MGSC 395 Exam Two
Pull VS Push Production Systems
Pull System (LEAN): - A method in which the customers demand activates the production of a service or item. - "need one, take one" - Consistent with the Theory of Constraint Push System (NOT LEAN): - A method in which the production of an item or service beings before the customer demand. - Production is pushed through the system - Results in high inventories and long cycle times
Quality is Another Key Pillar in Lean Systems - Poka-Yoke & Jidoka
Quality at the Source - Don't pass bad product onto the next step. Poka-Yoke: - Mistake-Proofing methods aimed at designing fail proof systems that minimize human error. - 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 line itself as they occur.
Lean activities focus on optimizing value-added activities, minimizing business non-value-added, and eliminating non-value-added activities.
Value-Add: -- Optimize - Activities that the customer is willing to pay for and that change form, fit, or function. Business-Non-Value-Add: -- Minimize - Activities that must be performed for legal or regulatory requirements. Non-Value-Add: -- Eliminate - Activities that the customer would be unwilling to pay for.
What are the Key Components of Value Stream Mapping?
1. Information Flow 2. Product Flow 3. Timeline
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
Formulating a Linear Programming Model
1. Define the decision variables 2. Write out the objective function 3. Write out the constraints (including non-negativity functions)
Determining the Minimum Cost Schedule
1. Determine the project(s) critical path 2. Find the activity or activities on the critical path(s) with the lowest crashing costs per week 3. Reduce the time for this activity until... a. It can not be reduced further b. Another path becomes critical c. 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.
Application of TOC
1. Identify the System Bottleneck(s) 2. Exploit the system bottleneck(s) - Maximize the throughput of the bottleneck 3. Subordinate all other decisions to step 2 - Align all other processes with the bottleneck 4. Elevate the bottleneck(s) - Consider increasing the capacity of the bottleneck 5. Do not let inertia set in - Follow-up to see if you've created a new bottleneck. Repeat steps 1-4 for the new bottleneck.
5S - A place for everything and everything in its place
1. Sort: Separate needed items from unneeded items (including tools, parts, materials, and paperwork), and discard the unneeded. 2. Straighten: Neatly arrange what is left, with a place for everything and everything in its place. Organize the work area so 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 3 S practices so that perpetual cleanliness and a state of readiness are maintained. 5. SUSTAIN: Create discipline to perform the first 4 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. *The hardest step to implement is sustain*
How do we find a bottleneck in a service process?
1. Start with understanding the 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 a product OR highest average utilization and total workload.
1. Key Principle of TOC
1. The focus should be on balancing flow, not on balancing capacity.
2. Key Principle of TOC
2. Maximizing the output and efficiency of every resource may not maximize the throughput of the entire system.
What is a Lean System?
A System That: - Maximizes the value added by each of the company's activities - By removing waste and delays 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
The Theory of Constraints TOC (Definition)
A systematic management approach that focuses on actively managing those constraints that impede a firm's progress towards its goal. - 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)
6. Key Principle of TOC
Activating a non-bottleneck resource is not the same as utilizing a bottleneck resource. It doesn't increase throughput or promote better performance.
3. Key Principle of TOC
An hour lost at a bottleneck or constrained resource is an hour lost for the whole system. An hour saved at a non-bottleneck resource does not make the system more productive.
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.
Constraint Definition
Any factor that limits the performance of a system and restricts its output. Every process has some kind of constraint. Constraints need to be recognized and addressed. A constraint can occur anywhere in a process.
Managing Constraints in a Line Process - Finally, the rest of the Key Metrics --> Balance Delay
Balance Delay: - The amount of time by which efficiency falls short of 100%
From our Textbook: -- "The House of Toyota"
Built on a Solid Foundation: - Operational Stability: Heijunka, Standard Work, TPM, & Supply Chain With 3 Important Pillars: 1. Just in Time (JIT) -- Takt Time, One-Piece Flow, Pull system. 2. Culture of Continuous Improvement 3. Jidoka -- Manual or automatic line stop, Separate operator and machine activities, error-proofing, & visual control. The GOAL: - Highest quality, lowest cost, shortest lead time by eliminating wasted time and activity.
Supply Chain Considerations in Lean Systems - Close Supplier Ties, & Small lot sizes help reduce inventory and lead times.
Close Supplier Ties: - Needed because lean systems operate on low levels of inventory and capacity slack. - Supplier must have short lead times, arrive on schedule, and be of high quality - Create WinWIN 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 of requirements, quality standards, and feedback performance. Small lot sizes help reduce inventory and lead times: - Single-digit setup (Single Minute Exchange of Dies - SMOD)
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 - Examples: A painted square on a workbench = one unit.
Kanban Definition
Created by Toyota for the 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 fabrication (pull system) 3. Containers can not 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
Managing the Constraints in a Line Process - Matching Output to the Plan - Key Definitions
Desired Output = r - Ideally is to match the staffing or production plan. - 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 Where as... c = Cycle time in hours r = Desired output rate
Line Balancing Definition
Effective assignment of work to balance the flow through the facility.
Managing Constraints in a Line Process - Finally, the rest of the Key Metrics --> Efficiency
Efficiency: - The ratio of productive time to total time, expressed as a percent
7. Key Principle of TOC
Every capital investment must be viewed from the perspective of the global impact on overall throughput, inventory, and operating expense.
How can we use TOC to improve performance of the business with many products and the same equipment or resources? Product Mix Example
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) How can you schedule your operation to maximize contribution margin? 1. Traditional Method: Maximize production of products that provide the greatest contribution margin 2. Bottleneck Method: Maximize production of products that provide the greatest contribution margin at the bottleneck (Ex: Contribution margin / time)
Other Key Components of Lean Systems: Flexible Workforce & Automation
Flexible Workforce: - Workers trained to perform more than one job - Benefits --> Shift workers to address bottlenecks or fill in for absences to keep the process moving. - Generally, focused on learning the job 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 use effectively EXAMPLE: Bank ATMs provide 24 hour service - BUT. not all automation is good or needed!
