Lean All

Engineering Services
Lean Manufacturing Elimam & Gaafar 2006/1
Lean Manufacturing
A 6-day training program
Tailored for LEONI
Abdelghani A. Elimam
Lotfi K. Gaafar
The American University in Cairo
June-July 2006
Elimam and Gaafar 2006 1

Course Objectives
The objective of this training program is

to introduce lean manufacturing and its
main requirements. Participants will
understand the lean manufacturing
approach and develop the skills to
successfully implement it. Participants
are expected to contribute to tailoring
case studies to their own environment.
Course Outline
Overview of Lean Manufacturing

Waste Elimination
The TPM model
Quality Assurance
The Quality Link
The Toyota Production System
Lean Production Models
Implementation Tips

What is Lean Manufacturing?
Lean production can be traced to the 1960s

in Japan, when Toyota Motors started
innovating changes in mass production to
deal with its domestic automotive market.
The term itself was coined by MIT

researchers to describe the collection of
efficiency improvements that Toyota Motors
undertook to survive in the Japanese
automobile business after World War II

Two of the authors of The Machine that

Changed the World (Womack and
Jones) define lean as doing "more and
more with less and less-less human
effort, less equipment, less time, and
less space-while coming closer and
closer to providing customers with
exactly what they want"
Lean production is a term that embraces

many topics such as flexible manufacturing,
minimizing work-in-process, "pull" systems of
production control, and setup time reduction.
The term "lean production" was coined

around 1989 with the popularity of the book,
The Machine that Changed the World.

According to another author of The

Machine that Changed the World, lean
production is based on four principles:
1. minimize waste
2. perfect first-time quality
3. flexible production lines
4. continuous improvement
Mass Production vs. Lean Production
Mass Production Lean Production

Inventory buffers Minimum waste
Just-in-case deliveries Minimum inventory
Just-in-time deliveries
Acceptable quality level (AQL) Perfect first-time quality
Taylorism Worker teams
Maximum efficiency Worker involvement
Flexible production systems
If it ain't broke, don't fix it Continuous improvement

Lean Thinking roots in the Toyota Philosophy
Doing it all for the Multi-skilling

Customer TQM
Leveled production TPM
Pull system Poka Yoke
Continuous-flow SPC
production Standardized
work
Takt time
Kaizen

What is Total Productive Maintenance ( TPM )?
Total Productive Maintenance (TPM) is a

maintenance program which involves a
newly defined concept for maintaining
plants and equipment. The goal of the
TPM program is to markedly increase
production while, at the same time,
increasing employee morale and job
satisfaction.
Total = Everyone
Productive = No Waste
Maintenance = As new
Lean Manufacturing Elimam & Gaafar 2006/14 14

Why TPM?
Avoid waste in a quickly changing
economic environment.
Produce goods without reducing
product quality.
Reduce cost.
Produce a low batch quantity at the
earliest possible time (JIT).
Goods send to the customers must be
non defective.
TPM History
TPM is an innovative Japanese concept originating in 1951 with
preventive maintenance concepts taken from USA.
Nippondenso of the Toyota group was the first company to introduce
plant wide preventive maintenance in 1960.
Nippondenso added Autonomous maintenance done by production
operators.
The maintenance crew went in the equipment modification for
improving reliability. The modifications were made or incorporated in
new equipment. This led to maintenance prevention. Thus preventive
maintenance along with Maintenance prevention and Maintainability
Improvement gave birth to Productive Maintenance.
The aim of productive maintenance was to maximize plant and
equipment effectiveness to achieve optimum life cycle cost of
production equipment.
By then Nippondenso had made quality circles, involving the
employees participation. Thus all employees took part in
implementing Productive maintenance. Based on these developments
Nippondenso was awarded the distinguished plant prize for
developing and implementing TPM, by the Japanese Institute of Plant
Engineers ( JIPE ). Thus Nippondenso became the first company to
obtain the TPM certification.

TPM Objectives
Achieve Zero Defects, Zero Breakdown

and Zero accidents in all functional
areas of the organization.
Involve people in all levels of
organization.
Form different teams to reduce defects
and achieve Self Maintenance
TPM Targets
Productivity
Obtain Minimum 80% OPE ( Overall
Plant Efficiency)
Obtain Minimum 90% OEE ( Overall
Equipment Efficiency)
Run the machines even during lunch.
(Lunch is for operators and not for
machines!)
Quality
No customer complaints

TPM Targets
Cost
Reduce manufacturing cost by 30%
Delivery
100% on time delivery
Safety
Accident free environment
Morale
Increase suggestions 3 folds. Develop
Multi-skilled and flexible workers
Direct benefits of TPM

Increase productivity and OPE 1.5 or 2
times.
Rectify customer complaints.
Reduce manufacturing costs by 30%.
Satisfy customers needs 100 %
(Delivering the right quantity at the
right time, in the required quality.)
Reduce accidents.
Follow pollution control measures.

Indirect benefits of TPM

Higher confidence level among
employees.
Clean, neat and attractive work place.
Favorable change in the attitude of the
operators.
Achieving goals by working as team.
Horizontal deployment of a new
concept in all areas of the organization.
Knowledge and experience sharing.
Workers feel they own the machines.
Pillars of TPM

PILLAR 1 - 5S
Japanese Term English Translation Equivalent 'S' term
Seiri Organization Sort
Seiton Tidiness Systematize
Seiso Cleaning Sweep
Seiketsu Standardization Standardize
Shitsuke Discipline Self - Discipline
PILLAR 1 5S Sort
Priority Frequency of Use How to use
Less than once per year, Once Throw away, Store away
Low
per year from the workplace
At least 2/6 months, Once

Average Store together but offline
per month, Once per week
High Once Per Day Locate at the workplace
As a result of this step, the search time is reduced


PILLAR 1 - 5S
SEITON - Organize
The concept here is that "Each item has a
place, and only one place". The items should
be placed back after usage at the same place.
To identify items easily, name plates and
colored tags have to be used. Vertical racks
can be used for this purpose, and heavy
items occupy the bottom position in the
racks.
SEISO - Shine the workplace
This involves cleaning the work place free of
burrs, grease, oil, waste, scrap etc. No
loosely hanging wires or oil leakage from
machines.
PILLAR 1 - 5S
SEIKETSU - Standardization
Employees have to discuss together and
decide on standards for keeping the work
place / Machines / pathways neat and clean.
These standards are implemented for whole
organization and are tested / inspected
randomly.
SHITSUKE - Self discipline

Considering 5S as a way of life and bring
about self-discipline among the employees of
the organization. This includes wearing
badges, following work procedures,
punctuality, dedication to the organization
etc.

