MGSC 395 Exam 2

Software packages are set up to optimize the results - there are decision rules to help develop the solution

- Create one station at a time. For the station now being created, identify the unassigned work elements that qualify for assignment: they are candidates if: 1. All of their predecessors have been assigned to this station or stations already created 2. Adding them to the workstation being created will not create a workload that exceeds the cycle time

How do Drum-Buffer-Rope systems work?

-The bottleneck schedule is the DRUM because it sets the beat or the production rate for the entire plant and is linked to market demand. -The BUFFER is the time buffer that plans early flows into the bottleneck and thus protects it from disruption. -The ROPE represents the tying of material release to the drum beat, which is the rate at which the bottleneck controls the throughput of the entire plant

What is a Project?

An interrelated set of activities with a definite starting and ending point, which results in a unique outcome for a specific allocation or resources.

What is a "Constraint" in TOC?

-A constraint is any factor that limits the performance of a system and restricts its output -Every process has some type of constraint and -Constraints need to be recognized and addressed A constraint can occur anywhere in the process.

Precedence Diagram

-Allows one to visualize immediate predecessors 1. Identify the steps and immediate predecessors 2. Create the precedence diagram

What is Linear Programming?

-An optimization technique that is useful for allocating scarce resources among competing demands --> used to maximize or minimize ---> deals with the problem of allocation of finite limited resources across competing activities in the most optimal manner ---> Generates solutions based on the feature and characteristic of the actual problem or situation

Managing Constraints in a Line Process MATCHING OUTPUT TO THE PLAN -Key Definitions

-Desired output rate 'r' Ideally is matched to the staffing or production plan and assures on-time deliveries and prevents inventory build-up -Cycle time Maximum time allowed for work on a unit at each station c=1/r or c=Production time available per period/units required per period c=cycle time r=desired output rate

Managing Constraints in a Line Process - FINALLY, THE REST OF KEY METRICS

-Efficiency: the ratio of productive time to total time, expressed as a percent ---> efficiency (%)=(sum of t/nc)*100 -Balance Delay: the amount by which efficiency falls short of 100 percent ---> Balance Delay (%)= 100-efficiency

Managing Constraints in a Line Process- OTHER KEY MEASURES

-Idle time: the total unproductive time for all stations in the assembly of each unit and it is total available time minus total work time (productive time)---> Idle time=nc-sum of t n= number of stations c= cycle time sum of t= total time required to assemble each unit

JIT vs Traditional

-Inventory JIT: Minimal necessary to operate Traditional: Much to offset forecast errors, late deliveries -Deliveries JIT: many, small Traditional: Few, large -Lot sizes JIT: small Traditional: large -Setup; runs JIT: many, short runs Traditional: few, long runs -Vendors JIT: partners Traditional: long-term relationships are unusual -Workers JIT: Assets Traditional: Necessary to do the work

Operational Measures

-Inventory: TOC View---> all the money invested in a system in purchasing things that it intends to sell Relationship to Financial Measures---> A decrease in inventory leads to an increase in net profit, ROI, and cash flow. -Throughput: TOC View---> Rate at which a system generates money through sales Relationship to Financial Measures---> An increase in throughput leads to an increase in net profit, ROI, and cash flows -Operating Expense: TOC View---> All the money a system spends to turn inventory into throughput Relationship to Financial Measures---> a decrease in OE leads to an increase in net profit, ROI, and cash flows

Decision Rules

-LONGEST WORK ELEMENT: picking the candidate with the longest time to complete is an effort to fit in the most difficult elements first, leaving the ones with short times to "fill out" the stations -SHORTEST WORK ELEMENT: this rule is the opposite of the longest work element rule because it gives preference in workstation assignments to those work elements that are quicker. It can be tried because no single rule guarantees the best solution. It might provide another solution for the planner to consider -MOST FOLLOWERS: when picking the next work element to assign to a station being created, choose the element that has the most followers (due to precedence requirements). -FEWEST FOLLOWERS: Picking the candidate with the fewest followers is the opposite of the most followers rule

