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numericals

Sessions 1 & 2 Lean Tools and Theory of Constraints:

1. In a typical 7-day period, the planning department programmes a particular

machine to work for 150 hours its loading time. Changeovers and set-ups take

an average of 10 hours and breakdown failures average 5 hours every 7 days.

The time when the machine cannot work because it is waiting for material to be

delivered from other parts of the process (or IDLING) is 5 hours on average and

during the period when the machine is running, it averages 90 per cent of its

rated speed. Three per cent of the parts processed by the machine are

subsequently found to be defective in some way. What is the machines OEE?

Availability = (150-10-5)/150 = 0.9

Performance = 0.9*(135-5)/135 [0.9 because the machine loses out 10% of

performance time due to slow running speed] = 0.87

Quality = 100%-3% = 97% = 0.97

OEE=Availability X Performance X Quality = 76%

3. As local developers prepare for an increase in housing starts, they must

anticipate their demand for various materials. One such material is tile. Used in

bathrooms, kitchens and for decoration, tiles come in many shapes, colors and

sizes. In order to accommodate the varying needs, the tile manufacturer must

schedule its production efficiently. Each month developers order 30000 boxes of

quarry tile, 15000 boxes of Italian mosaic tile and 45000 boxes of 4 bathroom

tile. Determine a mixed model sequence that will efficiently meet these needs.

Assume 30 days a month.

Ratio of demand= Quarry:Mosaic:Bathroom = 2:1:3 (monthly)

Hypothetical calculation

Take LCM of 2, 1, 3 = 6

Find the individual frequency for each product type using the LCM as the total

takt time

So in a cycle of 6 time units, Quarry needs to be produced twice, Mosaic once

and Bathroom once.

Quarry release during a period of 6 time units:

0

3

Mosaic release during a period of 6 time units:

0

Bathroom release during a period of 6 time units: 0 2 4

Hence the sequence for production is: Bathroom, Quarry, Mosaic, Bathroom,

Quarry and Bathroom.

In this sequence Bathroom comes first as it is the most demanded.

If we consider one piece flow, then this sequence will be repeated 15000 times

per month.

However if we consider daily level production, daily 3000 units are to be

produced and in ratio 2:1:3. In that case this sequence will be repeated 500

times per day.

4. One supplier of Toyota is planning to implement Heijunka. Toyota has

recommended that the supplier cut the batch sizes from the current level of 60

down to 10. In order to achieve this, the supplier should reduce setup time by

what factor?

Q*/Q* = 60/10 = 6 (Q*= EOQ current and Q* = EOQ reduced) = (A*/A*)

numericals

A* = 36A*, Assuming setup cost is directly proportional to setup time. The

setup time needs to be reduced by a factor of 36 for batch size to be cut

by 6.

5. The average daily demand for three products A,B and C are 480, 360 and 240

respectively. The cells production rates are: 4 As in 1 minute, 10 Bs in 3 minutes

and 10 Cs in 3 minutes. Assume a 8 hour daily shift of operation with two 10

minute breaks. The setup time required for each unit A, B and C are respectively

7, 6 and 7 minutes. If we use container size of 20, 15 and 10 for A, B and C

respectively, how many production kanban cards are required for A, B and C

assuming zero safety factor?

A: 0.25 minutes per part, B: 0.3 minutes per part, C: 0.3 minutes per part

The total extended run time required for work cell = 480X0.25 + 360X0.3 +

240X0.3 = 300 min

Total available time per day for production = 480 minutes 20 minutes = 460

minutes

Time available for set-up = 460-300 = 160 minutes

Total Setup time for A-B-C sequence cycle = 7+6+7 = 20 minutes

The number of times the sequence cycle can be set up for A B and C = 160/20 =

8

The lot size that must be produced for each part is:

Part A lot size = 480pcs/day/8setups = 60

Part B lot size = 360pcs/day/8setups= 45

Part C lot size = 240pcs/day/8setups= 30

The manufacturing lead time for all parts is calculated as:

Part A: 7min setup + 15min run time per lot (60pcs @0.25) = 22 minutes

Part B: 6min setup + 13.5min run time per lot (45pcs @0.3) = 19.5 minutes

Part C: 7min setup + 9min run time per lot (30pcs @0.3) = 16 minutes

Hence, one sequence Mfg Lead time = 57.5 minutes (summing up the above

times)= 57.5/460 = 0.125 days

Now the calculation of Kanbans is quite straightforward,

Part A= 480X0.125X(1+0)/20 = 3

Part B= 360X0.125X(1+0)/15=3

Part C=240X0.125X(1+0)/10=3

6. If lead time demand has mean of 100 and standard deviation of 6, and we

want to avoid shortages with 97.5% probability, what safety factor should we

use?

Z value corresponding to 97.5% cumulative probability for a standard normal

distribution = 1.96

Therefore safety stock = Z x lead time standard deviation = 1.96 x 6 = 11.76

Total inventory = lead time demand (DL) + Safety factor (S) x DL = 100 + 100 x

Safety Factor

Hence, 11.76 = 100 x Safety Factor => Safety Factor = 0.12

Handout #2

1. A retail website sells a variety of products including clothes, electronics,

furniture, sporting goods, books etc. An average customer order is $47. Weekly

2

numericals

total variable costs are $365000 and weekly fixed costs are $85000. The

company averages 18400 orders per week and 12% of all orders are returned for

a variety of reasons. 30% of all returned orders are turned around and refilled

correctly per the customers desire, but at a cost of $8 per order, while the

remaining 70% of the returned orders are lost. In addition it is estimated that half

of the customers associated with lost orders will not return to the website at a

cost of $15 per order.

a) Determine the weekly cost of poor quality for the website.

b) The company can implement a quality improvement programme for $800000

a year that will reduce the % of returned orders to 2%. Assuming 30% of all

returned orders are turned around at same cost and remaining are lost forever at

the same cost as before, should the company invest in this programme?

