the competitive advantage of STCPCB?
? Fast-responsive, reliable supplier of small orders
? External Environment
?
Fragmented structure of PCB Market
? Internal Environment
? ? ?
Complex workflows & scheduling Equipment Flexibility Worker skills
STC :Current Situation
? Impressive Growth ? A few production issues ? Chasing the order is very effective? ? Is there any problem(s) with STC’s operations strategy ? What are the operational decisions?
Process Flow Diagram
Artwork
Manual Drill (7)
Punch tooling Holes
Inspect& Shear
Metalize
CNC (1)
Panel Prep
Laminate
Develop
Electroplate
Strip DFPR
Etch & Tin Strip
Punch Press Soldermask Solder Dip
CNC Router Inspect,Test Pack Rework ship
Process Flow Diagram
29 /0 15 /40b
Artwork
20 /0.5 10 /0.5 Punch tooling Holes
Manual Drill (7)
10 /0.75
Inspect& Shear
Metalize
240 /16pa
CNC (1)
5 /0.2
20 /2
20 /0.2
25 /8.5
Electroplate 50 /1 b
5 /0.2
Panel Prep
Laminate
Develop
Strip DFPR
10 /0.2 Etch & Tin Strip
Punch Press
45 /1.5 30 /0.5
Soldermask
Solder Dip
150 /0.5 b CNC Router
45 /1.5 Inspect,Test Pack
Rework
ship
? Process Design
? ? ?
Design Decisions
?
Equipment selection :degree of automation Flexibility with product ranges Capacity of operating system as a whole Information flow designs
? Operating Decisions
? ?
Order selection Loading and scheduling
? ? ?
When to send an order to shop floor To rush an order Tukker and work allotment
? Technology Choice
Technology Choice
? Drill : Manual Vs CNC
15+40 B ? 240 + 2 B ? B= 5.975 ? CNC Router vs Punch Press ? 150 + 0.5 B ? 50 + B
?
Time
? Minimum of 10 boards in CNC drill
?
? Minimum 200 boards in Router
? What should be the shop floor policy and why? ? IS CNC Drill a Botteleneck? ? What is the capacity utilisation
Board/order
Capacity and Product Mix
Dry Film Photoresist
? What is the Capacity?
? ?
Capacity dependent on order size? Calculate the capacity if order size is 1 board?
?
What will be the capacity, if order size is 10 boards or 100 boards
Panel Prep
Laminate
Develop
? Dry Film Photoresist
Capacity and Product Mix
Panel Prep
Laminate
Develop
Order size Lam& Exp Daily Capacity Daily Capacity Boards Time in orders in Boards 1 10 100 22 40 220 21.8 12 2.18 21.8 120 218
•Capacity is not an absolute number. It is a result of product mix decisions
Labour Time ? Calculate total labour time (per board basis) ? Order size of 1 board ? Order size of 8 boards ? Order size of 40,200 and 800 boards
Order size Technology Setup Boards Choice Time Run Time Total Time per order Time per Board 396.55 90.05 39.29 36.47 33.81
1 MD/PP 339 57.55 396.55 10 CNC/PP 564 336.5 900.5 100 CNC/PP 564 3365 3929 200 CNC/CR 664 6630 7294 1000 CNC/CR 664 33150 33814 MD : Manual Drill,CNC: CNC Drill, PP
unch Press,CR: CNC Router•How will we price the boards?
How is STC’s PCB Division Doing?
? What are the problems? Why?
? What are the information flows
?
Customer order-to-delivery
? How to address these problems?
Is Financial Performance Satisfactory?
Financial Performance August Gross Profit 27.2 Net Profit 14.8
September 15.8 3.1
? Why such dismal performance?
? ? ? ?
Increase in Direct Labour and Manufacturing overhead Is it because of explosive growth? Poorly structured systems? New product introductions
Information Flow Analysis
Normal
Customer Bid Specs
Estimate Sheet
Design Engr Rush Order Manager1
Blue print
Factory Order
Purchasing
Vendors Blue Print Factory Order Raw Material
COO DPR
Factory Supervisor
Sales Manager
Small Orders
Batch #
Shop Floor
Tukker
Information Flow Analysis
Normal
Customer Bid Specs
Estimate Sheet
Design Engr Rush Order Manager1
Blue print
Factory Order
Purchasing
Vendors Blue Print Factory Order Raw Material
COO DPR
Factory Supervisor
Sales Manager
Small Orders
Batch #
Role of Tukker?
Tukker
Shop Floor
? Delivery Performance ? Quality Performance
Performance Measures and Problems
? Productivity
? Financial Performance
? Delivery Target
? ?
Delivery Performance
Actual deliveries are 9 days late WHY? What are the
implications?
?
?
Rush orders : 4 days avg :2-3/month : Are they the real culprit?
What percentage of total orders are rush orders?
? Why Delay?
? ? ? ? ?
Lack of material in stock Shifting of bottlenecks Mistakes Interruptions Poor information flows
Shifting of Bottlenecks ? Degree of variability in orders, routing ? Interruptions due to rush orders ? Tukker & Small rush orders
? Poor information flow
? ? ? ?
Delay in reaching the shop floor Split set ups Spaghetti info flow Ticket number on the top rack only
? Internal Rejects : ? External rejects: ? Total rework : 8.0%
? ?
Quality Performance 7% ? 1.4% total loss & 5.6% rework 1-3% in Sep 0.6% loss and 2.4% rework
Interrupt the work To tack the lot for blueprints will delay the process
? WHY there are quality problems?
?
Deliveries on Sep 29: 44560 (35.694%)
? ?
i.e 21.42 orders or 2056 boards on a day Inspection req : 21.42*45 +1.5*2056 = 4059 min i.e 67.65 labour hours
?
No inspection or inspection by non-experts
? September :
?
Productivity
Total hours worked :1531.7 hrs ? Available : 21 * 22* 8 = 3696 hrs i.e productivity 41.44%
?
Machine utilisation : CNC Drill ? Metalisation?
? Why Low Utilisation?
Realistic standards? Anything for rework? ? Material handling :layout? ? Idleness due to confusion and Tukker factor ? Supervision
?
?
Is Financial Performance Satisfactory?
Financial Performance August Gross Profit 27.2 Net Profit 14.8
September 15.8 3.1
? Why such dismal performance?
? ? ? ?
Increase in Direct Labour and Manufacturing overhead Is it because of explosive growth? Poorly structured systems? New product introductions
What should we do?
Recommendations
? Specific operating Decisions ? Procedural Recommendations ? System Changes ? Strategic decisions
Recommendations: Operating
? Buy one more CNC Drill? ? Shop floor policy on drill and router? ? ??
Recommendations: Procedural ? Change information flow ? How?
? Removing “hockey stick phenomenon”? ? Tukker? ? ??
Recommendations: System Changes ? Scheduling with a “chain” view and change POP
? Modify the standards considering the work pressures? ? Inventory Management ? Achieve synchronisation among operations
Product-Process Matrix Analysis
Process Structure
Project One Of a Kind Low Volume Little Moderate Vol High Volume High Volume Little Standardisation Customised Features Low Variety High Standard High Variety Multiple Products Few Major prdts Commodity
Job Shop (General Eqp Jumbled Flow)
Batch (Disconnected Line Flow Flexible Eqp) Assembly (Connected Line Flow Specialised Eqp) Continuous Process (Dedicated equp Continuous flow)
Any Misalignment for STCPCB?
Recommendations: Strategic
? How to move : Large orders/ Small orders
? Is it necessary?
? Can we have flexibility?
-NCC Case….
doc_913942047.ppt