PILLAR 1 - 5S
To Sort To Straighten
Ensure space for
Eliminate whats each thing, and a
not absolutely thing for each space.
necessary No more searching.
To Sustain
Visual Control & Maintain

continuous
the Workstation effort. This is a
way of life. To Sweep
To Sanitize Maintain a clean
and orderly space to
Improvement of make problems
the workstation. easily identifiable.
Be organized to Eliminate rejects
reduce clutter. and scrap..
PILLAR 1 - 5S
Visual Control &
the Workstation
Ergonomics
Adapt the workstation to the
employee
- more security
- more comfort
Reduce waste
- excessive fatigue
- useless efforts and movement
- less physical constraints

PILLAR 2-JISHU HOZEN ( Autonomous maintenance)

This pillar is geared towards developing operators to be
able to take care of small maintenance tasks, thus
freeing up the skilled maintenance people to spend time
on more value added activities and technical repairs.
The operators are responsible for upkeep of their
equipment to prevent it from deteriorating.
Policy
Uninterrupted operation of equipments.
Flexible operators to operate and maintain other
equipments.
Eliminating the defects at source through active
employee participation.
Stepwise implementation of JH activities.

Steps in JISHU HOZEN :
Preparation of employees (training).
Initial cleanup of machines.
Take counter measures
Fix tentative JH standards
General inspection
Autonomous inspection
Standardization
Autonomous management


Initial cleanup of machines
Supervisor and technician set a date for first cleaning
Arrange all items needed for cleaning
On the arranged date, employees should clean the equipment
completely with the help of maintenance department.
Dust, stains, oils and grease have to be removed.
Cleaning should cover:
Oil leakage, loose wires, unfastened nuts and bolts and worn out parts.
After clean up problems are categorized and suitably tagged.
White tags are placed where problems can be solved by operators.
Pink tags are placed where the aid of maintenance department is
needed.
Contents of tag is transferred to a register.
Inaccessible areas are noted
Finally close the open parts of the machine and run the machine

Counter Measures
Inaccessible regions must be reached easily. (e.g. If
there are many screw to open a fly wheel door, hinge
door can be used. Instead of opening a door for
inspecting the machine, acrylic sheets can be used.)
Machine parts should be modified to prevent
accumulation of dirt and dust.
Tentative Standard :
JH schedule has to be made and followed strictly.
Schedule should be made regarding cleaning,
inspection and lubrication and it also should include
details like when, what and how.


General Inspection
Employees are trained in disciplines like pneumatics, electrical,
hydraulics, lubricant and coolant, drives, bolts, nuts and Safety.
This is necessary to improve the technical skills of employees and to use
inspection manuals correctly.
After acquiring this new knowledge the employees should share this
with others.
By acquiring this new technical knowledge, the operators are now well
aware of machine parts.

Autonomous Inspection
New methods of cleaning and lubricating are used.
Each employee prepares his own autonomous chart / schedule in
consultation with supervisor.
Parts which have never given any problem or parts which don't need
any inspection are removed from list permanently based on experience.
Inspection that is made in preventive maintenance is included in JH.
The frequency of cleanup and inspection is reduced based on
experience.

Standardization
Previous steps focused on machinery/equipment only.
In this step the surroundings of machinery are
organized, such that there is no searching or searching
time is reduced.
Work environment is modified such that there is no
difficulty in getting any item.
Everybody should follow the work instructions strictly.
Necessary spares for equipments is planned and
procured.
Autonomous Management :
OEE and OPE and other TPM targets must be achieved
by continuous improve through Kaizen.
PDCA ( Plan, Do, Check and Act ) cycle must be
implemented for Kaizen.

PILLAR 3 - KOBETSU KAIZEN

"Kai" means change, and "Zen" means good (for the better)
Small improvements carried out on a continual basis.
Involve all people in the organization.
Kaizen is opposite to big spectacular innovations and
requires no or little investment.
A very large number of small improvements are more
effective in an organizational environment than a few
improvements of large value.
This pillar is aimed at reducing losses in the workplace that
affect efficiencies.
By using a detailed and thorough procedure we eliminate
losses in a systematic method using various Kaizen tools.
Not limited to production areas (Administrative areas as
well).

Kaizen Target :
Achieve and sustain zero loses with respect to minor
stops, measurement and adjustments, defects and
unavoidable downtimes. It also aims to achieve 30%
manufacturing cost reduction.
Kaizen Policy:
Practice concepts of zero losses in every sphere of
activity.
relentless pursuit to achieve cost reduction targets
in all resources
Relentless pursuit to improve over all plant
equipment effectiveness.
Extensive use of PM analysis as a tool for eliminating
losses.
Focus on easy handling by operators.


Tools used in Kaizen
PM analysis
Why - Why analysis
Summary of losses
Kaizen register
Kaizen summary sheet
TPM aims at maximization of machine utilization and

not merely machine availability maximization. As
one of the pillars of TPM activities, Kaizen pursues
efficient equipment, operator and material and
energy utilization, that is extremes of productivity
and aims at achieving substantial effects. Kaizen
activities try to thoroughly eliminate 16 major losses
PILLAR 3 KOBETSU KAIZEN (Losses)

Losses that impede equipment efficiency
Failure losses - Breakdown loss

Setup / adjustment loss
Tool loss
Start up loss
Minor stoppage / Idling loss.
Speed loss - operating at low speeds.
Defect / rework loss
Scheduled downtime loss

PILLAR 3 KOBETSU KAIZEN (Losses)

Loses that impede human work efficiency
Management loss
Operating motion loss
Line organization loss
Logistic loss
Measurement and adjustment loss
Losses that impede efficient use of production

resources
Energy loss
Die, jig and tool breakage loss
Yield loss
PILLAR 3 KAIZEN (Classification of losses)

Aspect Sporadic Loss Chronic Loss
Causes for this failure can This loss cannot be easily
be easily traced. Cause- identified and solved.
Causation
effect relationship is Even if various counter
simple to trace. measures are applied
This type of loss is caused
Easy to establish a remedial by hidden defects in
Remedy
measure machine, equipment and
methods.
A single cause is rare - a
Impact / Loss A single loss can be costly combination of causes
trends to be a rule
The frequency of
The frequency of loss is
Frequency of occurrence occurrence is low and
higher.
occasional.
Specialists in process
Usually the line personnel in engineering, quality
Corrective action the production can assurance and
attend to this problem. maintenance people are
required.

Elimination of Wastes and Continuous Improvement

The Approach The Means The Strategy
Elimination of One piece flow
wastes SMED Leadtime
Visual Controls
KAIZEN Workplace Costs
Organization
Kanban Quality the
Continuous Standard Work
Improvement First Time
Process Control
Total Productive
Maintenance
Poka-Yoke
PILLAR 4 - PLANNED MAINTENANCE

The objective is trouble free machines and
equipment producing defect free products for total
customer satisfaction.
Preventive Maintenance
Breakdown Maintenance
Corrective Maintenance
Maintenance Prevention
With Planned Maintenance we evolve our efforts

from a reactive to a proactive method and use
trained maintenance staff to help train the
operators to better maintain their equipment.


