North Carolina State University

Design and Control of Production and Service Systems

ISE 552 - Fall 2016

Case Study I
Dynatrol Corporation

Authors:
Instructor:
Vicente Figarella
Dr. Reha Uzsoy
German Velasquez

October 18, 2016

Contents
1 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2 Andover Division: Company background . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.1 DynaSense Vs. TalkBack product line . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Current Andover Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Production capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3 Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Capacity analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1.1 Rework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Matching production with demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2.1 Scheduling policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

4 Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

5 Summary and conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

6 Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Manufacturing Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Chamber Machining Cell capacity calculations . . . . . . . . . . . . . . . . . . . . . 15
6.3 Best-case, Practical Worst-case and Worst-case Simulation . . . . . . . . . . . . . . . 16
6.4 Cost of quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

List of Figures
1 WIP vs. TH for Best-Case, PWC and Worst-Case Analysis . . . . . . . . . . . . . . 9
2 Rework capacity analysis summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3 Andover Assembly Dvision Sensor Manufacturing Process . . . . . . . . . . . . . . . 15
4 Average Effective Availability of the line in minutes . . . . . . . . . . . . . . . . . . 15
5 Capacity per station in Chamber Machining Cell . . . . . . . . . . . . . . . . . . . . 16

List of Tables
1 Daily operations parameters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2 Sensor catalog information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3 Cycle relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4 Current production schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5 Capacity Analysis results Chamber Machining Cell . . . . . . . . . . . . . . . . . . 8
6 Best-case, Practical Worst-case and Worst-case analysis data . . . . . . . . . . . . . 16
7 Estimated annual profits/loss, cost of rework and scrap for 28,500 units output. . . . 17

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1 Executive Summary
Andover Assembly Division, part of instrument maker Dynatrol Corporation, has been struggling
with major operational issues on different fronts. Poor service level, high inventory, long lead times
and quality problems have led Dynatrol corporate executives to issue a six-month deadline to re-
verse the situation. Andover Division must also introduce a new TalkBack product line in a period
of 12 months. Since TalkBack sensors use the same resources as the current product line, it will
put more pressure on the production system.

It was the consensus of Andover management team that an increase in production capacity was
the solution for Andover’s problems. Alternatives ranged from acquiring a $2MM new chamber-
machining line, installing a $450K new CNC grinder, dedicating all resources to produce TalkBack
and maintaining higher WIP levels. Our analysis shows that Andover does not need new equipment
to improve operating performance and introduce the new product line. Several recommendations
are made that aim to: (1) control the disruptive effect of expediting units that do not pass inspec-
tion and (2) generate schedules that consider due dates as well as setup times.

This report showed that Andover Division has a potential production increase of 35% and annual
savings of $615,000 by eliminating rework. This potential increase is sufficient to serve the current
DynaSense demand and the estimated demand for TalkBack sensors.

Andover’s currently scheduling policy do not account for the dynamic behavior of demand. This
results in a mismatch between production and demand. In order to obtain additional improve-
ments, a scheduling policy is recommended. By using the proposed schedule, improvements in lead
time, on-time deliveries, setup cost and inventory levels can be achieved.

Our team is confident that implementing the recommendations given in this report would improve
Andover’s operating performance and enable it to introduce the new product line meeting the
required deadlines.

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2 Andover Division: Company background
Andover Assembly Division, located in Boston, has been in the instrumentation business since
1979. Originally independent, Andover Division has been part of Dynatrol Corporation for the
last 30 years. Andover Division was responsible for developing, customizing and manufacturing the
popular DynaSense product line of volume and pressure sensors.

Even though the Andover Division had been recognized for the high quality in product design, it
has been facing difficulties keeping their customers as well as corporate directives satisfied. Oper-
ating performance is not meeting customers nor corporate’s expectations. On one side, customers
frequently complain about missed delivery commitments and long lead times. On the other side,
corporate directives are not happy with high inventory levels and profits lost due to low quality.
Moreover, a new line of sensors, the TalkBack, which requires the same resources as the DynaSense,
must be introduced putting more pressure in the production system.

In conclusion, Andover Division management faces two challenges: in a matter of six months, they
must improve on-time deliveries, manufacturing lead times and increase profits for the DynaSense
product line, and introduce the new product line TalkBack within a period of 12 months.