Developing the Project Schedule

-Path: Each sequence of activities between a project's start and finish -Critical path: the sequence of activities between a project's start and finish that takes the longest time to complete

Sensitivity Analysis Information provided by Linear Programming

-REDUCED COST: how much the objective function coefficient of a decision variable must improve (increase for maximization or decrease for minimization) before the optimal solution changes and the decision variable "enters" the solution with some positive number -SHADOW PRICE: The marginal improvement in Z (increase for mazimization and decrease for minimization) caused by relaxing the constraint by one unit -RANGE OF OPTIMALITY: the interval (lower and upper bounds) of an objective function coefficient over which the optimal values of the decision variables remain unchanged -RANGE OF FEASIBILITY: the interval (lower and upper bounds) over which the right-hand-side parameter can vary while its shadow price remains valid

Work Breakdown Structure

-Statement of all work that has to be completed -Company owners and project managers use the WBS to make complex projects more manageable. -Designed to help break down a project into manageable chunks that can be effectively estimated and supervised

Theory of Constraints

-Systematic management approach that focuses on actively managing those constraints that impede a firm's progress toward its goal of maximizing profits and effectively using resources. -Deliberate process for identifying and overcoming constraints -Focuses on bottlenecks that constrain the system as a whole -Utilization of the bottleneck must be maximized to improve throughput (assuming demand is sufficient)

How can you schedule your operation to maximize contribution margin?

-TRADITIONAL METHOD: Maximize production of products that provide the greatest contribution margin -BOTTLENECK METHOD: Maximize production of products that provide the greatest contribution margin at the bottleneck (ex: contribution margin/time)

Managing Constraints in a Line Process- HOW DO YOU KNOW THE SMALLEST NUMBER OF STATIONS NEEDED?

-Theoretical Minimum (TM) A benchmark or goal for the smallest number of stations possible and the time it takes to make the product divided by cycle time ---> TM= sum of t/ cycle time t= work-element standard times sum of t= total time required to assemble each unit c= cycle time

Value Stream Mapping

-Widely used qualitaitve lean tool aimed at eliminating waste or muda -Creates a visual map of every process involved in the flow of materials and information in a product's value chain -Shows the big picture spanning the supply chain from receipt of raw material to delivery of final product.

Activity

-the smallest unit of work effort consuming both time and resources that the project manager can schedule and control -the activity is rolled up into the work breakdown structure -each activity must have an owner (accountable person)

How do we find a bottleneck in a Service Process?

1) Start with understanding throughput time ---> total elapsed time from the start to the finish of a job or a customer being processed at one or more work centers 2) How to identify the bottleneck? ---> either highest total time per unit OR highest average total utilization and total workload

Main Goals of a Project

1. Complete the project on-time or sooner 2. Do not exceed the budget 3. Meet the specifications to the satisfaction of the customer

Key steps in defining and organizing projects

1. Defining the scope and objectives of a project a. Scope-succinct statement of project objectives -identifies major deliverables -identifies what's in and what's out of a project -Note: changes to the scope, called "scope creep", can cause delays and increase project costs b. Objective-statement of project's scope, timeframe and allocated resources 2. Selecting the project manager and team a. project manager must be a good facilitator, communicator, and decision maker b. project team must be technically competent, sensitive to interpersonal issues within the team, and dedicated to getting project done 3. Recognizing organizational structure-3 types a. Functional - project supported by one department, generally with most interest in the project b. Pure Project - Team members report directly to project lead during the entire project c. Matrix - Project manager reports to central project group for this project, functional areas control the resources that work on the project

Crashing: Determining the Minimum Cost Schedule

1. Determine the project's critical path(s). 2. Find the activity or activities on the critical path(s) with the lowest cost of crashing per week. 3. Reduce the time for this activity until... -It cannot be further reduced or -Another path becomes critical, or -The increase in direct costs exceeds the indirect and penalty cost savings that result from shortening the project. 4. Repeat this procedure until the increase in direct costs is larger than the savings generated by shortening the project.