Policy
Achieve and sustain availability of machines
Optimum maintenance cost.
Reduces spares inventory.
Improve reliability and maintainability of machines.
Targets
Zero equipment failure and breakdown.
Improve reliability and maintainability.
Reduce maintenance cost.
Ensure availability of spares all the time

Six steps in Planned maintenance
1. Equipment evaluation and recording present status.

2. Restoring deterioration and improving weakness.
3. Building up information management system.
4. Preparing time based information system and
selecting equipment, parts and members and
mapping out plan.
5. Preparing predictive maintenance system by
introducing equipment diagnostic techniques.
6. Evaluation of planned maintenance.

PILLAR 5 - QUALITY MAINTENANCE

Focus is on eliminating non-conformances in a
systematic manner, much like Focused Improvement.
We gain understanding of what parts of the equipment
affect product quality and begin to eliminate current
quality concerns, then move to potential quality
concerns. Transition is from reactive to proactive
(Quality Control to Quality Assurance).
QM activities is to set equipment conditions that

preclude quality defects, based on the basic concept of
maintaining perfect equipment to maintain perfect
quality of products. The condition are checked and
measure in time series to verify that measure values
are within standard values to prevent defects. The
transition of measured values is watched to predict
possibilities of defects occurring and to take counter
measures before problems develop.

Policy
Defect free conditions and control of equipments.
QM activities to support quality assurance.
Focus on prevention of defects at source
Focus on poka-yoke. ( error proof system )
In-line detection and segregation of defects.
Effective implementation of operator quality
assurance.
Target
Achieve and sustain customer complaints at zero.
Reduce in-process defects.
Reduce cost of quality.


Data requirements
Quality defects are classified as customer end

defects and in house defects. For customer-end
data, we have to get data on:
Customer end line rejection

Field complaints.
In-house, data include data related to products
and data related to process

Data related to product:
Product wise defects

Severity of the defect and its contribution major/minor
Location of the defect with reference to the layout
Magnitude and frequency of its occurrence at each stage
Occurrence trend in beginning and the end of each
production/process/changes.
Occurrence trend with respect to restoration of
breakdown/modifications/periodical replacement of components.
Data related to processes:
The operating condition for individual sub-process related to men,

method, material and machine.
The standard settings/conditions of the sub-process
The actual record of the settings/conditions during the defect
occurrence.

PILLAR 6 - TRAINING
Aims at:
Multi-skilled revitalized employees whose morale is

high and who are eager to come to work and
perform all required functions effectively and
independently.
"Know-How" and "Know-why".
Four phases of skill:
Phase 1 : Do not know.

Phase 2 : Know the theory but cannot do.
Phase 3 : Can do but cannot teach.
Phase 4 : Can do and also teach.
PILLAR 6 - TRAINING
Policy
Focus on improvement of knowledge, skills and
techniques.
Creating a training environment for self learning
based on felt needs.
Training curriculum / tools /assessment etc geared
to employee revitalization.
Training to remove employee fatigue and make work
enjoyable.
Target
Achieve and sustain downtime due to want at zero
on critical machines.
Achieve and sustain zero losses due to lack of
knowledge / skills / techniques.
Aim for 100 % participation in suggestion schemes.

PILLAR 6 - TRAINING
Steps in Educating and training activities
Setting policies and priorities and checking present

status of education and training.
Establishing a training system for operation and
maintenance skill upgrade.
Preparing a training calendar.
Kick-off of the system for training.
Training employees for upgrading the operation
and maintenance skills.
Evaluating activities and studying future changes.
PILLAR 7 - OFFICE TPM
Office TPM should be started after activating four

other pillars of TPM (JH, KK, QM, PM). Office TPM
must be followed to improve productivity,
efficiency in the administrative functions and
identify and eliminate losses. This includes
analyzing processes and procedures towards
increased office automation.


Office TPM addresses twelve major losses:
Processing loss
Cost losses in areas including procurement,
accounts, marketing, and sales
Communication loss
Idle loss
Set-up loss
Accuracy loss
Office equipment breakdown
Communication channel breakdown
Time spent on retrieval of information
Non availability of correct online stock status
Customer complaints due to logistics
Expenses on emergency dispatches/purchases

Kobetsu Kaizen topics for Office TPM:
Inventory reduction
Lead time reduction of critical processes
Motion & space losses
Retrieval time reduction
Balancing the work load
Achieving zero breakdown of office equipment
like telephone and fax lines.


P Q C D S M in Office TPM
P Production output lost due to want of material, Manpower

productivity, Production output lost due to want of tools.
Q Mistakes in preparation of checks, bills, invoices, payroll,

Customer returns/warranty attributable to BOPs,
Rejection/rework in BOPs/job work, Office area rework.
C Buying cost/unit produced, Cost of logistics

inbound/outbound, Cost of carrying inventory, Cost of
communication.
D Logistics losses (Delay in loading/unloading)

Delay in delivery due to any of the support functions
Delay in payments to suppliers
Delay in information
S Safety in material handling/stores/logistics, Safety of soft and

hard data.
M Number of kaizens in office areas.


Extension of office TPM to suppliers and distributors
This is essential, but only after we have done as

much as possible internally. With suppliers it will
lead to on-time delivery, improved in-coming
quality and cost reduction. With distributors it will
lead to accurate demand generation, improved
secondary distribution and reduction in damages
during storage and handling. In any case we will
have to teach them based on our experience and
practice and highlight gaps in the system which
affect both sides. In case of some of the larger
companies, they have started to support clusters
of suppliers.


Benefits of Office TPM
Involvement of all people in support functions for focusing on better

plant performance
Better utilized work area
Reduction of repetitive work
Reduction of inventory levels in all parts of the supply chain
Reduction of administrative costs
Reduction of inventory carrying costs
Reduction in number of files
Reduction of overhead costs (to include cost of non-production/non
capital equipment)
Productivity of people in support functions
Reduction in breakdown of office equipment
Reduction of customer complaints due to logistics
Reduction in expenses due to emergency dispatches/purchases
Reduced manpower
Clean and pleasant work environment.
SMED

SMED Principles
1. Separate internal setup from external
setup
2. Convert internal setup to external
setup
3. Streamline all aspects of setup
4. Perform setup activities in parallel or
eliminate them entirely
Based on information from Russell/Taylor Oper Mgt 3/e
Reducing Setup Time

Preset desired settings
Use quick fasteners
Use locator pins
Prevent misalignments
Eliminate tools
Make movements easier
Based on information from Russell/Taylor Oper Mgt 3/e

SMED
Ultimately, SMED focuses on reducing changeover
and set-up times, thus enabling organizations to:
Produce smaller lots of products and services more

frequently.
Develop a broader scope of products and services.
Reduce quality defects towards zero.
Meet Customer Expectations.
Benefits of SMED
Increased customer service levels and profits
Via Waste Elimination resulting in:
Reduced Lead Times-Faster Delivery
Zero Inventories-Reduced Working Capital
Improved Quality
Improved Safety
Smaller lots of products-flexibility
Diversified Product & Service Options

Poka-Yoke
3.5 inch diskette cannot be inserted unless
diskette is oriented correctly. This is as far as
a disk can be inserted upside-down.
The beveled corner of the diskette pushes a

stop in the disk drive out of the way allowing
the diskette to be inserted. This feature, along
with the fact that the diskette is not square,
prohibit incorrect orientation.
From http://csob.berry.edu/faculty/jgrout/everyday.html
Poka-Yoke
File cabinets can fall over if too many
drawers are pulled out
For some file cabinets, opening one drawer

locks all the rest, reducing the chance of the
file cabinet tipping.

