Kaizen Summer Prep

Summer Preparatory

SessionClub Kaizen

Bottlenecks What is a bottleneck ?

◦ Any resource whose capacity is less than demand placed upon it – this is the one that limits the throughput

◦ “An hour saved at the bottleneck adds an extra hour to the entire production system”

How many bottlenecks can firm have at a given point of time?

ONLY ONE !There can be a firm without a bottleneck

– (Yes/No) ? No !

Types of Bottlenecks? Policy Related or Physical

The Nature of Production Flow

If each resource has the average capacity as indicated and

Each resource feeds the next, fully dependent resource at the best possible rate,

What do you expect the average output of this chain to be?

Capacity:(Units per

Hour)

?

• Resource D has a capacity of only 10 units per hour and since all the flow must go through it, the chain can only produce 10 units per hour

11 12 13 10 12 11

A B C D E F

Perfectly Balanced Capacity

This is what we “intuitively” want to achieve.

The best balance of cost and capability to make the most money

No wasted capacity A WELL BALANCED PLANT !!!

10 10 10 10 10 10

10A B C D E F

How much will it produce on average?10 10 10 10 10 10

?A B C D E F

Assuming that each resource has an availability of 90% (a fair industrial standard), the chain will produce:

Output of the chain = (.9 x .9 x .9 x .9 x .9 x .9) x 10

= 5.3 or 53% of design capacity

Availability90%

• Six resources, each with a 90% availability, will produce on average about 53% of design capacity in an interdependent chain

A B C D E F

98%

95%

98%

Chain output = (.98) x (.95) x (.98) = 91%

How to exploit the bottleneck

What must be in place to keep D running as close as possible to 100%?- MAXIMISED AVAILABILITY (Maintenance)- MAXIMISED ABILITY TO WORK (No blockage or starvation)

Protective Capacity

A B C D E F

Releasing material – the rope

Constraint buffer management

Buffer management

The drum and rope provide the “logistics” of the solution

How to exploit the bottleneck

Concepts of Inventory Inventory is the stock of any item used in an organization

Inventory System - Set of policies and controls for:

• Monitoring levels of inventory

• For each item determine: When to order? AND How much to order?

Terminology Associated with Inventory(Important to know about these key words from Interview Point of View)

• ABC analysis

• EOQ

• p-type of system

• q-type of system

• Safety stock

• Lead time

• Service level

• Re-order point

• Target inventory level

9

ABC analysis EOQ

Safety stock

The Concept of EOQ

EOQ = Economic order quantity

The optimum lot size that minimizes the total annual inventory

costs

11

Concept of ‘Safety Stock’ and ‘Service Level’

EOQ models assume: “Demand rate is constant and deterministic”

Not realistic in actual practice

Demand varies from period-to-period

Safety stock: Protection against “stock out” situations

12

The ‘risk period’ = time interval in which one can run out-of-stock

Relation between ‘safety stock’ and ‘service level’

(safety stock) = z x σRisk Period

Concept of ‘Safety Stock’ and ‘Service Level’ (cont…)

z-value from the standard normal distribution corresponding to the required ‘service level’

standard deviation of the demand during the ‘risk period’

Supply Chain

Plan

Source

Make

Deliver

Return

Supp

ly C

hain

Man

agem

ent What is a supply chain?

Introduction

Introduction

Raw Material Vendors

Production Facility

Depots/Wholesalers

Retailers

Consumers

Some activities are:ProcurementForecastingProductionTransportationWarehousingCustomer ServiceRevenue

Management

Mat

eria

lIn

form

ation

Fina

nce

Supp

ly C

hain

Man

agem

ent

Strategic Supply Chain – What do you do?Objective:

To achieve maximum cost reduction?

To optimize costs?To ensure availability at all

times?Which is important?

Decision VariablesLocationProductionInventoryTransportat

ion

Supp

ly C

hain

Man

agem

ent

Commodity Functional Innovative

Example FMCGs, Gas , etc. Fashion Apparels, PCs

Type Efficient Supply Chain Responsive Supply Chain

Main Objective Cost Reduction Lead Time Reduction

Demand Predictable Unpredictable

Lead Time 6 months – 1 year 1 day – 2 weeks

Design Compact Design Modular Design

Physical Function – Transformation of Goods – Production, Transport, InventoryMarket Mediation – Matching Supply and Demand – Stock Out, Over Ordering

Bull-whip EffectSu

pply

Cha

in M

anag

emen

t

As you move up the Supply Chain, variability of demand increases. This is called the Bull Whip Effect. This term was coined by P&G. Some reasons for the same are:

Over Reaction to OrderNeglecting Inventory LevelsNo communication & coordination in chainDelay time for information

Cust Retail W.Sale PlantJan 45 40 35 30Feb 55 60 65 70Mar 45 40 35 30Apr 55 60 65 70May 45 40 35 30Jun 55 60 65 70

Total 300 300 300 300Avg 50 50 50 50

Jan Feb Mar Apr May Jun0

1020304050607080

Cust Retail W.Sale

Bull Whip Effect

Avg

ForecastingSu

pply

Cha

in M

anag

emen

t •APP (Aggregate Production Planning)Month Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb MarDmd 250 220 300 290 260 180 200 220 250 200 240 270Days 23 22 21 24 22 22 19 23 21 23 20 24

•MRP (Material Resource Planning)Month Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb MarDmd X 0 0 80 0 0 80 0 0 80 0 0Dmd Y 0 50 0 50 0 50 0 50 0 50 0

X

2As

1P,2Q

2Bs

2P,1Q

1C

2P,2Q

•ERP (Enterprise Resource Planning)•SAP, etc.