The goals of a Lean System are:

1. Eliminate the waste 2. Produce product and service only when needed 3. Continuously improve the value-added aspects of the system

Steps for completing the product mix problem

1. Identify the bottleneck operation 2. Calculate the contribution margin 3. Based on traditional method, determine the best run plan 4. Determine profit for this option 5. For bottleneck method - determine contribution margin per minute 6. Based on the bottleneck method, determine the best run plan 7. Determine profit for this option 8. Compare the two results - which has the most profit? Which has the most volume? Why?

Theory of Constraints Cycle (TOC)

1. Identify the constraint or the system bottleneck 2. Exploit the constraint or the bottleneck ---> maximize the throughput of the bottleneck 3. Subordinate all non-constraints or all other decisions to step 2 ---> align all other processes with the bottleneck 4. Elevate the constraints or bottlenecks ---> consider increasing the capacity of the bottleneck 5. Repeat the process and do not let inertia set in ---> follow-up to see if you have created a new bottleneck repeat steps 1-4 for the new The focus is on the material flowing more rapidly through the entire system to improve financial performance.

What are the key components of value stream maps?

1. Information Flow 2. Product Flow 3. Timeline

Managing Bottlenecks in Manufacturing-Line Processes

1. Line Balancing- Effective assignment of work to balance the flow through the facility 2. Precedence Diagrams- Provides a method for determining how to balance a line based on the required sequence of process steps ---> Activity-on-node network-nodes are activities and arcs represent the precedence relationship

Characteristics of Linear Programming Models

1. OBJECTIVE FUNCTION: states mathematically what is being maximized or minimized 2. DECISION VARIABLES: choices the decision maker can control (inventory level, production quantity) 3. CONSTRAINTS: limitations that restrict the permissible choices for the decisions variables (=,<,>,...) 4. FEASIBLE REGION: all permissible combinations of the decision variable 5. PARAMETERS: choices the decision maker does not control and cannot change when the solution is implemented 6. LINEARITY: objective function is assumed to be linear (no products or powers) 7. NON-NEGATIVITY: decision variables must be positive or zero. Each decision variable should include a > or equal to 0

Types of Constraints

1. Physical- machine, labor, work cells, material, space and quality 2. Demand- shortages of demand, work stoppages at customers 3. Management- policies, metrics, mindsets

8 Types of Waste (or Muda) - Tim Woods

1. Transport: unnecessarily moving things, equipment, parts, tools and materials from one location to another 2. Inventory: Making more than customer demanded, building up unnecessary stocks 3. Motion: unnecessary movement; people walking to get things which should be located closer to the point-of-use 4. Waiting: delays between operations because parts are missing. Stopped work: waiting for parts, machines, or people 5. Over Production: making too much or too many. completing a task before it is needed. making products that the customer has not ordered 6. Over Processing: duplicate or redundant operations, performing wasteful steps that are not required. often because "we always do it this way" 7. Defects: Failing to produce a quality part the first time generating rework or scrap. not delivering the product or service "right the first time" 8. Skills: failing to use skills and capabilities of the workforce. not listening to people, using their knowledge or learning from past mistakes/issues

5S Term

1. SORT: Seperate needed items from uneeded items 2. STRAIGHTEN: neatly arrange what is left, with a place for everything and everything in its place. organize work area so that it is easy to find what is needed. 3. SHINE: clean and wash the work area and make it shine 4. STANDARDIZE: establish schedules and methods of performing the cleaning and sorting. formalize the cleanliness that results from regularly doing the first three S practices so that perpetual cleanliness and a state of readiness are maintained 5. SUSTAIN: Create discipline to perform the first four S practices, whereby everyone understands, obeys, and practices the rules when in the plant. implement mechanisms to sustain the gains by involving people and recognizing them through a performance measurement system. HARDEST STEP TO IMPLEMENT IS 'SUSTAIN'!

