Summer Preparatory Session: Club Kaizen

Summer Preparatory
Session
Club 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

Capacity:
(Units per
Hour)
11
12
13
10
12
11
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
the of
average
chain
be?
Resource
D you
has expect
a capacity
only 10output
units of
perthis
hour
andtosince
all the flow must go through it, the chain can only produce 10
units per hour
Perfectly Balanced Capacity

10
10
10
10
10
10
10
intuitively want to achieve.
This is what we
The best balance of cost and capability to make the most

money
No wasted capacity
A WELL BALANCED PLANT !!!
How much will it produce on average?

10
10
10
10
10
10
Assuming that each resource has an availability of 90% (a fair industrial

standard), the chain will produce:
Availability
90%
Output of the chain = (.9 x .9 x .9 x .9 x .9 x .9) x 10

= 5.3 or
53% of design capacity
Six resources, each with a 90% availability, will produce on

average about 53% of design capacity in an interdependent chain
How to exploit the bottleneck

95%
D
98%
98%
Protective Capacity
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)
Chain output = (.98) x (.95) x (.98) = 91%
How to exploit the bottleneck

Releasing material the rope
Buffer
management
Constraint buffer
management
The drum and rope provide the logistics of the solution
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
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
Concept of Safety Stock and Service Level

(cont)
The risk period = time interval in which one can run out-of-stock
Relation between safety stock and service level

(safety stock) = z x Risk Period
z-value from the standard normal
standard deviation of the demand
distribution corresponding to the
during the risk period
required service level
Supply Chain
Introduction
Supply Chain Management
What is a supply chain?
Plan
Make
Source
Return
Deliver
Raw Material Vendors
Production Facility
Depots/Wholesalers
Retailers
Consumers
Material
Information
Finance
Introduction
Some activities are:

Procurement
Forecasting
Production
Transportation
Warehousing
Customer Service
Revenue Management
Strategic Supply Chain What do you do?

Decision Variables
Location
Production
Inventory
Transportation
Objective:
To achieve maximum cost
reduction?
To optimize costs?
To ensure availability at all times?
Which is important?
Physical Function Transformation of Goods Production, Transport, Inventory

Market Mediation Matching Supply and Demand Stock Out, Over Ordering
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
Bull-whip Effect
Jan
Feb
Mar
Apr
May
Jun
Total
Avg
Cust Retail W.Sale Plant

45
40
35
30
55
60
65
70
45
40
35
30
55
60
65
70
45
40
35
30
55
60
65
70
300 300
300 300
50
50
50
50
80
Bull Whip Effect
60
Avg
40
20
Cust
Retail
Feb
Mar
W.Sale
Plant
0
Jan
Apr
May
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 Order
Neglecting Inventory Levels
No communication & coordination in chain
Delay time for information
Jun
Forecasting
APP (Aggregate Production Planning)
Month Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Dmd 250 220 300 290 260 180 200 220 250 200 240 270
Days 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 Mar
Dmd X 0
0 80 0 0 80 0 0 80 0 0
Dmd Y 0
50 0 50 0 50 0 50 0 50 0
X
2As
2Bs
1C
2As
1B
2Cs
1P,2Q
2P,1Q
2P,2Q
1P,2Q
2P,1Q
2P,2Q
ERP (Enterprise Resource Planning)

SAP, etc.
A few terms!
Reverse Supply Chain

Reverse 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 Chain
Green supply chain deals with eco-friendly ways of disposal
of used goods and wastes. Eg: Mobile Recycling
Introduction
Project Management
What is a Project ?
A project is a temporary
endeavor undertaken to create
a unique product or service.
Cookin
Making
g
Movie
Power Plant
Temporary - meaning definite

beginning and definite end.
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.
Some Terms
Project Management
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
Its a Pull Strategy
Uses Kanban Cards
JIT - Advantages
Minimizes Inventory
Minimizes Storage Space
Manufacturing Synchronized with
Demand
Increased Emphasis on Supplier
JIT - Disadvantages
Relations
Needs RELIABLE supplier

Predictable Transport time
Trained employees
Six Sigma
A business Management Strategy
Developed by Motorola
Improves Quality by:

Identifying and Removing Defects
Minimizing variability
Allows only 3.4 defects per million

opportunity (DPMO)
For Existing Process
Define
Measure
Analyse
Improve
Control
For New Process
Define
Measure
Analyse
Design
Verify
Vendor Managed Inventory

Vendor Manages Inventory till the part
is consumed/ sold
Supplier takes responsibility to stock
certain amount of inventory, usually at
buyers location
Shared Risk in some cases
Eg. Wal-Mart, P&G, etc.
Total Productive Maintenance
Also called Total Preventive

Maintenance
Proactive Maintenance for better
utilization of maintenance and production
resources
Base is 5S
Seiri (Sorting out the required or not required
items);
Seition (Systematic Arrangement of the
required items);
Seiso (Cleaniness);
Seiketsu (Standardisation);
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 System

Toyotas Management Philosophy and
Practices
Customer oriented Philosophy
TPS 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 Manufacturing
Also 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 Reduction
Robust process
Lean Disadvantages
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 Problems
o High dependence on Supplier
Total Quality Management

Integrative philosophy of management
for continuous improvement of product
and processes
Quality is responsibility of EVERYONE
Drop Shipping
Goods are shipped to the customer

directly from the warehouse or
supplier rather than from the retailer
Minimizes risk
for retailers
Eg: Ebay
Cross Docking
Similar to drop shipping
Presence of a distribution terminal
Eg: Amazon
Milk Run
All the best..

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Summer Preparatory

How many bottlenecks can firm have at a

There can be a firm without a bottleneck

The Nature of Production Flow

If each resource has the average capacity as indicated

Perfectly Balanced Capacity

intuitively want to achieve.

The best balance of cost and capability to make the most

How much will it produce on average?

Assuming that each resource has an availability of 90% (a fair industrial

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

53% of design capacity

Six resources, each with a 90% availability, will produce on

How to exploit the bottleneck

- MAXIMISED ABILITY TO WORK (No blockage or starvation)

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

How to exploit the bottleneck

The drum and rope provide the logistics of the solution

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

Terminology Associated with Inventory

(Important to know about these key words from

The Concept of EOQ

EOQ = Economic order quantity

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

Concept of Safety Stock and Service Level

Relation between safety stock and service level

z-value from the standard normal

standard deviation of the demand

distribution corresponding to the

during the risk period

required service level

What is a supply chain?

Raw Material Vendors

Supply Chain Management

Some activities are:

Supply Chain Management

Strategic Supply Chain What do you do?

Physical Function Transformation of Goods Production, Transport, Inventory

FMCGs, Gas , etc.

Fashion Apparels, PCs

Efficient Supply Chain

Responsive Supply Chain

Lead Time Reduction

Supply Chain Management

Cust Retail W.Sale Plant

Bull Whip Effect

As you move up the Supply Chain, variability of demand increases.

Supply Chain Management

MRP (Material Resource Planning)

ERP (Enterprise Resource Planning)

Reverse Supply Chain