MBA 513 Operations Management PROSIM Simulation -

Team 6
ByoungHak Kim Chi-Tsung Lin Kai Chen, Xue-Wen Ding, Sabarish Rajagopal Chandrasekaran Oct. 15th, 2011

1. Summary
Based on our members specialties and experiences, we equally separated five main operations with respect of production planning and forecasting demand, raw material procurement, operators

planning, quality planning, and maintenance planning. Respectively, Byounghak Kim and Sabarish are in charge of production scheduling and material purchasing benefited with Kims sophisticated production planning experience in pharmaceutical manufacturing factory and Sabarishs quantitative skills. Xue-Wen Ding takes responsibility of operators planning and training with efficiency analysis. In consequence, the rest two parts of quality control and maintenance planning are operated correspondingly by Chi-Tsung Lin and Kai Chen with their financial specialties. Our principle is to meet the demand with lower cost determined by operators proficiency, material ordering time, and other controllable expenditures such as quality control and maintenance fee simulated by our production plan. We were working on reaching the optimal allocation of production by negotiating and coordinating with each operating section to improve our weekly plan more efficiently as well as take possible measures to delivery our products in demand. Through reading the PROSIM book and taking group discussions, we got a sound picture of the simulation and started to set our strategies. At beginning, each operating section of our team made a format based on its calculation or planning proposed by PROSIM book to help us be more flexible to adjust our input according to strategy changes. Afterwards, we systematically ran our simulation based on our forecast step by step. Operated from forecast to raw material procurement and operator planning, once we calculated the amount of weekly production from scheduling working hours, we made a cost-efficient plan for quality and maintenance. To specifically illustrate, our strategies and simulation for each section orderly are as follows:

3. Operator planning
When look ahead of the production, we struggled with the production proficiency of personal instead of inspecting from a higher and strategic stand point. So we started off the initial assessment of the each individual in the very first week to track the performance. The entire decision making on HR aspect are based two key performance

indicators: 1, Potential It is quite easy to understand the concept. We inspired from this point and it led us to make a significant decision in the early stage that to conduct fire and replacement based on the appraisal after week1. The operators #4 & 5, have the lowest production proficiency (67.03% and 65.15% respectively) in after week1, were been fired and replaced. The criteria of picking the new ones are based on the potential as well. But the results came to be lower than we expected. The proficiency is high than those two whom been fired, but it didnt match the learning curve that the logic set up in the Prosim. 2, learning curve The rational of the learning curve are based on the trainable level that each operator been acquired before the week1. It does make sense that the learning curve will be steep in the beginning weeks after training and contingent to stable when the times by. Therefore, after full analysis and collaborate the potential, we keep track the proficiency of each operator by weekly basis and simultaneously adjust the production planning based on the last week total proficiency to approach a more accurate estimation of the schedule hours for the next week. After tons of experiment of reran the first month, we fully understood that the best practice of operator allocation in early one and half month are all about the best allocation to meet the production requirement in terms of assigning the best personal on the production or assembly line that need higher production rate. And as testified by ourselves, all the proficiency rocketed up after 5 consecutive training sessions. The pressure from the best allocation had been released. The top priority shifted from allocation of human intelligence to tracking the training performance and cost reduction. But we missed one important part of the operator planning we realized until the results came up due to the lack of sufficient capacity to meet the demand that hurt us a lot. We concern too many on the delivery performance when we observed the potential of shortage of the production, we add extra operator on o the marginal assembly line (#13). The results are: 1, less total proficiency in the beginning round of the new hire since this certain operator has not been trained for 4 weeks, his production proficiency decreases a lot. It brings us a nervous circumstance and also limited our decision making of the production planning for the next two months. 2. Related to the point 1, mass production strategic had been applied in terms of increasing the production allowance (5%). Although the carrying effect had been absorbed due to the early week of the month, the strategic blueprint had been determined, which led our team to overestimate the demand

in 3rd month. In the mean time, the entire production proficiency dropped under 100% as we archive in the first 4 weeks. Table 1 So if we have sufficient time to run the game Prosim again. Weekly cost, delivery and proficiency assessment should be considered in the same page along with the production planning in order to utilize the operators efficient, in the mean time, reduce the cost spending.