2.1 DynaSense Vs. TalkBack product line

DynaSense sensors’ main components are flanges, housing, diaphragms, and chambers, all of which
are machined at Andover Assembly Division. Additional components such as electronic assemblies
are acquired externally. The manufacturing process consists of three stages, namely machining,
assembly/test and packing/shipping. The machining stage consists of four manufacturing cells
working in parallel, each of which makes one main component. Production lead times are 8 days
for each machining cell, 12 days for the assembly/test stage and 3 days for the packing/shipping
stage. Overall lead time is 23 days.

DynaSense product line consists of five families of volume and pressure sensors and five different
product types in each family. DynaSense target markets include the chemical, petrochemical, food,
beverage, and utility industry. One of the characteristics that have made DynaSense popular is
the high degree of customization since sensors can be tailored and adjusted for a wide range of
customers’ requirements. Customized designs routinely manufactured at the Andover Assembly
division approximates to 150. Customization is done at the end of the manufacturing process and
utilizes 60% of the product development department resources.

TalkBack sensors need the same resources as DynaSense sensors to be produced. Such re-
sources include raw materials to machine flanges, housings, diaphragms and chambers as well as the
externally-sourced electronic assemblies, machines and trained personnel. One feature that differ-

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entiates the TalkBack sensor line from its predecessor is that, due to its greater sensitivity across a
broader range of parameters, product variety can be reduced without affecting the potential market.

Raw material, electronic assemblies, and trained personnel would not restrict the production
of TalkBack. On the other hand, sufficient production capacity to produce DynaSense as well as
TalkBack sensors raise understandable concerns given the currently considerable order backlog and
poor on-time delivery performance. Thus, production capacity is the main focus of this analysis.

2.2 Current Andover Operations

Andover Assembly Division currently employs 60 associates distributed in two 8-hour shifts per
day, five days per week, 50 weeks per year. Each one of four machining cells available is responsible
for manufacturing one of the four main components of DynaSense sensors: flanges, housings, di-
aphragms, and chambers. These main components are then assembled, tested, packed and shipped
in subsequent manufacturing cells: the Assembly, compensation and test Cell and the packing and
shipping manufacturing cell (refer to Appendix 6.1). Manufacturing lead times for the latter cells
are 12 and 3 days, respectively. Even though all machining cells have a lead time of 8 days, the
Chamber Machining Cell is the most problematic and hence will be the focus of the analysis.

Andover Assembly Division’s production environment is best described as an assemble-to-order

(ATO) even though it is not exploiting all its advantages. In ATO environments, components are
manufactured and held in inventory following a forecasted demand. Stored components are then
assembled into units when orders are placed. Characteristics of assemble-to-order product envi-
ronments are: No finished goods inventory, a few components are used for all products, demand
uncertainty is alleviated by pooling variance at the component level and short lead times. In ad-
dition, due to high component commonality and delayed differentiation, the customer decoupling
point is located close to the customer. Root causes of Andover having finished good inventory and
long lead times, as will be explained later, are not related to the production environment.

Rework for products that do not meet design specifications has been a long-time illness that
has not been cured yet at Andover. Rework consumes resources and profits: the first-pass yield
is roughly 75%, secondary-products accounts for 8% and 17% of all units produced are reworked.
On top of it, 5% of the material that comes into the manufacturing process can not be sold after
rework, turning into scrap. Causes have been located at the chamber machining process but a
solution has not being identified. Quality problems have a direct negative impact on production
effective capacity. Rework is known in Andover to consume 15% of the chamber machining capac-
ity. When a unit does not meet premium or secondary first pass inspection, the defective chamber
is disassembled and reworked at the chamber machining cell. Such rework is expedited causing
additional setups and thus reducing Chamber Machining Cell capacity.

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 Scheduling, lot size and production control policies have remained unchanged for 2 years. Families
and types are scheduled one every week and one every day, in lot sizes of 600 and 120, respectively.
Same lot sizes would be used for all manufacturing machining cells. Such policies imply that produc-
tion components are treated independently of the real demand for sensors. Thus, no differentiation
between independent and dependent demand is considered. In order to reduce setup costs, types of
the same family are produced consecutively. As per family and type order production sequencing,
there is no clear policy defined. There is no evidence that due dates are considered for scheduling
machining manufacturing cells.

