MODULE 3 Manufacturing Methodologies 29 August 2014 Lesson 4: Safety Stock

Module Objective To understand how to: alleviate supply and demand bottlenecks; identify production strategies; understand lot-sizing and buffering techniques; analyze cost, order lead time, and customer service levels.

LESSON 1 Theory of Constraints (TOC) 29 August 2014

Lesson Objectives Upon completion of this lesson, you should be able to: Define common Production Planning & Control (PPC) terms Summarize the video The Goal Given a scenario, analyze bottleneck resources and their effect on throughput Given a scenario, propose suggestions for improving throughput

Lesson Topics This lesson will cover the following topics: Terminology The Goal Bottlenecks and Constraints Improving Throughput

What’s In It For Me? Understanding how to identify bottlenecks will allow you to support your contractors in reducing the impact of constraints and improving performance.

Lesson Introduction Your ability to identify bottlenecks will enable you to discuss how a contractor will reduce the impact of constraints while measuring and controlling the flow of materials How can you identify the causes of a contractor’s inability to meet contract requirements?

Terminology Lesson Topics: Terminology The Goal Bottlenecks and Constraints Improving Throughput

Theory of Constraints (TOC) Metrics Terminology – Metrics Traditional Metrics Theory of Constraints (TOC) Metrics Throughput: Quantity of product assembled per unit of time The rate at which an organization generates money through sales Efficiency: Amount of time from start to finish compared to expected amount of time from start to finish for an activity Inventory: All the money the organization invests to purchase things it intends to sell Utilization: Production hours divided by number of available hours (usually per machine) Operating Expense: All the money the organization spends to turn inventory into throughput

Terminology – Definitions Traditional Definitions Theory of Constraints (TOC) Definitions Production Batch: Producing more than one item to take advantage of a set-up For the Bottleneck: batch size is no more than the required order size and may be smaller to optimize throughput On Non-Bottlenecks: batch sizes are reduced to smallest allowable size to maximize throughput for items not moving across the bottleneck. Set-up: Changing tooling required to produce another type of part Same as traditional with priority given to the bottleneck (reduce, eliminate, or streamline to get maximum output from the bottleneck)

Example: Custom Cables, Inc. Large Group Scenario Refer to Module 3, Lesson 1, Scenario 1 CMM100_M3_L1_S1_Scenario_FINAL.docx Read directions on the Custom Cables, Inc. – Scenario Example (Part 1) Complete the activity as a class

Scenario 1: Custom Cables, Inc. (cont.) Custom Cable, Inc. (CC) is using the job shop layout shown in Figure 1 of your scenario file. CC has been able to meet most of the requirements from past contracts on time; however, they are experiencing growing challenges as they win additional contracts. You are concerned that CC may not be able to meet the cost, time, or quality requirements of future contracts.

Scenario 1: Custom Cables, Inc. (cont.) During recent site visits, you often see large inventories of unfinished parts and assemblies waiting to be processed through various machines. During the performance of a recent contract, you tracked the manufacturing sequence for a product as shown in below. 1 2 3 4 5 6 7 8 9 10 11 12 13 Inventory waiting for connectors Inventory waiting for heat shrinking

Scenario 1: Custom Cables, Inc. (cont.) You receive the following information: Orders are usually for dozens of products. One finished product may require dozens of parts. Many parts may require several operations. Operations vary from product to product. Most work stations can be set up to perform many different operations depending on tooling. Each work station requires set-up time to install specific tooling. Production occurs in large batches. Parts must be transported between work centers using hand trucks. Parts travel great distances often hundreds of yards. Continuing the discussion you identify the following challenges:

Scenario 1: Custom Cables, Inc. (cont.) You’re also told about: Jumbled flow of parts: Next operation for a given part is not clear. Parts require an accompanying traveler with routing and processing information to know what the next operation is. Difficultly scheduling: Work centers are experiencing ebbs and flows of work. Difficultly synchronizing flow of work among process steps: Inventory builds up in front of some work centers. There is no material to work on at other work centers.

Scenario 1: Custom Cables, Inc. (cont.) Meanwhile: Cost, Time, and Quality Significant capital is tied up in inventory. There are long production lead times. Quality is declining: Defects not discovered promptly resulting in rework of entire batches Increase in parts damaged while waiting to be processed Parts lost while waiting to be processed Finally, you identify some additional questions for consideration: Which product needs to be set up for at each work station? What production batch size should be used? How should work be prioritized? How much work should be released to the shop as a whole?

Scenario 1: Custom Cables, Inc. (cont.) Analyze bottlenecks resources, etc. Discuss possible causes of the challenges Brainstorm ideas that may increase CC’s performance on future contracts.

The Goal Lesson Topics: Terminology The Goal Bottlenecks and Constraints Improving Throughput

The Goal The Goal video

Evidence of a Problem What were some indications that there was a problem at the Bearington plant? In terms of inventory? In terms of money? In terms of shipments? In terms of customers?