Managing Constraints in a Line Process - Other Key Measures
Idle Time: - The total unproductive time for all stations in the assembly of each unit - It is total available time minus total work time (productive time) Where... n = Number of Stations c = Cycle time Sigma (t) = Total time required to assemble each unit
4. Key Principle of TOC
Inventory is only needed only in front of the bottlenecks and in front of assembly and shipping points. Why? To assure the bottleneck does not lose time (inventory in front of bottleneck) and to assure you meet customer demand (inventory in front of finished goods).
What is Included in this Culture of Continuous Improvement?
Kaizen - Japanese word for continuous improvement - 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 (EX: To stop operations), and hold them accountable. - Teams and systems success is emphasized over individual success. - Pay and Performance metrics are based on these standards.
Total Preventative Maintenance AKA (Total Productive Maintenance)
Lean systems need to be predictable, meaning that 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 level of maintenance of their equipment.
Example of Bottleneck in a Service Process?
Managers at the First Community Bank are attempting to shorten the time it takes customers with approved loan applications to get their paperwork processed. 1. What single step is the bottleneck? Step 2. 2. What's the maximum number of loans this system can process in a 5-hour work day? 3 Per hour = 15 in 5 hours.
Takt Time
Matching the rate of production to the rate of demand. German word for the baton used in orchestra to regulate the tempo of the music. 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.
Value Stream Metrics
Value Streams have their own symbols and identify key metrics. KEY METRICS: 1. Takt Time - Daily availability/ daily demand 2. Cycle time 3. Set up time 4. Per unit processing time - Cycle time + setup time 5. Capacity - Availability/Time at bottleneck
Just in Time Production
Originated by Toyota. Describes how material should be processed and moved in order to arrive "just in time" for the next operation.
3 Types of Constraints
Physical: Examples --> Machine, Labor, Work Cells, Materials, Space, Quality. Demand: Examples --> Shortages of demand, work stoppages at customers. Management: Examples --> Policies, Metrics, Mindsets
What is a project?
Project: An interrelated set of activities with a definite starting point and ending points, which results in a unique outcome for a specific allocation of resources. Project Management: A systemized, phased approach to defining, organizing, planning, monitoring, and controlling projects.
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 the activities and arcs represent the precedence relationship.
Theory of Constraints
Systematic management approach that focuses on actively managing those constraints that impede a firm's progress toward its goal of maximizing profit and effectively using resources. Developed by Eli Goldratt in the 1980's. The book, The Goal, was used to help people internalize the concepts. The focus is on material flowing more rapidly through the entire system to improve financial performance.
8 Types of Waste (Or Muda) - TIM WOODS
T = Transportation I = Inventory M = Motion W = Waiting O = Over Production O = Over Processing D = Defects S = Skills
Managing Constraints in a Line Process - Line Balancing
The Goal --> Achieve the desired output rate with the lowest number of stations. The most efficient line = the one that produces the desired pace with the least number of work stations. - 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
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 the 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.
Sensitivity Analysis - Shadow Price
The marginal improvement in Z (increase for maximization and decrease for minimization) caused by relaxing the constraint by one unit..
Description of Lean
The relentless elimination of waste in every area of operations with the aim of reducing inventory, cycle times, and costs -- so that you can produce higher quality goods and services in the most efficient, effective, and responsive manner possible.
Managing the Constraints in a Line Process - How do you know the smallest number of stations needed?
Theoretical Minimum (TM) - A benchmark or a goal for the smallest number of stations possible - The time it takes to make the product divided by the cycle time TM = Sigma(t)/c Where... t = Work-element standard times Sigma (t) = Total time required to assemble each unit c = Cycle time
Scheduling and Standardization in Lean Systems - Uniform Work Stations & Standardized Components and Work Methods
Uniform Workstation Loads: - Paced by Takt Time - Level load by both volumes and product mix = Hiejunka. Standardized Components and Work Methods: - Components, use of "standard" components to reduce complexity, inventory, and costs EXAMPLE: Standard engines and other parts on automobiles. - Work Methods, Creation of "standard" work methods locks in improvements and takes variability out of the production process. EXAMPLE: Helps keep the process "in control"
Value Stream Mapping -- Method of Total Preventative Maintenance
Value Stream Mapping: - A widely used quantitative 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.
Value-Added Activities that are Small Percent of the Total Time of the Entire Process
Value-Added Activities: - What the customer wants - Transform materials/ information into products or service. - Are done right the first time - (3-5%) Non-Value Added but Necessary: - Consume resources, but don't directly contribute to the product or service - Are CURRENTLY required - (10-15%) Non-Value Added Activities: - Consume resources, but don't directly contribute to the product or service - Could be eliminated without deterioration in product/service functionality - (85%)
Defining the Work Breakdown Structure
Work Breakdown Structure: - A statement of all work that must be completed - Company owners and project managers use WBS to make complex jobs more manageable. The WBS is designed to help break down a project into manageable chunks that can be effectively estimated and supervised. Activity: - The smallest unit of work effort consuming both time and resources that project manager can schedule and control. - The activity is rolled up in the Work Breakdown Structure - Each activity must have an owner (accountable person)
5. Key Principle of TOC
Work should be released in to the system only as frequently as needed by the bottlenecks. Bottleneck = Market Demand Why? The most volume that will go through the system is limited by step 2 above. If work is released at step 1 at a higher rate, it will only build up in front of step 2. That creates inventory and ties up $$$.