Andover Assembly Division’s manufacturing process is managed under cellular manufacturing

principles. Company policies regarding inventory levels determined a WIP after each manufacturing
cell of 3000 units, representing 25 days of inventory.

2.3 Production capacity

Sufficient production capacity to introduce TalkBack sensors has been identified as a potential issue
at Andover Assembly Division. Proposed solutions range from acquiring a $2MM new chamber-
machining line, installing a $450K new CNC grinder, dedicating all resources to produce TalkBack,
thus stopping DynaSense production and maintaining higher WIP levels.

Besides the need for a considerable capital investment, new equipment acquisition does not
guarantee the solution of Andover’s primary causes of its problems. Total product transition is
not expected in the short-term, thus stopping DynaSense production is not viable. A number of
customers are expected to remain using DynaSense given that TalkBack is more technologically
advanced than what they require. Despise the first impression that the current inventory level of
four months is high, WIP levels will be discussed in detail later on.

Aspects that affect production capacity at Andover include production environment, product
quality, scheduling policies, batch-size policies and production control methods and inventory level
policies. These aspects as well as WIP levels will be discussed in detail in the next section.

3 Analysis
This section presents an analyze and recommendations about how Andover can overcome its ca-
pacity issue and be able to introduce TalkBack sensors and improve performance. The analysis
focuses on two key points that are affecting Andover’s performance: (1) rework and (2) matching
production with demand. In the first part of the analysis, a detailed capacity analysis of the bot-
tleneck is presented. Then, rework and the expediting policy effects on capacity are investigated.
Finally, the scheduling and batching policy is studied and recommendations are provided.

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3.1 Capacity analysis
Constraints or bottlenecks are resources with the highest long-term utilization limiting the through-
put of the system. Thus, the following capacity analysis is focused on the constraint or bottleneck
of the production process.

Empirically, the Chamber Machining Cell has been identified as the bottleneck. Such claim can
be justified by analyzing the WIP inventory levels before the assembly, compensation, and test cell.
On one side, WIP levels for flanges, housings and diaphragms are 25 days or 3000 units. This means
that a component will spend in average 25 days waiting to be assembled. On the other side, WIP
levels for the chambers are 8 days or 960 units, which means that, in average, chambers wait 8 days
in inventory before they are assembled. Such inventory levels imply that the chamber machining
cell is behind the schedule compared to the other machining cells and hence has a higher utilization.

Once the constraint is identified, efforts for improvement can be localized. The goal of such ef-
forts must be in exploiting the constraint, that is assuring the constraint is running at full capacity.
In this case, Andover Division personnel must focus on doing whatever they can to assure that the
chamber machining cell is running at full capacity.

In order to set internal benchmarks on what the production line is capable of achieving and
where it currently stands, a capacity analysis of the cell using best-case, worst-case and practical
worst-case scheme is used. This approach was originally introduced by [Hopp and Spearman(2008)].

Relevant parameters used by Andover to plan and schedule its operations are summarized in
Tables 1 and 2 . Table 1 shows the number of production hours planned and lot sizes for types and
families of sensors. Table 2 shows the annual output and the number of types and families offered
by Andover.

Operations
Shifts per day 2 Product Variety and Output
Hours per shift 8
Families 5
Minutes per shift 480
Types 5
Days per week 5
Different Products 25
Weeks per year 50
Output (units per year) 28,500
Type batch size 120
Family batch size 600 Table 2: Sensor catalog information

Table 1: Daily operations parameters

Also, as shown in Tables 3 and 4 with current scheduling policy a “Family and Type” setup is
incurred 20% of the time and only a “Type” setup 80% of the time. This proportion will help

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determining the impact of setup times in the capacity analysis of the line. It is worth noting that
Table 4 assumes an ascending family production schedule, e.g. from A1-A5, for each week just for
illustration, but the proportion of setups remains the same with any type order within each week.

Current Schedule

Important Relations Family Monday Tuesday Wednesday Thursday Friday

Cycle (days) 25 A A1 A2 A3 A4 A5
B B1 B2 B3 B4 B5
Setup Fam+Type 20%
C C1 C2 C3 C4 C5
Setup Type 80%
D D1 D2 D3 D4 D5
Table 3: Cycle relations E E1 E2 E3 E4 E5

Table 4: Current production schedule

In addition, by considering the duration of the shifts, the setup times of the machining cells,
the processing times per unit per station, and the proportion mentioned above, one can estimate
the capacity of the line per day. Table 5 summarizes the results, for detailed calculations refer to
Appendix 6.2.