What is the Goal? What does Alex take away from his meetings with Jonah? A company’s goal is to make money, by: Handling throughput how? Handling inventory how? Handling operational expense how?

Operational Measures Operational Measure Definition Throughput The rate at which an organization generates money through sales Inventory All money the organization invests to purchase things it intends to sell Operational Expense All money the organization spends to turn inventory into throughput

Question and Answer In the video The Goal , what was the constraint for the Bearington plant? Robots Raw materials NCX-10 Quality checks

Question and Answer In the video The Goal, after Jonas’ intervention, what was the throughput for the Bearington plant after TOC was applied? The rate the plant generated money through sales The amount of money spent to produce products The man-hours used to produce an order The quantity of parts in production

Question and Answer After Jonas’ intervention, what was the inventory for the Bearington plant? The rate the plant generated money through sales The amount of money spent to purchase the old machine to relieve the bottleneck The man-hours used to produce an order The money spent on material to be transformed and then sold

Question and Answer After Jonas’ intervention, what was the operational expense for the Bearington plant? The rate the plant generated money through sales The amount of money spent to transform inventory into salable product Operational expense was unknown The rate of parts flowing through the plant

Bottlenecks and Constraints Lesson Topics: Terminology The Goal Bottlenecks and Constraints Improving Throughput

Bottlenecks and Constraints Bottleneck Resource Non-bottleneck Resource Definition Capacity is less than or equal to the demands placed upon it Capacity is greater than the demands placed upon it Scout Hike Herbie, slowest boy Other boys Bearington Plant NCX-10 Other work centers e.g., robots, drilling Impact of Idleness Time can’t be recovered later in process Time may be recovered later in process

Question and Answer In the video, The Goal, what was the impact of using robots that were faster than subsequent steps? Robots eventually ended up replacing 10 different operations and 17 machinists Inventory build up prior to slower operations Shift size reduction was likely to occur

Question and Answer In the video, The Goal, how was work released to the shop floor using the new scheduling method? Two machinists were hired to operate a new NCX-10 machine Inventory was staged in WIP holding area At a pace to keep bottlenecks busy

Improving Throughput Lesson Topics: Terminology The Goal Bottlenecks and Constraints Improving Throughput

Theory of Constraints (TOC) Five Focusing Steps TOC 5-Step Process for Continuous Process Improvement: Identify the system’s constraint Decide how to exploit the system’s constraint Subordinate all else to that decision Elevate the system’s constraint If in this process a constraint is broken, go back to step 1, but don’t allow inertia to become the constraint

Improving Throughput Methods to improve throughput: Reduce idle time at bottleneck Prioritize items entering bottleneck Improve quality entering bottleneck Supplement capacity

Drum-Buffer-Rope (DBR) Definition Plant Example Drum Bottleneck machine or person NCX-10 Drum Beat Act of completing a work unit at the drum NCX-10’s pace Buffer Work waiting to be processed Parts waiting to be processed by the NCX-10 Rope Mechanism that listens to the drum beat and then causes new work to be released into the first processing step Managers releasing work orders at a pace to keep the NCX-10 busy

DBR (cont.) Application Drum The drum represents the beat to which manufacturing works — the drum is the customer due date if the constraint is in the market. Buffer The buffer is a demined amount of time represented by work in front of the drum Rope The rope restricts jobs from being released to the plant floor faster than the drum can process the work. If the market is the drum, then the work is paced to customer demand.

Example: Custom Cables, Inc. Large Group Scenario Refer to Module 3, Lesson 1, Scenario 2 CMM100_M3_L1_S2_Scenario_FINAL.docx Read directions on the Custom Cables, Inc. – Scenario Example (Part 2) Complete the activity as a class

Scenario 2: Custom Cables, Inc. Based on the scenario information from last scenario: INSTRUCTIONS Using the concepts presented in the video: Identify the bottlenecks during the manufacture of the product Explain the impact that these bottlenecks have on CC’s money, production time, and quality. Develop strategies to increase CC’s performance on future contracts. Compare these ideas to the suggestions recorded earlier this lesson.

Question and Answer One method for improving throughput in a manufacturing plant would be to ____________. Subordinate all activities to other than the bottleneck Maximize the number of critical parts Reduce idle time at a bottleneck

Question and Answer In scheduling plant resources, what does the drum represent in Drum-Buffer-Rope? Bottleneck machine, service provider, or person WIP inventory Order due dates Uncertainty

Summary Having completed this lesson, you should now be able to: Define common Production Planning & Control (PPC) terms Summarize the video The Goal Given a scenario, analyze bottleneck resources and their effect on throughput Given a scenario, propose suggestions for improving throughput

Summary (cont.) Understanding TOC and bottlenecks, you can: Use the Socratic method with to identify bottlenecks, Use the 5-Focusing steps and the Socratic method to solve production delays, prioritization problems, etc.