Poka-Yoke
Automobile controls have a mistake-proofing
device to insure that the key is in the on
position before allowing the driver to shift out
of park. The keys cannot be removed until
the car is in park.
Filling pipe insert keeps larger, leaded-fuel

nozzle from being inserted
gas cap tether does not allow the motorist to
drive off without the cap
gas cap is fitted with ratchet to signal proper
tightness and prevent over-tightening.
Poka-Yoke
Electronic door locks can have three
mistake-proofing devices:
insures that no door is left unlocked.
doors automatically lock when the car
exceeds 18 miles an hour.
lock won't operate when door is open and the
engine is running.
Even bathroom sinks have a mistake-proofing

device. It is the little hole near the top of the
sink that helps prevent overflows.

Poka-Yoke
This iron turns off automatically when it is left
unattended or when it is returned to its holder
The dryer stops operating when the door is

opened, which prevents injuries.
Poka-Yoke
This wall mounted hair dryer has two slots on
either side of the switch. (One slot is partially
covered by my thumb.) The bracket on the
wall has two pointed prongs that go through
the two slots and turn the dryer off if the user
neglected to do so.
The sink is fitted with light sensors. These

sensors insure that the water is turned off in
the sink (a urinal is flushed).

TPM Implementation- 12 steps

Announcement to introduce TPM
Introductory education campaign for the workforce
Preparation TPM Promotion (special committees)
Establish basic TPM policies and goals
Preparation and Formulation of a master plan
Kick-off Invite customers, affiliated companies and subcontractors

Develop an equipment management program
Develop a planned maintenance program
Implementation Develop an autonomous maintenance program
Increase skills of production and maintenance personnel
Develop early equipment management program
Stabilization Perfect TPM implementation and raise TPM levels
TPM Benefits
Increased equipment productivity
Reduced equipment downtime
Increased plant capacity
Lower maintenance and production
costs
Approaching zero equipment-caused
defects
Enhanced job satisfaction
Increased Return On Investment

TPM Awards
Each year, JIPM offers TPM Awards to plants for exemplary TPM
achievements. The TPM Awards Committee, consisting of the
professors and JIPM experts, selects Award winners on the basis
of the Preliminary Assessment, Document Assessment and the
Final (On-site) Assessment. Award Categories are:
Award for World-Class TPM Achievement

Special Award for TPM Achievement
Award for Excellence in Consistent TPM Commitment-First
Category
Award for TPM Excellence-First Category
Award for Excellence in Consistent TPM Commitment-Second
Category
Award for TPM Excellence-Second Category
Eligibility, schedule and criteria, please contact award-

office@jipm.or.jp
Sources and Bibliography

www.plant-maintenance.com/index.shtml
Groover, M. P. 2001. Automation, Production Systems,
and Computer-Integrated Manufacturing, Second Edition,
Prentice Hall
http://www.ct-yankee.com/lean/smed.html#origin
http://www.maint2k.com/what-is-tpm.html
http://www.plant-
maintenance.com/articles/RCMvTPM.shtml
TPM for every operator by Japan institute of plant
maintenance
Autonomous Maintenance in seven steps - implementing
TPM on the shop floor by Masaji Tajiri and Fumio Gotoh
TPM New Implementation Program in Fabrication and
Assembly Industries, edited by Kunio Shirose, Japan
Institute of Plant Maintenance.

Quality Assurance
and Management
This presentation uses information from Presentations by Dr. D. C. Montgomery
Main Topics
Quality assurance
The ISO 9000:2000 model for quality assurance and
management
Documentation and auditing
Total quality management
The 6 model for implementing total quality management
Quality Tools
process capability
Control charts

Quality
"The totality of characteristics on an entity that bear on
its ability to satisfy stated or implied needs"
(ISO 8402: Quality - Vocabulary)
Conformance to stated (agreed) requirements

Doing the right things right the first time and every
time
Value for money
more features,
courteous service,
low purchase cost,
low after sale cost.
Dimensions of Quality
Performance Aesthetics
Reliability Features
Durability Perceived Quality
Serviceability Conformance to
standards
Quality means fitness for use

- quality of design
- quality of conformance
Quality is inversely proportional to variability.

Dimensions of Quality
Quality is:
Defined as conformance to
requirements, not goodness.
Achieved through prevention, not
appraisal.
Measured by the price of
nonconformance, not indexes.
The quality performance standard is zero

defects, not acceptable quality levels
Quality Characteristics
Physical - length, weight, voltage, viscosity
Sensory - taste, appearance, color
Time Orientation - reliability, durability,
serviceability
Specifications
Quality characteristics being measured are
often compared to standards or specifications.
Nominal or target value
Upper Specification Limit (USL)
Lower Specification Limit (LSL)

Quality and Variability
Quality improvement requires the reduction

of variability in processes and products
Sources of variability:
Processes
People
Equipment
Surroundings
Causes of Variation
What prevents perfection? Process variation...
Natural Causes Assignable Causes

Inherent to process Exogenous to process
Random Not random
Cannot be controlled Controllable
Cannot be prevented Preventable
Examples Examples
weather tool wear
accuracy of measurements Monday effect
capability of machine poor maintenance

Quality Evolution
1. Inspection 5. Quality Planning

2. Quality Control 6. Quality Management
3. Quality Assurance 7. Total Quality
4. Quality Engineering Management
Three Important Leaders
W. Edwards Deming
- Emphasis on statistical methods in quality
improvement (14 points)
Joseph Juran
- Emphasis on managerial role in quality
implementation
Armand V. Feigenbaum
- Emphasis on organizational structure
Words of Wisdom
Demings Deadly Sins
Lack of Constancy
Concentration on Short-Term Profits
Over-reliance on Performance Appraisals
Job Hopping
Overemphasis on Visible Figures
Crosbys Absolutes for Quality Management
Quality is Conformance to Requirements, Not Goodness
Quality Systems Amount to Prevention
Zero Defects Define the Performance Standard
Measurement of Quality is the Price of Nonconformance

A Brief History of Quality

Walter Shewhart (1924) introduced
statistical control chart concepts.
The American Society for Quality
Control formed in 1946 (now known
as the American Society for Quality
(ASQ)).
1950s and 1960s saw an increase in
reliability engineering, experimental
design, and statistical quality control
Competition from foreign industries
(Japan) increases during the 1970s
and 1980s.
A Brief History of Quality

Statistical methods for quality
improvement use increases in the United
States during the 1980s
Total Quality Management (TQM) emerges
during 1970s and into the 1980s as an
important management tool to implement
statistical methods.
Malcolm Baldridge National Quality Award
is established in 1988.
ISO 9000 certification activities increase
in U.S. industry in the 1990s.
Motorolas Six-Sigma initiative begins in
the late 1980s.