Solution:

Potential profit/wk: $47x18400-$365000-$85000=$414800

Actual Profit/wk (a):

Yield= Good Units + reworked units = 88%+12x0.3% = 91.6%

Total Revenue = $47x18400x0.916 = $792156.8

Total cost of rework after return = $8x18400x3.6/100=$5299.2

Total cost of lost orders = $15x18400x8.4x0.5/100 = $11592

Profit/wk = $792156.8-$365000-$85000-$5299.2-$11592=$325265.6

Hence Cost of Quality/wk =$414800 - $325265.6 = $89534

(b)

Actual Profit/wk after implementing quality improvement programme:

Yield= Good Units + reworked units = 98%+2x0.3% = 98.6%

Total Revenue = $47x18400x0.986 = $852692.8

Total cost of rework after return = $8x18400x0.6/100=$883.2

Total cost of lost orders = $15x18400x1.4/100 = $3864

Total cost of quality improvement programme/wk = $800000/50 (assuming

50wk/year) = $16000

Profit/wk = $792156.8-$365000-$85000-$883.2-$3864-$16000=$381945.6

As the profit/week in second case is larger than that in a, we must go ahead with

the programme

3. Case: MBPF Doors Inc.

MBPF Inc. is a high tech manufacturer of steel doors sold to industrial

warehouses as well as to those looking for a residential garage door. They pride

themselves on the high quality of their products and their professional after-sales

service and have built a strong reputation as a premier steel door manufacturer,

commanding 15% market share. Lately, however there were reports of customer

dissatisfaction from the field. The sales manager explained that, several

customers were unhappy with the door quality in terms of safety, durability and

ease of operation; others were annoyed with the higher cost and still many

complained about the difficulty in getting the deliveries on time or receiving

prompt service when something went wrong with installation or operations. The

CEO concluded that it is time to proactive by identifying and elimination the root

causes of customer dissatisfaction.

Suppose the MBPF team collects data on the actual weight of 100 standard

garage doors sampled randomly from monthly production of almost 2000

3

numericals

doors. Suppose 5 doors from each of the past 20 days production runs were

weighed at same 2 hour time intervals (7am, 9am, 11am, 1pm, 3pm) and

recorded. The average and overall standard deviation of the 20 sample

averages came out to be 82.5 kg and 4.2 kg respectively. Can you set the

control limits for the production process? Assuming a normal distribution of

weights of garage door produced by the production process, what % of

samples would be falling within the control limits? How many hours on

average will pass by before an assignable cause for weight variation is

detected?

Answer:

82.5+3*4.2/sqrt(5) = 88.13, 82.5-3*4.2/sqrt(5) = 76.87

Zh= (88.13-82.5)/4.2/sqrt(5)=0.6; zl= -0.6; 99.7% within control; 0.3%

of samples will be out of control =>long time to detect an out of

control sample

Suppose the design engineers determine that a standard garage door weighs

a minimum of 75kg and a maximum of 85kg, specifying its design quality.

Calculate process capability and explain the state of the process. What % of

doors do not fall within the specifications assuming normal distribution for the

garage door weight (with above mean and s.d.)?

Cpk = min (85-82.5/3*4.2; 82.5-75/3*4.2) = 0.1984, 0.6 sigma process.

Hence it is grossly incapable of meeting the specifications

Zh = (85-82.5)/4.2 =0.5952; Zl=(75-82.5)/4.2=-1.78, 68.7% are out of

spec

If the process is correctly centered at 80kg, compute Cp and sigma capability

0.4, 1.2

What % of doors now conform to specifications?

76.6%

In order for the door making process to be a six sigma process what should be

the standard deviation? 0.8333

What will be the control limits once the process becomes a six sigma process?

How many hours on average will pass by before an assignable cause for

weight variation is detected?

80+3*0.8333/sqrt(5)=81.12, 78.89

Same result

If the mean shifts to 82.5 now, only 0.012% will be within CL

THEORY OF CONSTRAINTS

Problem on finding the maximum weekly profit done in 3 rd session, slide 8

I hope all of you got the reason behind producing 100 P and 30 Q within the 2400

minutes weekly assigned for each machine A B C D. So the total maximum

weekly profit is:

100X45 + 30X60 6000 = $300/Problem on Slide 9

a)Assuming a batch size of 50

Capacity of step 1 (in units/minute): 50 units/(50x1+20m setup) =0.714285714

Capacity of step 2 (in units/minute):

Capacity of step 3 (in units/minute):

50/(50x1.5)=

0.666666667

numericals

The total capacity of the process is 0.5 units per minute (30 per hour) because

that is the minimum capacity among the three process steps.

b)

Time to process 20 parts from an empty system with batch size of 50 units:

Note: All 50 parts must finish step 1 before moving to step 2, and all 50 must

finish step 2 before moving to step 3.

Time spent in step 1:

70

Time spent in step 2:

100

Time to finish 20 units in step 3: 30

Total time to finish 20 units:

200 minutes

c) Time to process 20 parts from an empty system with batch size of 50 units:

Note: Parts can move to steps 2 and 3 whenever they are done (Transfer batch

size of 1)

This is exactly like the problem of computing the time to complete X units in an

empty system.

Including the setup, the first unit takes 20+1+2+1.5=24.5 minutes. After that,

units are finished every 2 minutes.

Time to process 20 parts:

62.5 minutes

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