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

2. 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.

3. LESSON 1 Theory of Constraints (TOC)
29 August 2014

4. 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

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

6. 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.

7. 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?

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

9. 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

10. 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)

11. 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

12. 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.

13. 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

14. 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:

15. 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.

16. 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?

17. 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.

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

19. The Goal
The Goal video

20. 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?

21. 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?

22. 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

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

24. 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

25. 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

26. 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

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

28. 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

29. 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

30. 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

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

32. 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

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

34. 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

35. 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.

36. 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

37. 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.

38. 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

39. 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

40. 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

41. 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.