Final Project

IEE 545
Team CJG
SM Electronics: Cost Savings through Simulation Analysis
Team CJG
Team Members: *Gabriel Silva, Chris Weinkauf, Johnathon Wright

Executive Summary
This report provides an analysis and evaluation of SM Electronics fourth production line. Arena
simulation models were built to mimic the real world production line to allow data and conclusions to
be drawn from. Using simulation data and results to test their recommended production changes
allowed the representation of calculable (all calculations can be found in appendices) results without the
large investment of money. Results of testing the recommendations in simulation showed that currently
SM Electronics is losing an average of close to $2,680.00 per week in lost production. Implementation of
their first proposed recommendation proved to show no improvement to the financial weekly amount
lost in production. However, results showed that implementing their second proposed modification
would reduce their weekly lost production cost down to approximately $1,900.00. It is recommended
that SM Electronics implement proposed modification two, as it satisfies the cost justification needed
for a two year ROI.
Problem Description and Research Question
Currently SM Electronics is having too high of production loss and wants to simulate their
production lines to financially calculate their production losses as well as use the simulation to decide if
a their proposed recommendations can reduce their losses. Their current production line chosen to be
analyzed has the following work flow:








Proposed Modification 1: addition of pallets to the existing fourth system.
$17K + $3K for each new pallet.
Benefit: More parts to work in the fourth line.

Proposed Modification 2: insert additional space for incoming parts by adding three new buffer
conveyers. Specifically three buffer conveyers would be added at the incoming merge point. Then parts
would be released in batches to save machine setup time on each process.
$56K, total cost to implement modification 2.

SM Electronics asked that the report give results based off of a few specific questions:
1. What is the cost of lost production for our current system?
2. What is the cost savings, if any, resulting from the implementation of the first proposed modification?
How many additional pallets should be added?
3. What is the cost savings, if any, resulting from the implementation of the second proposed modification?
Include a detailed description of your proposed release logic.
4. Should we implement both of the proposed modifications?
Final Project
IEE 545
Team CJG
Per SM Electronics request, all cost comparisons will be presented in dollars per week to allow
for easy assessment. The main deliverable SM Electronics would like is to determine which option from
above will produce the largest return on investment if implemented.

Data Analysis
Assumptions

1. Negligible transfer time from input conveyor to line 4.
2. Cell 8 will first take a new part even if cell 7 is ready to transfer to it.
3. Limitation on the maximum number pallets is 48.
4. Two year ROI to consider an alternative, with fifty work weeks per year.

Procedure
In order to properly construct a valid simulation, four different models will be needed for
comparison. The four models were:

1. Current Process (no modifications)
2. Extra Pallets
3. Buffer Lines for Parts A, B, and C
4. Buffer Lines and Extra Pallets

Model 1 is the model used to answer question one from our problem statement. We will be able to
calculate the lost production cost of their current system. Model 2 allows the user to increment extra
pallets into production, starting with 40 and up to 48, which will allow us to answer question two. Model
3 implements buffer lines for parts A,B, and C to allow the model to send parts out in batches to
properly answer question 3. Lastly, combining buffer lines and extra pallets will provide data necessary
to answer question 4.
In our simulation models we created module types that could be used in each model to help
keep the models similar. Those module types included:

Part Entry into the Holding Conveyor
Automatic Cells (Automated Process, contains decision tree in logic)
Manual Cells (Manual Process, no setup time required)
Cell 8
Completed Part Exit
Lost Production Part Exit

These modules remain constant throughout the models, the only part that changes is the way parts
enter into the holding conveyer. This will be different in model 3 and 4 due to the introduction of buffer
lines. (Logic for each model can be found in Appendix A).
Once simulation models were completed and output data was gathered, it was necessary to
calculate the return on investment of each proposed improvement to choose whether or not the
proposal should be implemented.



Final Project
IEE 545
Team CJG
Experimental Summary Results
Question 1/Model 1 Results
Replication # Part A Lost Part B Lost Part C Lost Part A Good Part B Good Part C Good Lost Production per Week
1 951 1611 1131 748 1780 1243 $2,675.64
2 955 1627 1119 739 1769 1255 $2,680.64
3 949 1614 1137 750 1776 1238 $2,680.07
4 1009 1576 1099 695 1813 1272 $2,682.17
5 982 1586 1119 714 1808 1255 $2,678.84
6 998 1572 1105 700 1826 1264 $2,674.18
7 969 1579 1143 728 1814 1230 $2,680.14
8 1001 1543 1133 703 1844 1240 $2,678.74
9 981 1573 1125 713 1822 1249 $2,674.08
10 991 1596 1099 708 1802 1268 $2,678.75