Descriptors of the Chamber Machining Cell

rb 188 units per day
To 8 days (manufacturing lead time)
Wo 1,504 units

Table 5: Capacity Analysis results Chamber Machining Cell

The capacity analysis shows that the Chamber Machining Cell is able to produce 188 units.
Hence, the cell currently running with a planned utilization for new production of 63.83%. There-
fore, the remaining capacity will be able to accommodate the new sensor line and expedite rework.
Given the rework levels, it is not immediately evident they can meet the new demand based on
this calculation alone.

In Figure 1 we can distinguish the best-case, worst-case and practical worst-case analysis com-
paring it to the current simulation of the line (data in Appendix 6.3). The current state of the
system suggests it is operating closer to the Practical Worst Case (PWC) when the WIP increases,
showing that there is room for improvement. As the literature suggests, the PWC can be improved
towards best-case applying some fixes. In our ongoing scenario, it is convenient to add capacity
to the Chamber Machining Cell, especially in the Face Grinding station, by reducing rework as we
will discuss forward in the analysis.

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 Figure 1: WIP vs. TH for Best-Case, PWC and Worst-Case Analysis

3.1.1 Rework

Rework represent annual losses of $615, 000 and a reduction in 20% of Andover’s annual profits
(see Appendix 6.3 for calculations). In addition, rework significantly consumes effective production
capacity.

Rework itself and the related company practice of expediting rework is identified as the single
main internal source of variability. The expediting policy of units through the Chamber Machining
Cell arises multiple setup times during the day inhibiting the ability to operate at full capacity. The
impact of rework depends on current product mix running on the line and the attributes family,
type, and quantity of the units that required it.

Since the annual real output of sensors is 28,500 units (30,000 units after 5% scrap), one can
assume that every machining cell complies with the 120 units of batch production per day, even
with the presence of rework.

Given the current batching policy of 120 units/day and the capacity of the Chamber Machining
Cell (188 units/day) calculated above, one can assume that even though rework is uncertain, the ca-
pacity to expedite and accommodate reworked units on the cell is limited. Therefore, the following
analysis will focus on determining how much rework the line can handle per day in its current state.

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 Figure 2: Rework capacity analysis summary

Figure 2 summarizes the averages available setups per day per station, one can notice that for
the reworked units that required a new chamber blank (40%) the Milling machine now represent an
important constraint since it only allows 2 completes family setups. Also, for the remaining parts
that only require a second pass through the Face Grinding (60%) the “rework capacity” limits to
6 parts from different families or 34 parts of a different type.

Furthermore, if the current utilization of the line is 63.83%, the capacity can scale up drastically
if a large family or type diverse parts need to be reworked. Hence, this analysis not only put
in evidence the impact that rework can have in the capacity of the line but also provides some
insights of “rework capacity” for the departments involved. This new data can help the Production
Department to have an Upper Bound for rework activities and leave some slack for the Quality
Control Department starts revising the Face Grinder in order to minimize them.

Ideally, the primary focus of Andover’s would be to be to eliminate or reduce rework as much as
possible. Although in case of rework can not be reduced, the following measures might ameliorate
its negative effects:

• Change the expediting policy by scheduling rework with the alike sensor batches in order to
maximize the capacity available per day.

• Limit the daily number of rework setups following the “rework capacity” threshold calculated
above.

• Set the face grinding machine in such a way that scrapping the chamber is less likely than
just performing a re-grinding adjustment. In this way, the rework distribution will change
and parts will only need to pass through face grinding instead of the whole cell.

• Take advantage of the veteran experience of the Quality Control team and try to fix the
machine.

3.2 Matching production with demand

It is proven that a reduction in variability affecting a system, all others parameters maintained
equal, improves system performance. In addition, if variability can not be reduced, the system
must accommodate to handle uncertainty. For such reasons, it is valuable to analyze the causes of

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internal as well external sources of variability affecting Andover’s manufacturing process. In the
previous section, recommendations for reducing the internal main source of uncertainty, namely
rework, were given. In the following section recommendations for managing the main external
source of uncertainty are provided.