VSM Metrics

1. Takt Time-Daily availability/daily demand 2. Cycle Time 3. Setup Time 4. Per Unity Processing Time-cycle time+setup time 5. Capacity-availability/time at bottleneck

Key Principles of TOC

1. The focus should be on balancing flow, not on balancing capacity 2. Maximizing the output and efficiency of every resource may not maximize the throughput of the entire system 3. An hour lost at a bottleneck or constraint resource is an hour lost for the whole system ---> an hour saved at a non-bottleneck resource does not make the system more productive 4. Inventory is needed only in front of bottlenecks and in front of assembly and shipping points - WHY? ---> to assure bottleneck does not lose time (inventory in front of bottleneck) and to assure you meet customer demand (inventory in front of finished goods) 5. Work should be released into the system ONLY AS FREQUENTLY AS NEEDED BY THE BOTTLENECKS. -bottleneck flows = market demand ---> WHY? the most volume that will go through the system is limited by step 2. If work is released to step 1 at a higher rate, it will only build up in front of step 2. That creates inventory and ties up money. 6. Activating a non-bottleneck resource is not the same as utilizing a bottleneck resource. It does not increase throughput or promote better performance. 7. Every capital investment must be viewed from the perspective of the global impact on overall throughput, inventory, and operating expense.

What is a Lean System?

A system that: -Maximizes the value added by each of a company's activities by removing waste and delays -Lean activities focus on optimizing value-added activities, minimizing business non-value-added, and eliminating non-value-added activities

Project Management

A systemized, phased approach to defining, organizing, planning, monitoring, and controlling projects

Business-Non-Value-Add

Activities that must be performed for legal or regulatory requirements ---> Minimize -Consume resources, do not directly contribute to the product or service and are currently required (this includes legislation, audit; and risk/safety requirements)

Value-Add

Activities that the customer is willing to pay for and that change form, fit or function ---> Optimize -are what the customer wants, transform materials/information into products or services, and are done right the first time

Non-Value-Add

Activities that the customer would be unwilling to pay ---> Eliminate -Consume resources, but do not directly contribute to the product or service and could be eliminated without deterioration in product/service functionality

What is a "Bottleneck"?

Any RESOURCE whose availability capacity limits the organization's ability to meet the product volume, product mix, or demand fluctuations required by the marketplace.

Supply Chain Considerations in Lean Systems

CLOSE SUPPLIER TIES >Needed because lean systems operate with low levels off capacity slack or inventory >Suppliers must have short lead times, arrive on schedule, and be of high quality >Create "win-win" situations where suppliers are open with their processes to work cooperatively for savings, shorter lead times, smaller lot sizes, etc >Companies must help suppliers with better communications on requirements, quality standards, and feedback on performance SMALL LOT SIZES REDUCE INVENTORY AND LEAD TIMES >Single-digit setup (single minute exchange of dies-SMED)

Other Kanban Signals

CONTAINER SYSTEM -Using the container itself as a signal device -Works well with containers specifically designed for parts CONTAINERLESS SYSTEM -Using visual means in lieu of containers as a signal device -ex: a painted square on a workbench=one unit

Kanban

Created by Toyota for production flow through the process -A Japanese word meaning "card" or "visible record" that refers to cards used to control the flow of production through a factory Rules: 1. Each container must have a card 2. Assembly always withdraws from fabrications (pull systems) 3. Containers cannot be moved without a kanban 4. Containers should contain the same number of parts 5. Only good parts are passed along 6. Production should not exceed authorization

Who developed the Theory of Constraints?

Eli Goldratt in the 1980's and The book, The Goal, was used to help people internalize the concepts

Other key components of Lean Systems

FLEXIBLE WORKFORCE -Workers trained to perform more than one job -Benefits - Shift workers address bottlenecks or fill in for absences to keep the process moving -Generally, focused on learning the jobs before and/or after your process step -Of course, the more customized the product or service, the more you will need multi-skilled workers AUTOMATION -This is a great opportunity, when used effectively -Good example - ATMs provide banks 24-hour service -But, not all automation is good or needed!

How can we use TOC to improve performance of the business with many products and the same equipment or resources?

