• Company Name

THE GOAL

A PROCESS OF ONGOING

IMPROVEMENT

// YIS // 062009//

WHAT IS YOUR PROBLEM ??

Why can't we consistently get a quality product out the door on time at the cost that can beat the competition?

What can we possibly do to be more competitive?

~ YIS//062009 ~

• Quality• Product design• Price• Deliveries

Efficiencies

decrease

Economies of scale disappear

Cost go up

No cost reducti

on

BIZ UNIT WORRIES

WHAT IS OUR GOAL ??

~ YIS//062009 ~

“If your inventories haven't gone down . . . and your employee expense was not reduced . . . and if your company isn't selling more products—which obviously it can't, if you're not shipping more of them—then you can't tell me these robots increased your plant's productivity."

ROBOTS??"Have they really increased productivity at your plant?“

Was your plant able to ship even one more product per day as a result of what happened in the department where you installed the robots?

"Did you fire anybody?"

Did you lay anybody off because we installed the robots?“

“Did your inventories go down?”

Productivity is the act of bringing a company closer to its goal. Every action that brings a company closer to its goal is productive.

Every action that does not bring a company closer to its goal is not productive.

You cannot understand the meaning of productivity unless you know what the goal is. Until then, you're just playing a lot of games with numbers and words."

"Your problem is you don't know what the goal is. And, by the way, there is only one goal, no matter what the company."

PRODUCTIVITY ??

~ YIS//062009 ~

So what is the goal? What are we supposed to be doing here? What keeps this place working?

The goal of a manufacturing organization is to

MAKE MONEY

• cost-effective purchasing, • employing good people, • high technology, • producing products, • producing quality products, • selling quality products, • capturing market share. • communications • customer satisfaction

IS THIS YOUR GOAL ?

~ YIS//062009 ~

FINANCIAL MEASUREMENT

NET PROFIT Money you’ve made

RETURN ON INVESTMENT (ROI)the money made VS the money invested

CASHFLOWMoney coming in VS money coming out

It's a measure of survival:

Stay above the line and you're OKAY;

Go below and you're DEAD.

~ YIS//062009 ~

Remember ….

We are always talking about the organization as a whole—not about the manufacturing department, or about one plant, or about one department within the plant.

We are not concerned with local optimums.

OPERATIONAL MEASUREMENT

Throughput the rate at which the system generates

money through sales

Inventory all the money that the system has invested in

purchasing things which it intends to sell

Operational expense all the money the system spends in order to

turn inventory into throughput

~ YIS//062009 ~

PHENOMENA IN PRODUCTION

Kind of information that we cannot precisely predict. These types of information vary from one instance to the next.

Dependent events

Statistical fluctuations

An event, or a series of events, must take place before another can begin . . . the subsequent event depends upon the ones prior to it

Is the customer have their preference in the menu ?Is the food still available ?

How long the chef need to cook?Is all the material need avail ?

How long it takes to serve the food order?How many guest should be served?

DEPENDENT EVENT

&STATISTICAL

FLUCTUATION

~ YIS//062009 ~

And mostly it's an accumulation of slowness—because dependency limits the opportunities for higher fluctuations. And that's why the line is spreading..

We’ve got limits on how fast we can.. However, there is no limit on my ability to slow down. Or on anyone else's ability to slow down. Or stop. And if any of us did, the line would extend indefinitely.

HERBIE

What's happening is not an averaging out of the fluctuations in our various speeds,

but an accumulation of the fluctuations.

~ YIS//062009 ~

We can make the line shrink only by having everyone in the back of the line move much faster than Ron's average over some distance

DR

UM

BU

FFER

R

OPE

"The idea is to move as many matches as you can from your bowl to the bowl on your right.

When it's your turn, you roll the die, and the number that comes up is the number of matches you can move.

But you can only move as many matches as you've got in your bowl. So if you roll a five and you only have two matches in your bowl, then you can only move two matches.

And if it comes to your turn and you don't have any matches, then naturally you can't move any.”

~ YIS//061409 ~

LET’S PLAY THE GAME !!

# of operator :# of dice : Operator InventoryCondition :

1Beginning inv : 2Throughput : 3Total Inventory : 4

5Learning : 6

1st Round

INVENTORY

CAPACITY

BOTTLENECK RESOURCES• is any resource whose capacity

is equal to or less than the demand placed upon it

NON- BOTTLENECK RESOURCE• any resource whose capacity is

greater than the demand placed on it.

Balance the flow, not capacity !!

You should not balance capacity with demand. What you need to do instead is balance the flow of product through the plant with demand from the market

MANAGE YOUR RESOURCES!!