Quality Costs
Quality Costs are those categories of costs
that are associated with producing,
identifying, avoiding, or repairing products
that do not meet requirements. These costs
are:
Prevention Costs
Appraisal Costs
Internal Failure Costs
External Failure Costs
Quality Costs
Prevention costs
Costs to prevent non-conformance "Make it right
the first time"
Quality planning and engineering
New products review
Product/process design
Process control
Burn-in
Quality data acquisition and analysis

Quality Costs
Prevention costs (continued)
Technical support for vendors

Quality-certified suppliers
Integrated system development
Quality circles
Quality improvement projects
Preventive maintenance
Quality training of employees
Quality Costs
Appraisal costs
Costs to insure conformance to requirements and
standards
Inspection and test of incoming material
Inspection and test of products
Destructive tests
Calibration
Maintenance of test equipment and machines
Quality audits of products and processes
End of process sampling and processes testing
Field testing
Vendor audits and sample testing

Quality Costs
Internal failure costs

Product failure before delivery costs
Scrap
Rework
Retest
Failure analysis
Downtime
Throughput losses
Downgrading
Quality Costs
External failure costs

Product failure after delivery costs
Customer complaint processing
Lost sales
Returned goods and replacements
Restoration of reputation
Investigation of defects
Warranty claims and adjustments
Product recalls
Product-liability settlements

Quality Measures
Financial Measures of Quality

Total costs of quality as a percentage of net sales
Ratio of costs of conformance to total costs of quality
Ratio of costs of nonconformance to total costs of
quality
Costs of nonconformance as a percentage of new
sales
Non-Financial Measures of Quality

Product design quality.
Vendor performance.
Production performance.
Delivery cycle time.
Customer satisfaction.
Quality Tools: Tutorial

Quantitative data analysis
Run charts
Scatter Diagrams
Pareto charts
Histograms
Cause-and-Effect Diagrams
Sampling plans

Variation- Why?
Variation- Types
Variables are either Random or systematic.

Variables may also be classified as attribute or numerical.
Attribute variables describe properties such as color or
quality.
Numerical variables may be classified as Discrete or
Continuous.

Random Variables
Their values cannot be predicted accurately.
Formally, a random variable is a function that assigns a real
number to each outcome in the sample space of a random
experiment.
Examples include:
The number of students passing an exam out of 25 students.
The time to the first failure of a computer which is known to
fail, on average, once a year.
The temperature on any given day.
The number of defective products from a production line.
Discrete Random Variables

A random variable is discrete if its range is finite or
countably infinite.
Usually discrete random variables arise from counting.
Examples include:
The number of students passing an exam out of 25 students.
The number of defects on a product.
The number of defective products from a production line.
The number of typographical errors in a document.
The number of satisfied customers in a service facility.
The number of calls arriving at a switchboard in an hour.

Continuous Random Variables

A random variable is continuous when it can take on values
on a continuous scale, i.e., when its range is uncountably
infinite.
Usually continuous random variables arise from measuring.
Examples include:
The temperature on any given day.
The time it takes to perform a certain task.
The deviation of a product from its nominal diameter.
Time between calls arriving at a switchboard in an hour.
The useful life of a light bulb.
Variables
Assume that we are in the business of producing bottled

water. We receive complaints that too many of our
bottles are cracked when they arrive to the customer.
How do we solve this problem?
Problem: too many cracked bottles (the variable)
Cause? (Sources of variation)
Solution? (Eliminate the root cause)

Variables- The Root Cause
Fishbone/ Cause-and-Effect/ Ishikawa

Measurement Materials Methods
Main
Effect
Environment Manpower Machines

WIP Pressure Temperature
Measurement Materials Methods

Lab Error Raw materials Filling
Calibration Analyst Storage Supplier Speed Clamping

Pigment Molding
Parameters
Temperature
Storage Supplier Pressure
Cracked
Bottle
Maintenance Parameters
Controls Warm up
High Humidity
Inexperienced Blow
Sealing Machine
Ventilation
Tampering Blow Mold
with process
Power Interruption
Temperature
Uneven thickness
Environment Manpower Machines

Observing cracks and recording the frequency of each cause:

Cause Frequency
Bad raw materials 18
Contaminated raw materials 162
Inappropriate molding temperature 12
High molding pressure 18
High filling pressure 324
High filling speed 12
High claming force 30
Inadequate machine maintenance 6
High humidity 12
Others 6

Pareto Chart for Cracked Bottles
600 100
500
80
400
Percent
60
Count
300
40
200
20
100
0 re ce 0
ls r atu an
re ria re pe te n
su m at e orc e r ia ls s su eed y t em main
re s f t e re p it g
gp r aw ing ma gp gs id
um mold
in ine he
rs
Defect ted la m ldin illin hh ch Ot
illin hc
aw hf ma
hf ina dr mo Hig priate te
Hig ntam Hig Ba
High Hig
ro qua
o p e
Count C
324 162 30 18 18 12 Ina p 12 Inad 12 6 6
Percent 54.0 27.0 5.0 3.0 3.0 2.0 2.0 2.0 1.0 1.0
Cum % 54.0 81.0 86.0 89.0 92.0 94.0 96.0 98.0 99.0 100.0

What is the appropriate filling pressure?

Want higher pressure for faster operation
Want lower pressure for less interruptions
What affects the pressure?
Bottle material
Bottle condition
etc
How do we determine the optimum pressure?
Try bottles until they crack

How many? Is one enough?
Under what conditions?
When?
Measurement techniques

Variables- Data Collection
Try bottles until they crack

How many? Is one enough? Observe 60 bottles
Under what conditions? Different shifts, batches
When? Different times
Measurement techniques. Apply pressure until cracked
142 168 158 144 149 146 143 135 144 144
156 154 154 143 144 155 161 162 156 138
Results
155 149 159 151 154 166 139 137 143 147
144 147 164 165 124 155 151 164 166 151
143 158 158 166 156 156 141 143 155 165
134 153 157 150 140 139 164 146 160 139
Variables- Data Analysis

Which one of the 60 should we use?
142 168 158 144 149 146 143 135 144 144
156 154 154 143 144 155 161 162 156 138
155 149 159 151 154 166 139 137 143 147
154 147 164 165 124 155 151 164 166 151
143 158 158 166 156 156 141 143 155 165
134 153 157 150 140 139 164 146 160 139
Can we summarize the data?

