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Managing World Class Operations by Partha Priya Datta Solutions to

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*)

Managing World Class Operations by Partha Priya Datta Solutions to


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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
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Managing World Class Operations by Partha Priya Datta Solutions to


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
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Managing World Class Operations by Partha Priya Datta Solutions to


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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 units/ (50x2) =0.5


50/(50x1.5)=
0.666666667

Managing World Class Operations by Partha Priya Datta Solutions to


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