Demand is the main external source of variability and matching demand with inventory levels of
components is clearly an issue that must be addressed. Current high inventory levels and, at the
same time, few on-time deliveries suggest that Andover is not producing the sensors customers are
needing in a timely manner. Therefore, matching production and demand is subjected to improve.

Regarding demand, customers order 3-6 different types in batches of 1-140 units and orders
cannot be shipped partially because customers require a complete replace set for preventive main-
tenance. Shipping only complete orders considerable affects service level. For instance, let assume
that the service level for each component is 0.95. if a customer orders three types of sensors, the
service level for this order is expected to be (0.954 )3 = 0.54. This means that 46 out of 100 times
a customer places an order for 3 types of sensors, components are not going to be in stock and
hence order will likely not be ready on-time. Therefore, in order to have acceptable customer order
service levels, the service level for components must be much higher than for orders. For instance, if
order service level is established to be 0.9 for orders of 3 and 6 types of sensors, component service
level must be 0.985 and 0.99 respectively.

The first step to improving service levels for sensors and components is to obtain a good un-
derstanding of demand behavior. Since demand information is currently scarce, a detailed and
insightful demand analysis is suggested as a future project. Once demand behavior is studied,
improvements in scheduling policies can be suggested in order to increase customer satisfaction. In
the following section, a recommended approach for establishing better scheduling policies is given.
The advantage of the recommended approach is that it will take into consideration due dates as
well as setup times in the scheduling decisions, not only setup times as Andover is currently doing.

3.2.1 Scheduling policy

Based on a detailed knowledge of demand, improvements in production capacity and lead time
might be achieved by optimally determining the sequence of the families and types of sensor to
produce based on setup time but also on due dates. A scheduling policy includes decision rules for
determining the orders to release to the plant floor and the sequence of families and types in which
orders are going to be produced.

An approach similar to the one proposed by [Ashby and Uzsoy(1995)] provides some ideas. In
such paper, authors study a cylinder assembly plant where, in a similar manner to Andover’s
production strategy, order-independent components are made to stock while order-dependent com-

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ponents are made to order. Ashby’s plant, as Andover’s, faces the challenge of scheduling priority
orders that arrive. In the Andover’s case, such priority orders are represented by expediting orders
that need rework.

In [Ashby and Uzsoy(1995)], three scheduling rules are determined: (1) the order release, (2) the
group sequence and (3) the order sequence rule. The order release rule determines what orders
are released to the shop floor. The goal of the group sequence is to minimize major setups when
processing the released orders. Determining the sequence orders within a group is done with the
order sequence rule.
Based on [Ashby and Uzsoy(1995)], the process to generate daily schedules at Andover is as
follows:

• Step 1: Sort backlog in non-decreasing order of release date and create an initial schedule
using orders with release dates leq current day.

• Step 2: Estimate the capacity required to process the initial schedule. If there is available
capacity to process more orders, add additional orders using one of the following rules: pull
shortest group processing time first (PSGPT) or pull longest group processing time first
(PLGPT). In this step lot sizes for families and types are dynamically determined by the
orders scheduled.

• Step 3: Sequence families in the schedule using the “shortest group processing time” or the
“longest group processing time” rule. Since Andover only ships complete orders, using the
“shortest group processing time” rule would reduce order total flowtime and FGI. Therefore,
the “shortest group processing time” rule is recommended.

• Step 4: Sequence orders within families using “earliest due date” (EDD). [Ashby and Uzsoy(1995)]
recommended to use a “minimal setup time” (MST) rule. For Andover, MST would not
improve schedule performance, since type setups are not sequence-dependent. Hence, we
recommend EDD.

4 Recommendations
In the following section, recommendations given throughout the document are gathered and listed
for the better convenience of the reader. Recommendations can be grouped into two categories:
(1) Recommendations aimed to increase production capacity and (2) recommendations aimed to
match production with demand.

Recommendations to increase production capacity are as follows:

• The current line configuration is detecting the rework parts in the “Assembly, Compensation
and Test” workstation and redirecting them to the “Machining” process again. An improve-

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 ment might occur if spare parts were available in-situ and a “quick fix” can be implemented
while testing.