Data Analysis- Basic Concepts
Statistics
The goal of statistics is to study (quantify) random variation.
Observe the possible values of the random variable through a

planned experiment that is replicated until all possible sources of
variation are covered.
Population: all elements about which we wish to draw a

conclusion.
Sample: a subset of the population.
Numerical: counted or measured data.
Attribute: descriptive data.

Numerical Data Presentation
We summarize a large quantity of data numerically by calculating

measures of center and measures of variation (dispersion).
Measures of center include:
Mean: Arithmetic average

Median: Mid point or the data when ordered
Mode: The most frequent data point
Measures of variation include:
Range: The difference between the largest and smallest data points
Variance: The average square distance from the mean
Standard Deviation: The square root of the variance.


Measures of Center: Average

Measures of Center: Median


Measures of Center: Mode
For our data:

Mean = 151, Median = 152, Mode = 143.

Measures of Center: Are they enough?
Assume that we have data for another bottle brand:
166 138 143 155 154 183 167 165 159 205
126 148 162 123 131 121 143 135 124 159
162 165 169 135 159 120 164 148 110 133
157 127 199 139 155 161 83 146 167 169
138 156 146 175 143 133 119 143 155 177
148 146 160 167 166 172 168 161 164 148
Are these bottles better?


Measures of Center
142 168 158 144 149 146 143 135 144 144
Original Brand: 156 154 154 143 144 155 161 162 156 138
155 149 159 151 154 166 139 137 143 147
Mean = 151, Median = 152, 154 147 164 165 124 155 151 164 166 151
Mode = 143 143 158 158 166 156 156 141 143 155 165
134 153 157 150 140 139 164 146 160 139
166 138 143 155 154 183 167 165 159 205
Alternative Brand: 126 148 162 123 131 121 143 135 124 159
Mean = 151, Median = 155, 162 165 169 135 159 120 164 148 110 133
Mode = 143 157 127 199 139 155 161 83 146 167 169
138 156 146 175 143 133 119 143 155 177
148 146 160 167 166 172 168 161 164 148
Which brand is better?


Measures of Dispersion: Range
R = xmax - xmin
Advantages:
Easy to calculate
Same units as original data
Disadvantages:
Uses two data points only
Uses error-prone extreme data points


Measures of Dispersion: Variance

Measures of variation
142 168 158 144 149 146 143 135 144 144
Original Brand: 156 154 154 143 144 155 161 162 156 138
155 149 159 151 154 166 139 137 143 147
Range = 44, Variance = 94.85 154 147 164 165 124 155 151 164 166 151
Standard deviation = 9.74 143 158 158 166 156 156 141 143 155 165
134 153 157 150 140 139 164 146 160 139
166 138 143 155 154 183 167 165 159 205
Alternative Brand: 126 148 162 123 131 121 143 135 124 159
Range = 122, Variance = 440.14 162 165 169 135 159 120 164 148 110 133
157 127 199 139 155 161 83 146 167 169
Standard deviation = 20.98 138 156 146 175 143 133 119 143 155 177
148 146 160 167 166 172 168 161 164 148
Which brand is better?



Graphical Data Presentation
Stem-and-leaf
Exploratory technique to quickly displays data distribution.
Divide data into stem, consisting of one or more of the leading digits,
and leaf, consisting of the remaining digits. Record stems only once.

Ordered Stem-and-leaf
Original
Ordered
Median and mode may be easily calculated



Back-to-Back Stem-and-leaf
Median and mode may be easily calculated


Box Plot
Displays data variability and the central location.
The box extends from the first to the third quartiles. Lines
(whiskers) extend from the box to the minimum and maximum
or symmetric percentiles.


Box Plot

Histogram
Displays data distribution.
Divide data into c classes and record the frequency of data

in each class. Plot frequencies vs. classes.


Histogram
Probability and Statistics
In statistics, data are used to characterize the

random variable X, by defining a range over which
it varies, dividing that into suitable sub-ranges, and
finding the frequency of observing X in each sub-
range. We may also divide these frequencies by the
total number of observations to get the relative
frequency of observing X in each sub-range, or
equivalently, the probability of observing X in each
sub-range. This is where probability and statistics
combine together to address the goal of quantifying
random variation.


Dot Plot
A dotplot displays a dot for each observation along a number
line. If there are multiple occurrences of an observation, or if
observations are too close together, then dots will be stacked
vertically. The dotplot shows the data distribution.
Dotplot for original brand

Dot Plot


Are the data valid? 142 168 158 144 149 146 143 135 144 144
156 154 154 143 144 155 161 162 156 138
155 149 159 151 154 166 139 137 143 147
154 147 164 165 124 155 151 164 166 151
143 158 158 166 156 156 141 143 155 165
134 153 157 150 140 139 164 146 160 139
170
160
Pressure
150
140
130
120
10 20 30 40 50 60
Order

Data Analysis- Excel

Parameter Excel Function
Sample Average AVERAGE (number1, number2, ...)
Sample Median MEDIAN (number1, number2, ...)
Sample Mode MODE (number1, number2, ...)
Sample Maximum MAX (number1, number2, ...)
Sample Minimum MIN (number1, number2, ...)
Sample Variance VAR (number1, number2,...)
Sample Standard Deviation STDEV (number1, number2,...)
Forecasted Linear Value FORECAST (x, known_y's, known_x's)
Line Slope SLOPE (known_y's, known_x's)
Line Intercept INTERCEPT(known_y's, known_x's)
Histograms may be developed using a special Data

Analysis function under the Tools menu
The Normal Distribution
THE
NORMAL
LAW OF ERROR
STANDS OUT IN THE
EXPERIENCE OF MANKIND
AS ONE OF THE BROADEST
GENERALISATIONS OF NATURAL
PHILOSOPHY IT SERVES AS THE
GUIDING INSTRUMENT IN RESEARCHES
IN THE PHYSICAL AND SOCIAL SCIENCES AND
IN MEDICINE AGRICULTURE AND ENGINEERING
IT IS AN INDISPENSABLE TOOL FOR THE ANALYSIS AND THE
INTERPRETATION OF THE BASIC DATA OBTAINED BY OBSERVATION AND EXPERIMENT


The normal distribution
is an important
continuous distribution.
Symmetric, bell-
shaped
Mean,
Standard deviation,
-4 -3 -2 -1 0 1 2 3 4
Histogram of height, with Normal Curve
300
Frequency
200
100
0
152 162 172
height

=2
=4 =4
95%
2.5% 2.5%
-1.96 1.96
Z

For a population that is

normally distributed:
approx. 68% of the data
will lie within 1 standard
deviation of the mean;
approx. 95% of the data
will lie within 2 standard
deviations of the mean, and
approx. 99.7% of the data
will lie within 3 standard -4 -3 -2 -1 0
x
1 2 3 4
deviations of the mean.
Quality Improvement
Quality improvement is the
reduction of variability in
processes and products.
Alternatively, quality
improvement is also seen as
waste reduction.
Effective quality improvement can be instrumental in

increasing productivity and reducing cost.
The cost of achieving quality improvements and increased
productivity is often negligible (quality is free).