Y

2As

1P,2Q

1B

2P,1Q

2Cs

2P,2Q

Reverse Supply ChainReverse logistics is the process of managing the return of goods. Reverse logistics is also referred to as "Aftermarket Customer Services". In other words, anytime money is taken from a company's warranty reserve or service logistics budget one can speak of a reverse logistics operation Eg: Return of New Order from Flipkart

Green Supply ChainGreen supply chain deals with eco-friendly ways of disposal of used goods and wastes. Eg: Mobile Recycling

A few terms!

What is Project Management?

Project Management is the application of knowledge, skills, tools and techniques to project activities in order to meet or exceed stakeholder needs and expectations from the project.

What is a Project ?

Cooking

A project is a temporary endeavor undertaken to create a unique product or service.

“Temporary” - meaning definite beginning and definite end.

Making

MoviePower Plant

Proj

ect M

anag

emen

tIntroduction

Some TermsPr

ojec

t Man

agem

ent

Gantt Chart

Critical Path

Slack/Float

Some Important Operations Jargons that you need to know!

Just-In-Time“What is Needed, When is Needed and in the Amount that is Needed”

Aimed at reducing Inventory and associated Costs

It’s a Pull StrategyUses Kanban Cards

JIT - AdvantagesMinimizes InventoryMinimizes Storage SpaceManufacturing Synchronized with

DemandIncreased Emphasis on Supplier

RelationsJIT - Disadvantages• Needs RELIABLE supplier• Predictable Transport time• Trained employees

Six SigmaA business Management StrategyDeveloped by Motorola

Improves Quality by:◦Identifying and Removing Defects◦Minimizing variability

Allows only 3.4 defects per million opportunity (DPMO)

For Existing Process

DefineMeasureAnalyseImproveControl

For New Process

• Define• Measure• Analyse• Design • Verify

Vendor Managed InventoryVendor Manages Inventory till the

part is consumed/ soldSupplier takes responsibility to

stock certain amount of inventory, usually at buyers location

Shared Risk in some casesEg. Wal-Mart, P&G, etc.

Total Productive MaintenanceAlso called – Total Preventive MaintenanceProactive Maintenance for better utilization

of maintenance and production resourcesBase is 5S

◦Seiri (Sorting out the required or not required items);

◦Seition (Systematic Arrangement of the required items);

◦Seiso (Cleaniness); ◦Seiketsu (Standardisation); ◦Shitsuke (Self Discipline).

8 Pillars◦Focussed improvement (Kobetsu Kaizen)◦Autonomous maintenance (Jishu Hozen) ◦Planned maintenance ◦Training and education◦Early-phase management◦Quality maintenance (Hinshitsu Hozen); ◦Office TPM ◦Safety, health, and environment.

Toyota Production SystemToyota’s Management Philosophy and

PracticesCustomer oriented PhilosophyTPS has three desired outcomes:

◦ To provide the customer with the highest quality vehicles, at lowest possible cost, in a timely manner with the shortest possible lead times.

◦ To provide members with work satisfaction, job security and fair treatment.

◦ It gives the company flexibility to respond to the market, achieve profit through cost reduction activities and long-term prosperity.

Lean ManufacturingAlso refers to Lean, Lean enterprise or

Lean Production preserving value with less work

◦ Value = Any action or process that a customer would be willing to pay for

By eliminating 7 wastes: ◦ Transportation◦ Inventory◦ Motion◦ Waiting◦ Over-Processing◦ Over Production◦ Defect

Lean - Advantages Inventory Cost & Space

ReductionRobust process• High Cost of Implementation

o Change of plant setup and systems• Lack of acceptance by employees

o requires constant employee input on quality control• Customer Dissatisfaction

o  dependent on supplier efficiency, any disruption in Supply chain will adversely affect customers

• Supplier Problemso High dependence on Supplier

Lean - Disadvantages

Total Quality ManagementIntegrative philosophy of

management for continuous improvement of product and processes

Quality is responsibility of EVERYONE

Drop ShippingGoods are shipped to the

customer directly from the warehouse or supplier rather than from the retailer

Minimizes risk for retailers

Eg: Ebay

Cross DockingSimilar to drop shipping

Presence of a distribution terminal

Eg: Amazon

Milk Run

All the best…..