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

Supply Chain Management

Introduction

Some activities are:

Procurement
Forecasting
Production
Transportation
Warehousing
Customer Service
Revenue Management

Supply Chain 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

Supply Chain Management

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

Supply Chain Management

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..