Standard normal distribution
Z is normally distributed with mean 0
and standard deviation, 1.
Use the standard normal distribution
to find probabilities when the original

population or sample of interest is
normally distributed.
Tables, calculators, Excel are useful.

Example
The tensile strength of paper is modeled by a
normal distribution with a mean of 35 lbs/in2
and a standard deviation of 2 lbs/in2.
a) What is the probability that the tensile strength
of a sample is less than 40 lbs/in2?
b) If the specifications require the tensile strength
to exceed 30 lbs/in2, what proportion of the
samples is scrapped?

Quality Assurance
The ISO 9000:2000 model for

quality assurance and
management
Documentation and auditing
Total quality management
The 6 model for implementing
total quality management
What is ISO 9000?
It is a family of standards developed to assist

organizations to implement and operate effective
Quality Management System (QMS)
ISO = International Organization for Standards
Prepared by ISO/TC 176
9000 = code to denote QMS Family
2000 = year of last revision

ISO 9000:2000 Family

ISO 9000 - fundamentals, vocabulary
ISO 9001 - requirements
ISO 9004 - continual improvement guidelines
ISO 19011 - auditing guidelines
only ISO 9001 can be used for

certification purposes
ISO 9001:2000 Model
Continual
Continual Improvement
Improvementof
ofthe
theQMS
QMS
CUSTOMER REQUIREMENTS
clause 4
CUSTOMER SATISFACTION
info. flow management

management
responsibility
responsibility
clause 5
clause 6 clause 8
resource
resource meas,
meas,analysis
analysis info. flow
management
management improvement
improvement
clause 7
Input product
product Output
realization product
product
value adding realization value
activities
adding activities

Key Quality Tools
Documentation Auditing
Why Document?
Accuracy
Repeatability
Consistency
Accountability

Purpose
Purpose of documentation is to:
State quality policy and objectives
Describe organization, products, facilities
Inform employees and customers
Aid auditors
Refer to lower-level documents
DOCUMENTATION IS PRIMARILY DONE

FOR THE ORGANIZATION
Documentation Levels
Level
Policies I
ISO 9001 Level

Procedures II
Standards
(Department)
Level
Work Instructions III
(Job/Task)
Quality Records Level

External Documents IV

Why Audit?
The organization shall continually improve the
effectiveness of the QMS through the use of:
management review
quality policy and objectives
analysis of performance data
preventive and corrective actions
regular internal and external audits
Clause 8.5.1
What is a QMS Audit?

An audit is the systematic investigation of:
the intent,
implementation, and
effectiveness
of selected aspects of the Quality
Management System of an organization or
department.

Corrective Action Flowchart
NCR/CAR Signs NCR/CAR NCR/CAR docs.

Identify
Identify Agree
Agreeononneed
need Propose
ProposeCA
CA
NC
NC for
forCA
CA program
program
int. audit report proc/WI/records

Verify
VerifyCA
CAbyby Implement
Implement Agree?
Agree? not
internal
internalaudit
audit CA
CA OK
OK
Verifies
VerifiesCA CAby:
by:
Notify
Notifyauditor
auditor visit
visitor
or
obj.
obj.evidence
evidence
Letter/fax
Audit report
Corrective versus Preventive Action
Corrective Preventive
Action Action
Action taken to Action taken to
eliminate cause of eliminate cause of
nonconformity potential nonconformity
Taken to prevent Taken to prevent
recurrence occurrence

Audit: Common Deficiencies

Products/Materials
Inadequate identification
Unapproved material
Improper handling and storage
Inadequate shelf-life control
Quality status not clearly indicated
Extensive use of 'Use As Is" disposition
Non-conformance not identified
Packing inadequate to protect quality
People
Inadequate training
Lack of ISO requirements awareness
Non-compliance with existing procedures
Responsibilities not adequately defined and understood

Sub-suppliers
list not approved or inadequate
Not selected based on quality
Inadequate requirements communication to
sub-suppliers
Documents
Unapproved documents
Procedures and practices don't match
Unofficial changes
Obsolete documents in use
Documents not located per distribution
Incomplete records and poor filing systems


Corrective Actions
Not determined or documented
Slow or not fully implemented
Not adequately verified
Processes
New processes not qualified
Calibration incomplete
Poor reaction to out of control conditions
Management Review
Follow-up on previous meeting
Complaints and customer surveys
Improvement initiatives
Performance data
Corrective actions
Competition situation
Training needs
Technology changes

Just in Time (JIT)
The Japanese Approach to

Productivity
Imported technologies
Efforts concentrated on shop floor
Quality improvement focus
Respect for people
Elimination of waste

Waste in Operations
(1) Waste from overproduction
(2) Waste of waiting time
(3) Transportation waste
(4) Inventory waste
(5) Processing waste
(6) Waste of motion
(7) Waste from product defects
Tools of Lean Manufacturing

Pull Systems / Kanban
A Tool for Implementing Pull Systems
Lean Production
Through Waste Elimination
Quality
JIT at the
People
Source
Operational Stability

JIT Goals
Zero defects
Zero excess lot size or lot size of one
Zero setups
Zero breakdowns
Zero handling
Zero lead time
Zero Surging
Level production plan and uniform
product mix
Just-In-Time (JIT): Defined

JIT can be defined as an integrated set of
activities designed to achieve high-volume
production using minimal inventories (raw
materials, work in process, and finished
goods).

NEED TO REDUCE COST
Traditional Method
(Push) Selling
Cost + Profit = Price
Seller Driven
(SELLER)
PROFIT (MARKET)
Modern Method
(Pull)
Customer Driven =
Selling
Price - Cost
Just in Time
History - Japan
1980s conclusion
Japanese industry worked smart - JIT
Think of JIT as minimum stock production
Type of relationship: close & intimate?

JIT
internal JIT - in client-server stream
external JIT

Characteristics of JIT Vendor

Partnerships
Few, nearby suppliers

Long-term contract agreements
Steady supply rate
Frequent deliveries in small lots
Buyer helps suppliers meet quality
Suppliers use process control charts
Buyer schedules inbound freight
Japanese experience
Waste in operations from

overproduction
waiting time
transportation
inventory waste
processing
motion/movement
product defects

Minimizing Waste: Inventory Hides Problems
identify defects from

Machine supplier early in the
downtime process saves the
Scrap
downstream work
Vendor
Work in delinquencies Change
orders
process
queues Engineering design Design
(banks) redundancies backlogs
identify defective
Decision
Paperwork Inspection
backlogs
work from upstream
backlog backlogs
stations, saves the
downstream work
166
From Aggregate to MPS to MRP1
Aggregate
MRP2
Plan (product groups)
Firm Forecast
orders random
Master orders
production
schedule
Design Time-phased plan
(MPS)
changes how many + when we
will build each end item.
Bill of
material MRP1
Inventory
record
JIT
Reports Stock
movements