Table 1

7. Quality Planning
In the quality control section, we focus on the most cost-saving allocation of quality planning expenditures and cost of scrapped products. After giving production plan to our operating department, based on the unit cost of each XYZ and XYZ, we made a spreadsheet to calculate its reject cost provided by our estimated reject rate corresponding to our quality control. To specific, we use a formula below to compute a quality planning effectiveness at each week to get

a reject rate for our cost analysis. Ep = 0.3 Ep-1 + 0.7 QCp , Ep = the current dollar effectiveness of the firms QP efforts; Ep-1 = the dollar effectiveness in the previous period QCp = the expenditure made for quality planning in the present period Our strategy is to keep the scrap rate lower than 3% but sticking with the lowest total QP costs as priority. For example, for some weeks we may not need to produce parts or assemblies that much. Hence, we could reduce our QP expenditure to save money and meet our production plan for demand delivery as well. Under this circumstance, our QP expense is fluctuated at first according to our production amount. Basically, we increased our QP expense at week 2 to $2300 from $750, and the reject rate dropped to 3.1% from 17.7% for a better efficiency and control of our production plan for next week. By calculating the relationship of estimated reject rate with quality planning effectiveness that PROSIM book provided, we get an approximate scrap rate for production output forecast. However, in the simulation, the result of reject rate was slight higher than our expectation at first but still in a reasonable range and was getting more accurate. The result of our reject rate is graphed at Table 2 for reviews.

Table 2:

8, Simulation results
Cost proficiency On weekly basis, if we ignore the first week, which does not has the mature operation process and efficiency in terms of low reject rate, low sophisticate

operators and some roll over issue from the week1, There is the a relative low percent efficiency (0.62) and unit cost variance (-4.04) in week 9. The reason is base on overestimation of the orders forecasting and concern regarding on-time delivery performance. We do believe that the earliest order and produce the part will be less expensive than in the later weeks. After adjust the production planning and following purchasing, we decrease the production of X and Y for cost concern, but didnt help lot in the end. Therefore, after we implement a more gradual strategy in procurement and planning to fix this issue. We can observe that in the last month, both unit cost variance and efficiency have been put back and over the standard eventually. (Table 3) From the cumulative perspective, this impact has been absorbed by gradually increase of the all aspects of the performance. (Table 4)
Weeklyefficiencya v ria nd a nce 1 1 1 2

1 0 Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1 3

Percent E fficiency Per unit stdcosts P unit a er ctua cos $va per unit l ts r 0.834 7.144 8.562 -1.418 0.741 6.677 9.007 -2.330 0.731 8.536 11.683 -3.147 0.748 7.370 9.853 -2.483 1.060 5.824 5.493 0.331 1.204 5.399 4.483 0.916 1.076 8.002 7.436 0.566 1.041 6.380 6.131 0.249 0.620 6.578 10.618 -4.040 1.212 6.042 4.984 1.058 1.268 9.147 7.215 1.933 1.012 10.219 10.099 0.121 1.168 6.574 5.628 0.946 1.285 6.603 5.139 1.464 1.160 7.440 6.412 1.028 1.301 12.966 9.967 3.000

Table 3

1 0 Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

C ula um tive effic iencya va nce nd ria 1 1 1 2

1 3

Table 4

Percent E fficiency Per unit stdcosts P unit a er ctua cos $va per unit l ts r 0.834 7.144 8.562 -1.418 0.789 6.922 8.773 -1.851 0.765 7.481 9.780 -2.300 0.759 7.445 9.804 -2.359 0.815 6.981 8.570 -1.589 0.872 6.588 7.554 -0.966 0.909 6.845 7.533 -0.688 0.927 6.768 7.300 -0.532 0.886 6.750 7.616 -0.866 0.917 6.653 7.256 -0.603 0.950 6.891 7.252 -0.361 0.957 7.148 7.472 -0.324 0.969 7.105 7.333 -0.228 0.986 7.067 7.166 -0.099 0.995 7.088 7.123 -0.035 1.005 7.221 7.187 0.034

Delivery performance Since the overages of any one product should not be counted as helping to make up deficiencies of others, we only use 100% of the demand for calculation. The exceed inventory carry over to the next period. We can also inspect that in the beginning of two months, we set too high allowance for preventing the risks of the high reject rate and lower productive hours. The maximum of all the products results a significant increase and inefficient of the cost spending, especially the X. Therefore, we adjust the strategy in the second half of the game (month 3nd and 4 th), it is a little bit hard to meet the target if we cut the spending in all the aspects. This phenomenon testifies our conclusion of You cant have your cake and eat itin the next section

that there is no optimal solution for all. We need trade off among the products when resources are limited. (Table 5 &6)
Month 1 2 3 4 Week Ac l dem nd Unitsa il fors le Ov g S tua a va a era e horta e g Total 7,966 9,336 1,370 N/A Total 11,012 20,524 9,512 N/A Total 17,648 12,563 N/A 5,085 Total 11,047 9,570 N/A 1,477 %OT Cum tiv overa es C ula e s D ula e g um tiv hora es tg 100.00% 1,370 N/A 100.00% 10,882 0 71.19% 10,882 5,085 86.63% 10,882 6,562