• The process is not in statistical control since, as the employees reported, its performance
significantly change from time to time. Hence, it is convenient to eliminate the root cause of
the rework so DynaSense line could have a stable behavior over time. The problem has been
isolated and comes from the Face grinding in the Machining Cell. Therefore, since a new CNC
machine does not guarantee a process in statistical control in the time frame the Manager
have, focusing the experienced personnel in fixing this station is a reasonable measure that
could translate into an improvement of the line. If the process can not be in statistical control,
reduce rework caused by chambers machined in excess.

• Expediting can decrease the cycle times for the units that are “push” in front of the line,
but it delays all the other units that are waiting in line. Studies such as the work done by
[Ehteshami et al.(1992)Ehteshami, Petrakian, and Shabe] show that this bimodal behavior
with units experiencing an “express” and long cycle times arise more variability in the process.
Hence, management should avoid this policy.

• It was found that if rework is eliminated and assuming a machine availability of 0.95, Andover
can manufacture 44,500 and 67,000 units annually working two and three shifts respectively.
Assuming that DynaSense demand will stay in 28,500 units per year, there is the capacity to
manufacture 16,000 and 38,500 TalkBack sensors depending upon the number of production
shifts scheduled. Given that sale’s projections of TalkBack demand range from 10,000 to
40,000 per year, a recommendation is to add capacity when needed by scheduling an extra
shift, instead of acquiring new equipment.

Recommendations to match production and demand are summarized as follows:

• Scheduling policies such as order release rules, lot sizes and rules for sequencing families and
types to produce considerable impacts service levels, FGI inventory and lead times.

• A scheduling approach that takes into account setup times and due dates is recommended.
Following Ashby’s approach, the proposed approach determines three scheduling rules: (1)
the order release, (2) the group sequence and (3) the order sequence rule.

• Demand data for 1 or 2 years must be collected in order to simulate and test the different
proposed alternatives for each scheduling rule, therefore matching production and demand
remains as a future study.

• Establish components service levels in 0.99 in order to accomplish an order service level of
0.9.

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5 Summary and conclusions
Andover management needed to improve operating performance and introduce a new product line
to the market. Production capacity was identified as their main obstacle to achieving both goals.
Alternatives that required considerable investment such as new equipment acquisition and higher
inventory levels were discussed by Andover management team. Nevertheless, an overall analysis
suggested that for achieving both goals within the time constraint, the best option was to improve
the current process rather than pursue costly investments.

A detailed capacity analysis showed that Andover could gain an additional 35% of effective ca-
pacity if rework was eliminated. This additional capacity resulted sufficient to improve Andover
operating performance and introduce the new product line. Our analysis also showed that even if
rework could not be eliminated, it could be adequately managed in order to reduce its negative
effects on the production line.

The current production schedule and batching policy suggested a constant and uniformly dis-
tributed demand across product type. Nevertheless, since demand also behaves as an external
source of variability, a better policy to match production with demand was suggested.

Recommendations provided fell into two categories: rework and matching production with de-
mand. First, due to the variability of rework, the approach not only addresses the expediting
policy but also its potential impact on the line. Only a limited ”rework capacity” is available in the
Chamber Machining Cell. Therefore, a root-cause fix plan with the Quality Control Department
should be implemented, along with better expediting policies. Second, high FGI inventory levels
and poor on-time delivery accuracy proved that Andover was not producing what customers were
requiring. Suggestions to match production with demand consisted in a scheduling policy that
could consider due dates as well as setup costs. Demand data was needed to determine the optimal
scheduling policy for Andover therefore, this analysis is left as a future project.

Finally, all departments involved have a busy schedule to be committed in order to accomplish
both goals within the 6 month period, but the insightful analysis and recommendations have allowed
focusing efforts and resources in the right places.

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6 Appendices
6.1 Manufacturing Process

Machining
Cells
WIP
Flange policy FGI ship
Premium
policy
Products
External
Suppliers
WIP
Housing policy
Secondary FGI
Products
Assembly,
Packaging and
Compensation,
Shipping
WIP and Test
Diaphragm policy

FGI
West Coast Rework

Plant WIP
Chamber

Scrap
Electronic Assemblies

Make-to-Stock Assemble-to-Order

Figure 3: Andover Assembly Dvision Sensor Manufacturing Process

6.2 Chamber Machining Cell capacity calculations

Figure 4: Average Effective Availability of the line in minutes

Row calculation (Face grinding): Since there are 960 minutes available in a normal two-shift day,
one have to subtract setup times depending on the day of the production schedule. Using the
likelihood to perform a ”Family+Type” and ”Only Type” setups, of 20% and 80% respectively, one
can compute the Average Effective Availability of the line. ⇒ 960 − (50 × 0.2) − (10 × 0.8) = 940
minutes.

