Inventory adversely affects all competing edges (P/Q/V/D)

1
Lean Operations The Real Cost of Inventory

• Inventory adversely affects all competing edges
  (P/Q/V/D)
• Has cost
• Physical carrying costs
• Financial costs
• Causes obsolescence
• Due to market changes
• Due to technology changes
• Leads to poor quality
• Feed back loop is long
• Hides problems
• Unreliable suppliers. High defect rate, tools
  changeover times, machine breakdowns.
• Causes long flow time

2
Flow-Time Analysis

• Competitive Advantages of a shorter flow time
• Shorter response time (both in production and
  product design)
• Delayed differentiation (Postponement)
• Lower inventory costs (due to Littles Law)

3
Direct Methods of Measuring Flow Time

• Direct Method
• Observe a process over an extended, specified
  period of time
• Randomly sample flow units over the observation
  period
• Measure the flow time for each flow unit from
  entry to exit
• Compute the average of flow times measured
• Example
• During a given month, a sample of 50 applications
  was taken
• The average flow time 20.85 working days

4
Indirect Methods of Measuring Flow Time

• Indirect Method
• Count the number of units produced over an
  extended period of time
• R number of units produced / duration of time
  period
• Count the number of units of inventory at random
  points during the time period, and compute the
  average inventory (I).
• Compute T I/R

• Example
• 200 applications processed during a given month,
  20 days of operation during the given month.
  Throughput for the sample is R200/20 10
  applications per day.
• After counting the number of applications at 4
  random points during the month, the average
  inventory (I) was 215.
• TI/R ? T 215/10 ? flow time is 21.5 days

5
Process Flow Chart

• Process network of activities performed by
  resources
• 1. Flow unit The unit of analysis Level of
  detail
• 2-3. Network of Activities Storage/Buffers
• Define Process Boundaries
• Activities with activity times
• Buffers with waiting flow times
• Routes precedence relationships (solid lines)
  with throughputs
• 4. Resources Allocation
• - Who does what?
• 5. Information Structure flow (dashed lines)

Key for capacity analysis
6
Flowcharting
Activity

• Decision

Buffer

• See the total process a systems view
• Define flow units and process boundaries
• Include only the key steps
• Clarify the level of detail needed. Processes can
  be broken down into sub-activities. On the other
  hand, cascading allows several activities to be
  combined in a single sub-process
• Depicts resources required to carry out
  activities
• Identify the processes that need attention (weak
  points)

7
Wondershed Inc Narrative Representation

• Required activities
• Separate the roof and the base sheets
• 2. Punch the base
• 3. Punch the roof
• 4. Form the base
• 4. Form the roof
• 6. Sub-assemble the base
• 7. Assemble
• 8. Inspect

8
Wondershed Inc. Schematic Representation
Punch base
Form base
Sub assemble base
Separate Sheet
Start
Punch roof
Form roof
End
Assemble
Inspect
9
Theoretical Flow Time
Buffer
Activity
Entry
Exit

• Theoretical Flow Time The minimum amount of time
  required for
• processing a typical flow unit without any waiting

Activity Time The time required by a typical
flow unit to complete the activity once. Unless
stated otherwise, we assume that an activity can
not be broken down into smaller activities that
can be executed in parallel. What does that
mean???
10
Critical Path
Theoretical flow time of each path in the process
flowchart sum of the activity times of all
activities on that path Critical Path the
longest path Critical Activities activities
that lie on the critical path The theoretical
flow time of the process the time of the
theoretical critical path
How many Paths?
11
Wondershed Inc. Theoretical Flow Time
Activity Times at Wonder Shed Inc. Activity Times at Wonder Shed Inc. Activity Times at Wonder Shed Inc.
  Activity Activity Activity Time (minutes) Activity Time (minutes) Activity Time (minutes) Activity Time (minutes) Activity Time (minutes)
1 Separate 10 10
2 Punch the base 25 25
3 Punch the roof 20 20
4 Form the base 5 5
5 Form the roof 10 10
6 Subassemble the base 10 10
7 Assemble 10 10
8   Inspect   30 30    

• Path 1 (roof) Start ? 1 ? 3 ? 5 ? 7 ? 8 ? End
  80 minutes
• Path 2 (base) Start ? 1 ? 2 ? 4 ? 6 ? 7 ? 8 ? End
  90 minutes

12
Average Wait Time, Average Flow Time

• Average waiting time for roof
• T I / R 80 / 16.5 4.85 hours or
• 291 minutes
• Average waiting time for base
• T I / R 90 / 16.5 5.45 hours or
• 327 minutes
• Theoretical flow times
• Roof 80 minutes
• Base 90 minutes
• Flow Times
• Roof 291 80 371 minutes
• Base 327 90 417 minutes

16.5 sheds average flow rate (R) per hour based
on empirical data
13
Value-adding vs. Non-value-adding activities

• Value-adding activities are those activities that
  increase the value
• of a flow units
• Example assembly, surgery, piloting an airplane,
  etc.