Table 5

Table 6
Month 1 2 3 4

Month 1 2 3 4

Week Ac l dem nd Unitsa il fors le Ov g S tua a va a era e horta e g Total 6,731 7,135 404 N/A Total 8,511 11,539 3,028 N/A Total 12,228 10,009 N/A 2,219 Total 9,393 9,617 224 N/A

%OT Cum tiv overa es C ula e s D ula e g um tiv hora es tg 100.00% 404 N/A 100.00% 3,432 0 81.85% 3,432 2,219 100.00% 3,656 2,219

Table 7

Week Ac l dem nd Unitsa il fors le Ov g S tua a va a era e horta e g Total 5,008 5,956 948 N/A Total 6,388 6,769 381 N/A Total 9,008 10,106 1,098 N/A Total 7,974 6,245 N/A 1,729

%OT Cum tiv overa es C ula e s D ula e g um tiv hora es tg 100.00% 948 N/A 100.00% 1,329 0 100.00% 2,427 0 78.32% 2,427 1,729

9, What We Learned
Good practice Prosim provides us a real working environment that contents all the operation process from the forecast all the way to the order delivery, just as we observe in the daily manufactory industry. We has acquire ample experience during the more than 30 hours discipline in terms of assuming the conditions, determining the logic of the game, assess performance in lower level (operational division) and higher level (Cost proficiency, Effectiveness, Delivery performance, and etc), identify and solve the issues have been occurred. This game covers almost all the aspects that we do need take into consideration in the real industry. In other words, all the possible problems would occur if there is a small issue and functionally we have not emphasized in same way. The instruction book is a bible not only for this game, it also illustrates couples of tools and processes that we are able to make the best judgment in terms of detailed tables for each part of the operation and also the relationship to connect the each phase of the production and our though process. Great game! Production planning is critical All possible external information are limited in this game, the only hint regarding the production planning are estimated from conducting the demand forecasting based on the historical information suggested by

the instruction. Therefore, the production planning, which manipulated from the forecasting, is inaccurate in the beginning of the each week. This is real and painful when conducting the monthly planning and breaking down to the weekly as well. We have been struggle with finding the best allocation methodologies in each round (week). We truly understand the importance of the production planning since all the plant spending, quality control, operators assignment are accord to the goal we need to meet in the end of the week of each month. Reversely, the weekly production planning also needs the inputs from the backlog of the inventory of raw materials and parts, HR (individual and total production proficiency), Quality (reject rate) and Maintenance (machine break down) to adjust back. Therefore, this leads to the next part: How do we collaborate with each divisions? Collaboration As we organized in the first meeting of the simulation, our team split the responsibility of each stage of the production to the single personal to take over all the assignments of planning and assessment. Even the production planning part has been delegated, all the other team members work together to justify the best practice of the production planning. We collect all the insights from different perspective to address the assume the issue we might need to encounter in the following weeks, also address the problems from the result of last round in terms of pitching the pros and cons under different scenarios. This type of organization structure fully motivates each member in the team to share and keep the entire team in the same page. Even when there is conflict occurs in same stage of the game, we are able to listen and understand the insights that demonstrate in different business languages. We did confront couples of issues like assumption deciding, priority setting and other details. We all encourage with each other to move forward. Technically, we opened account of Google group to schedule the project, set up meeting and share the interactive docs. Leading time results thing ahead if time (purchasing) Plan head usually is the one of the hottest topic in each round of the simulation, we has spent huge amount time in arguing the possible trade off between the carry cost and the extra cost of the ordering the expedited raw materials and parts when we see the shortage of the production in the later week of the month. Since the game just gives us the opportunity of tracing one week back. This raised a significant issue when find it is impossible to redo the previous round in order to purchase sufficient parts. Therefore, we rerun the game over again for couple times to approach the best practice of the planning. After back and force run the simulation over and over again. We realized a final insight of the game as next part.

You cant have your cake and eat it Cost proficiency and delivery performance are opposite objectives in the simulation. This dilemma has no optimal solution to meet in the beginning of the game. Until the quality of the production has been improved and operators are sophisticated enough in the later month of the game, those goals can be accomplished automatically. Therefore, we learned that the big number of cost spending in the beginning of the game is inevitable even we found there is room to the reduce some spending in terms of making more suitable decision in some areas. This is real in the industry that when the equipments are not fully automated, operators are not educated well and the process of operation is not plan and execute well.