First -> define "Contribution Margin" - the amount each product contributes to profits and overhead; no fixed costs are considered when making the product mix decision (price minus variable costs)

Just in Time Production

Just in time is a phrase that originated at Toyota. It described how material should be processed and moved in order to arrive "just in time" for the next operation

What's included in this culture of continuous improvement?

Kaizen-Japanese term for continuous improvement >occurs with the ongoing involvement and input of new ideas from employees >this approach is an important part of implementing a Lean Culture. companies with this culture respect their people, give them authority, and hold them accountable >team and systems success is emphasized over individual success >pay and performance metrics are based on these

Total Preventive Maintenance (Productive)

Lean systems need to be predictable, meaning unplanned equipment downtime is disruptive and unacceptable. INCLUDES: -Planned maintenance cycles -Monitoring of equipment performance to detect deteriorating performance (process control!) -Autonomous Maintenance - operators performing some lower levels of maintenance of their equipment *Minimizing defects, accidents and downtimes

Takt Time

Matching the rate of production to the rate of demand TAKT is the german word for the baton that an orchestra conductor uses to regulate the tempo of the music. TAKT TIME may be thought of as a measurable "beat time," "rate time" or "heartbeat." In lean, TAKT TIME is the rate at which a finished product needs to be completed in order to meet customer demand. TAKT TIME sets the pace of production in a Lean System

Pull vs Push Production Systems

Pull Method of Workflow (LEAN)---> A method in which customer demand activates that production of the service or item, characterized as "need one, make one" and consistent with Theory of Constraints MAKE WHAT IS NEEDED WHEN WE NEED IT >Production Precision >Actual Consumption >Small lots >Low Inventories >Waste Reduction >Management by Sight >Better Communication Push Method of Workflow (NOT LEAN)---> A method in which production of the item begins in advance of customer needs, production is "pushed" through the system and results in high inventories and long cycle times MAKE ALL WE CAN JUST IN CASE >Production Approximation >Anticipated Usage's >Large Lots >Waste >Management by Firefighting >Poor Communication

Quality is another key pillar in Lean Systems

Quality at the source - Don't pass bad product on to the next step! -Poka-Yoke: Mistake-proofing methods aimed at designing fail-safe systems that minimize human error and the goal is to design the process to eliminate the ability for defects -Jidoka: automatically stopping the process when something is wrong and then fixing the problems on the line itself as they occur Poka-Yoke=Mistake Proofing

Formulating a Linear Programming Problem

STEP 1: Define the decision variables STEP 2: Write out the objective function STEP 3: Write out the constraints (including non-negativity restrictions)

The House of Lean- Building blocks for the Toyota Production System

THE GOAL- Highest quality, lowest cost, shortest lead time by eliminating wasted time and activity WITH 3 IMPORTANT PILLARS- >just in time (JIT): takt time, one-piece flow and pull system >Culture of Continuous Improvement >Jidoka: Manual or automatic line stop, separate operator and machine activities, error-proofing and visual control BUILT ON A SOLID FOUNDATION >Operational Stability: Heijunka, Standard Work, TPM and Supply chain

Managing Constraints in a Line Process-Line Balancing

THE GOAL-achieve the desired output rate with the lowest number of stations --> Most efficient line=the one that produces the desired pace with the least number of workstations - line balancing addresses bottlenecks by creating workstations with as close to equal flow as possible ---> Ideally, this results in the bottleneck utilization rate not much higher than the rest of the work stations (not a lot of waste) - consistent with scheduling the facility on the "drumbeat" in Theory of Constraints

Calculating Takt Time

Takt=Available time/customer demand

Why do you develop and then reinforce "standards"?

To lock improvement in place!

Scheduling and Standardization in Lean Systems

UNIFORM WORKSTATION LOADS: -Paced by Takt Time -Level load by both volumes and product mix- Heijunka STANDARDIZED COMPONENTS AND WORK METHODS -components-Use of "standard" components to reduce complexity, inventory, and costs -work methods-creation of "standard" work methods locks in improvements and takes variability out of the production process