Question 2/Model 2 Results
Replication # Part A Lost Part B Lost Part C Lost Part A Good Part B Good Part C Good Lost Production per Week
1 975 1605 1121 725 1780 1257 $2,686.02
2 958 1632 1107 740 1757 1269 $2,677.82
3 964 1620 1121 734 1771 1253 $2,685.68
4 948 1605 1146 753 1785 1225 $2,679.99
5 1011 1553 1104 686 1837 1272 $2,673.06
6 962 1569 1170 733 1818 1211 $2,687.05
7 1003 1569 1111 694 1828 1258 $2,681.06
8 968 1606 1128 728 1784 1248 $2,685.46
9 989 1567 1137 716 1817 1236 $2,686.06
10 943 1634 1127 761 1748 1250 $2,680.13
Replication # Utilization Pallets in Use
1 0.964397 39.5402876
2 0.9711 39.8154
3 0.9679 39.6851
4 0.971 39.8099
5 0.9705 39.7909
6 0.9693 39.7413
7 0.9717 39.8398
8 0.9738 39.9244
9 0.9721 39.8544
10 0.972875 39.8878865

Final Project
IEE 545
Team CJG
Question 3/Model 3 Results
Replication # Part A Lost Part B Lost Part C Lost Part A Good Part B Good Part C Good Lost Production per Week
1 160 1849 834 1520 1545 1532 $1,907.75
2 161 1845 835 1520 1549 1530 $1,906.84
3 161 1845 835 1520 1549 1530 $1,906.84
4 160 1849 833 1520 1545 1533 $1,907.03
5 161 1846 835 1520 1549 1530 $1,907.47
6 160 1849 833 1520 1545 1533 $1,907.03
7 160 1849 833 1520 1545 1533 $1,907.03
8 161 1845 835 1520 1549 1530 $1,906.84
9 160 1849 834 1520 1545 1533 $1,907.75
10 161 1845 835 1520 1549 1530 $1,906.84
Replication # Utilization Pallets in Use
1 0.9866 39.4643
2 0.9863 39.4522
3 0.9833 39.5303
4 0.9809 39.2365
5 0.99 39.602
6 0.9853 39.412
7 0.9876 39.493
8 0.9872 39.4867
9 0.9876 39.5028
10 0.989 39.562

Question4/Model4 Results
Replication # Part A Lost Part B Lost Part C Lost Part A Good Part B Good Part C Good Lost Production per Week
1 160 1849 834 1520 1545 1531 $1,907.75
2 161 1845 835 1520 1548 1530 $1,906.84
3 161 1845 835 1520 1548 1530 $1,906.84
4 160 1849 833 1520 1545 1532 $1,907.03
5 161 1846 835 1520 1548 1530 $1,907.47
6 160 1849 833 1520 1545 1532 $1,907.03
7 160 1849 833 1520 1545 1532 $1,907.03
8 161 1845 835 1520 1548 1530 $1,906.84
9 160 1849 834 1520 1545 1532 $1,907.75
10 161 1845 835 1520 1548 1530 $1,906.84
Replication # Utilization Pallets in Use
1 0.986 40.4254
2 0.9857 40.4149
3 0.9877 40.4977
4 0.9801 40.1846
5 0.9896 40.5724
6 0.9847 40.3711
7 0.9869 40.4615
8 0.9865 40.448
9 0.9869 40.4649
10 0.9885 40.5296
2 Year ROI for Buffer Line
Rough Estimate $2678-$1907 = $771 * 100 weeks = $77,100. Which is greater than initial investment
of $56,000.
Conclusion
After analyzing the four models the second proposal option proved to be the right choice. With
a two year ROI of +$20,000 it proved to be a worthy investment. We ran a means comparison in order to
maximize the weekly profit of the production line and found that the second choice was correct, with an
average weekly savings of over $700 a week (See appendix A for means calculations). Although the line
is far from perfect (still $1,900/week in production lost) it is an improvement. Analysis also showed that
batching parts were the key to the savings, which leads to the recommendation of further batching
experimentation. Reducing setup and changeover time (whether it is automated or not) will be the key
to further reducing the weekly losses. Pursuing the possibility of a larger manufacturing vicinity would
also be a recommendation worth investigating.

Final Project
IEE 545
Team CJG
Snapshot of Arena Animation

*Robotic Arms = Automatic Cells
*Drill Press = Manual Cells












Appendix A
Psuedo Model Logic

M1- Model of Current System


M3- Buffer Lines Model


Lost Production Exit
Auto Cell Model








Manual Cell

Cell 8




Appendix B
Difference of Means Calculations (Profit Maximization)
M1M2


M1M3
M1M4