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 Figure 5: Capacity per station in Chamber Machining Cell

Row calculation (Face grinding): Using Figure 4 time availability per setup and the machines run-
ning time per unit, one can calculate the Production Capacity per day of setup (Fam+Type= 900
5 =
180 and Type= 950
5 = 190). This calculation also uses the likelihood of ”Family+Type” and ”Only
Type” setups to compute the overall Average Effective Capacity rate. ⇒ (180 × 0.2) + (190 × 0.8) =
188 units per day.

6.3 Best-case, Practical Worst-case and Worst-case Simulation

Simulation THROUGHPUT (parts/day) Simulation Cycle Times (days)

WIP Avg TH Best-case Worst-case Practical Worst Case Avg CT Best-case Worst-case Practical Worst Case

120 15 15 0.125 13.9 8 8 960 8.63

240 30 30 0.125 25.89 8 8 1920 9.27
360 45 45 0.125 36.33 8 8 2880 9.91
480 60 60 0.125 45.51 8 8 3840 10.55
600 75 75 0.125 53.64 8 8 4800 11.19
720 90 90 0.125 60.89 8 8 5760 11.82
840 105 105 0.125 67.4 8 8 6720 12.46

960∗ 120 120 0.125 73.28 8 8 7680 13.1

1080 120 135 0.125 78.61 8 8 8640 13.74

1200 120 150 0.125 83.46 8 8 9600 14.38
1320 120 165 0.125 87.91 8 8 10560 15.02
1440 120 180 0.125 91.99 8 8 11520 15.65

1504∗∗ 120 188 0.125 94.03 8 8 12032 15.99

1560 120 188 0.125 95.75 8 8.3 12480 16.29

1680 120 188 0.125 99.23 8 8.94 13440 16.93
1800 120 188 0.125 102.45 8 9.57 14400 17.57
∗ current state of the line
∗∗ full capacity of the line

Table 6: Best-case, Practical Worst-case and Worst-case analysis data

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6.4 Cost of quality

No rework With rework Scrap

price 500 400 0
cost
direct labor 45 54 54
materials 150 150 150
variable plant o/h 70 90 90
scrap allocation 8 8 8
fixed plant o/h 100 100 100
% of output 0.75 0.2 0.05
Units 22500 6000 1500
Annual profits/loss 2857500 -12000 -603000

Table 7: Estimated annual profits/loss, cost of rework and scrap for 28,500 units output.

As observed in Table 7, for every unit requiring rework, $2 are lost (price - cost). If 25% of output
requires rework means that 30, 000 × 0.25 = 7, 500 units require rework per year. In addition 5%
of units are scrapped. Thus, 3, 000 × 0.05 = 1, 500 were scrapped. Since quality tests are done
at the end of the line, it is reasonable to think that cost incurred in producing scrapped units are
the same as producing unit requiring rework. Therefore, scrap cost is $402 × 1, 500 = $603, 000
for an annual output of 28,500 units. In addition, $12,000 are lost due to secondary and reworked
products sales. In total, the cost of quality is $615,000. Assuming an annual output of 28,500 units,
quality problem reduces profits by 20%, Margin reduces from 25% to 5%.

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References
[Ashby and Uzsoy(1995)] James R Ashby and Reha Uzsoy. Scheduling and order release in a single-
stage production system. Journal of manufacturing Systems, 14(4):290, 1995.

[Ehteshami et al.(1992)Ehteshami, Petrakian, and Shabe] Babak Ehteshami, Raja Petrakian, and
Phyllis Shabe. Trade-offs in cycle time management: hot lots. IEEE Transactions on Semicon-
ductor Manufacturing, 5(2):101–106, 1992.

[Hopp and Spearman(2008)] Wallace J Hopp and Mark L Spearman. Factory physics, 3rd, 2008.

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