• Non value adding activities are activities that
  do not directly
• increase the value of a flow unit.
• Re-work
• Transport
• Inspection
• Waiting

Flow time Value-adding times Non-value-adding
times
14
Activity Time, Number of Visits and Work Content

• Activity time is time required by a typical flow
  unit to complete the activity once.
• Sometimes we may need to repeat an activity, i.e.
  the number of visits is not necessarily 1.
• Work content Activity time Average number of
  visits
• Theoretical flow time is computed based on work
  content not based on Activity time

15
Activity Time vs. Work Content
16
Theoretical Flow Time vs. Flow Time
Theoretical flow time 90 Flow time 432
Flow Time Efficiency Theoretical Flow Time /
Flow Time Flow Time Efficiency 105/432 24
17
Flow Time Efficiencies in White Collar Processes
18
Reducing Theoretical Flow Time Shorten the
Length of Every Critical Path by 3 Basic
Approaches

• Eliminate Reducing the work content of critical
  activities
• Work smarter Eliminate non-value-adding aspects
  of the activity
• Work Faster Increase the speed at which the
  activity is performed, e.g. Better Methods,
  Training, Advanced Technology, Better Management.
• Work right in the first time Reduce repetitions
  of the activity
• Work in parallel Moving work off the critical
  path
• Move work off the critical path to a noncritical
  activity
• Move work off the critical path to the outer loop
  (pre- or post-processing)
• Select Modify the product mix
• Make more of a product that requires less
  processing time ? reduce overall flow time (Given
  market condition)

19
Levers for Managing Theoretical Flow Time

• - Move work to the outer loop (pre-meeting
  homework)
• - Work in parallel (professionals work
  simultaneously)
• - Elimination of non-value-adding work(only two
  meetings)

20
Critical Path Method The Network
Find the Critical Path.
21
Critical Path Method Paths
How many path?
6
4
4
3
3
2
10
11
8
Critical Path is the longest Path
22
Forward Path Earliest Starts
4
4
10
10
11
11
4
4
4
10
11
8
8
4
5
11
4
8
8
5
3
3
3
3
5
23
Forward Path
Max 30
35
10
35 35

30
20
5
24
Backward Path Latest Starts
11
5
4
0
11
5
5
11
11
4
0
11
8
4
8
11
11
0
4
8
8
11
8
3
3
3
6
8
6
8
6
6
25
Backward Path
Min 35
30
35

45
5
26
Activity Slack

• Slack, or float The amount of time a noncritical
  task can be delayed without delaying the project
• SlackLFT EFT or LST EST
• ESTEarliest Start Time Largest EFT of all
  predecessors
• EFTEarliest Finish Time EST duration for this
  task
• LFTLatest Finish Time Smallest LST of following
  tasks
• LSTLatest Start Time LFT duration for this
  task

2/10/2017
Ardavan Asef-Vaziri
5-1-26
27
Critical Path, Slacks
6
4
11
5
4
0
11
11
0
4
4
10
8
4
4
8
11
3
11
4
8
8
3
3
6
2
8
6
3
0
3
5
28
Theoretical Critical Path vs. Critical Path
The time of the critical path differs from the
time of the theoretical critical path. Why?
6
4
A3
A1
4
3
A4
A6
3
2
A2
A5
The critical path itself also may differ from the
theoretical critical path. Why?
29
Practice Draw the Network of Activities

• Task Pred. Dur. Task Pred. Dur.
• a -- 4 g c,d 1
• b -- 3 h e 4
• c a 3 i f 5
• d a 2 j e,g 6
• e b 6 k h,i 1
• f b 4
• For each task, compute ES, EF, LF, LS, slack

2/10/2017
Ardavan Asef-Vaziri
5-1-29
30
Practice Compute the Theoretical Flow Time
2/10/2017
Ardavan Asef-Vaziri
5-1-30