GAIN MORE CAPACITY

• Shift the parts that don’t have to be processed by the bottleneck to next non-bottleneck process

• Use other machine that can do the same process

• Ask vendor support

MAKE SURE THE BOTTLENECKS TIME

NOT WASTED

• Don’t let it sitting idle

• Don’t process part which are already defective or will become

defective through a careless worker / poor process control

• Don’t make it work on parts youdon’t need

INCREASE YOUR THROUGHPUTBy

FOCUSING ON YOUR BOTTLENECK

~ YIS//062009 ~

If your bottlenecks are not maintaining a flow sufficient to meet demand and make money, there is only one thing to do.

FIND MORE CAPACITY

To increase the capacity of the plant is to increase the capacity of only the bottlenecks.

PUT QC IN FRONT OF THE BOTTLE NECKS

Make sure the bottleneck works only on good parts by weeding out the ones that are defective.

If you scrap a part before it reaches the bottleneck, all you have lost is a scrapped part. But if you scrap the part after it's passed the bottleneck, you have lost time that cannot be recovered.

Be sure the process controls on bottleneck parts are very good, so these parts don't become defective in later processing.

Whatever the bottlenecks produce in an hour is the equivalent of what the plant

produces in an hour.

So ... an hour lost at a bottleneck is an hour lost for the entire system.

Capacity of the plant =

the capacity of its bottlenecks

Balance capacity with demand first, then try to maintain the flow.

"That's totally false because of dependency. For any resource that is not a bottleneck, the level of activity from which the system is able to profit is not determined by its individual potential but by some other constraint within the system."

Bottlenecks govern both throughput and inventory

When people give the performance calculation…The numbers were almost always right. However, the assumptions almost always wrong

The rule we should be following is to balance the flow with demand, not the capacity

The incentives we usually offer are based on the assumption that the level of utilization of any worker is determined by his own potential,

~ YIS//062009 ~

Assumptions :Available hours : 600 hr/monthX – bottleneck : 600 hr/monthY – nonbottleneck : 450 hrs/month

X FGY

X X FGY

If Y keep producing after 450 hours to catch 100% efficiencies, there would be excess inventory in Y

If Y only fed by X, the efficiency only 75%Then Y will be starving

1

2

3 X

YFG

If x = 100% and y= 100%There will be pile inventory in assembly line from Y waiting for X

X

Y

FG

FG

4

MARKET ?

Constraints no longer in production but in market demand

• The time part spends waiting for a resource, while the resource is preparing itself to work on the part

SETUP

WHAT DETERMINES YOUR LEAD TIME??

THROUGHPUT INVENTORY TURNOVER

WASTE

~ YIS//062009 ~

The measurement assumes that all of the workers in the plant are always going to be fully occupied, and therefore, in order to do more set-ups, you have to hire more people.

That isn't true, in fact it hasn't really done anything to our actual expenses.

We haven't added any additional cost by doing more set-ups since we haven't added more people to the payroll – just optimizing the time of people to set-up.

In fact, the cost of parts has gone down since we began the smaller batch sizes.”

++ overall efficiencies stays solid

++ work force more occupied than before

++ the parts moved to the next process center faster

++ less idle time overall

++ work flow is more smoothly than ever

More set-ups, the cost of making parts goes up??

Cut batch size instead of using Economical Batch Quantity (EBQ) ??

Economic Batch Quantity

Q = [2cdr/h(r – d)]½,

Q : quantity to be purchased or manufactured, c : cost of processing an order for delivery, d : demand in the period for that stock item, h : cost of holding a unit of stock, r : the rate of production.

1

2

3

4

WARNING!!!! If in the previous steps a constraint has been broken, go back to step 1, but do not allow INERTIA to cause a system's constraint.

IDENTIFY the system's constraint(s).

Decide how to EXPLOIT the system's constraint(s).

SUBORDINATE everything else to the

above decision

ELEVATE the system's constraint(s).

ATTACK YOUR CONSTRAINTS !!

~ YIS//062009 ~

What are we asking for is the ability to answer three simple questions:

1. What to change?2. What to change to?3. How to cause the change?

Most people are reacting rather than planning.

USE YOUR LOGICAL THINKING

TO ACHIEVE THE GOAL

1. WHAT IS YOUR GOAL ?• Throughput• Inventory• Operating expense

2. DEFINE THE MEASUREMENT

• Dependent Event• Statistical Fluctuation

3. FIND THE PHENOMENA IN YOUR COMPANY

• Herbie – bottleneck resources• Non- bottleneck resources

4. DISTINGUISH RESOURCES

• Don’t waste the time• Find more capacity

5. FOCUS ON BOTTLENECK

• Internal Production• External Market

6. FIND THE CONSTRAINTS

• Logical thinking

7. ATTACK THE CONSTRAINTS

SUM

MA

RY

~ YIS//062009 ~