Just-In-Time (JIT)
System for high-volume production with min.
inventory (raw materials, WIP, finished goods).
Involves
timed arrivals @ workstation JIT
reduced buffer stocks
no waste in production system
a Pull system thru the plant
A management philosophy
Expose problems & bottlenecks
Take away security blanket
Streamlined production
Factory & warehouse networks
Just-In-Time (JIT)
a system for high-volume production with
minimal inventory (raw materials, WIP, finished
goods).
involves
timed arrivals @ workstation JIT
reduced buffer stocks Requires

no waste in production system
participation
a Pull system thru the plant engineering/basics
industrial
a management philosophy continuing improvement
TQM
expose problems & bottlenecks
reducing set up times
Take away security blanket
smaller lot/order sizes sizes
streamlined production stable environment
supply partnership
factory & warehouse networks

JIT Requirements:
Design Flow Process: Link
operations, balance workstation
capacities, relayout for flow,
emphasize preventive maintenance,
reduce lot sizes, reduce
setup/changeover time
Total Quality Control: Worker

responsibility, measure SQC, enforce
compliance, fail-safe methods,
automatic inspection
JIT Requirements 1
Kanban Pull
Demand pull
Back flush
Reduce batch/lot sizes
Work with suppliers
Reduce lead times
Frequent deliveries
Project usage requirements
Quality expectations
Reduce inventory in
Stores
Transit
Conveyors
calculation from MRP & EOQs

JIT Requirements 2
Quality
Worker responsibility Stabilize Schedule
SQC Level schedule
Enforce compliance Under utilize capacity
Error proof
Automatic inspection
People Focus
Operations Design
Link operations
pay harmonization
Balance workstation capacities supportive unions
Review layout for flow subcontractor networks
Stress preventive maintenance hands-on manager style
Reduce lot sizes quality commitment &
Reduce setup/changeover time group involvement
JIT Requirements 3
Problem-solving
Problem-solving
Rootproblem
Root problem
Long-term solution
Long-term solution
Teamcontribution
Team contribution
Line-specialistcooperation
Line-specialist cooperation
Learning
Learning
Measureperformance
Measure performance
CQI
CQI
Monitor&&report
Monitor report Product Design
Improvement
DFM & process design
Modules & fewer parts
Quality standards
upgrade housekeeping
clarify process flows
revise equipment &
process technologies

JIT and Demand-Pull
Call (Kanban) & Pull
Call (Kanban) & Pull

Supplier Call (Kanban) & Pull
Fabric
Supplier Subass
Fabric Final
Subass Assembl Customer
Supplier Fabric
y
Supplier Fabric
Client Server Streaming

Avoid too much material stocks & WIP
Increase materials coordination/movement
Bin
Saw Call Supplier's
Materials
for local
warehouse
Bin more warehouse
Call
for
Finished
more
Goods
Bin Warehous
Bin
e
Lathe Grinder
Bin JIT
Bin deliveries
Customer

What is a kanban?
developed at Toyota 1950s to manage line
material flows.
Kanban ( Kan=card, Ban= signal )
simple movement system
cards to signal & communicate
reorder information
boxes/containers to take lots of parts
from one work station to another
(client-server).
Server only delivers components to client
work station as & when needed
(called/pulled).
What is kanban?
minimize production area storage.

Workstations only produce/deliver
components when called (they
receive card + empty container).
The work-station produces enough
to fill the container
Kanban = an authorization to
produce more inventory
Limit inventory amount in process.

BENEFITS OF KANBAN
An information network used to control

production quantities
A communication process that controls
the movement of material
A cost reduction (waste elimination) tool
that prevents over production
A quality control enforcer because it limits
lot quantities to small amounts, thereby
allowing defects to be identified early in
the manufacturing process
BENEFITS OF KANBAN (cont.)

Manages just-in-time production
Gives specific part number, quantity,
location, and time demands to lower work
centers
Identify excess in plant inventory levels
Identify potential inventory shortages (low
stock indicators)
Limits quality rejects by
reducing lot size produced

KANBAN PRE-CONDITIONS
Point of use
inclusion (all parts Level production
on the assembly line)
There are four
pre-conditions for
the successful
implementation of
Kanban
Quick Changeover Stabilized processes

procedures
KANBAN
Market Address Kanban Number Line-Side Address
<<Market_Address>> <<KAN>> <<Line_Side_Address>>
Part Number Route
<<Part Number>> <<Route>>
Bar Code Area

Part Description Dock Code
<<Part Number>> <<Dock Code>>
Supplier Code Quantity Serial Number
<<Supplier Code >> <<Quantity>>

Comment:
<<Comment>>

What does a Kanban card look like?
Kanban No. 5678990

part No: 66789X
description 16ga. Copper Wire accurate
accurate data:
data: correct
correct part
part #s,
#s,
units Ft. quantities
quantities & & measurements
measurements
reorder/lot qty 20 visible
visible -- chart
chart if
if material
material ordered
ordered
store location Row 12, Bin 6 &
& when
when
supplier BICC fool
fool proof
proof for
for no
no stock
stock outs
outs
supplier tel 0208-
0208-891-
891-0121 minimum
minimum inventory
inventory
supplier part RT45502 clear
clear & & complete
complete info.
info. to
to suppliers
suppliers
routing process link
link inventory
inventory directly
directly to
to demand
demand
Name/location of next process Tie
Tie in
in with
with POP:
POP: issuing
issuing orders,
orders,
Name/location of preceding receiving
receiving & & authorizing
authorizing accounts
accounts
process payable
payable
container type & capacity
number of containers released
Function of Kanban
Helps to reduce moving defects from one area

to the next know preceding processes.
Provides pick-up and/or transportation
information: where from and where to
locations. In some cases, indicate schedule
times for pick-up.
Communicates production information: what
to produce and how many are required.
Kanban must be produced in the order
received.

Function of Kanban
Prevents overproduction and excessive
transportation -restricting in-bound raw
material and production quantity of a
process to specific pre-determined lot
quantity indicated on the KB. It allows
ordering of multiple lot quantities only to the
extent of KB available to be replenished
Serves as a work order indicating what has
been produced and identifies the physical
product
Reveals existing production problems and
maintains inventory control
Rules of Kanban
Never send defectives products to
downstream processes
The downstream process draws only what is
required by the KB from upstream processes.
The upstream process produces items in the
quantity and sequence indicated by the KB.
Parts are never to be produced or conveyed
without a KB
KB must be attached to actual containers of
parts
KB is a tool to fine tune production

Kanban (KB) Rules

Rule 1: Subsequent process should withdraw
products from the preceding process in the
necessary quantities at the necessary point
in time.
any withdrawal without a KB should be
prohibited
Any withdrawal > # of KB should be
prohibited
A KB should always be attached to the
physical product
Kanban (KB) Rules

Rule 2: Preceding process should produce
in the quantities withdrawn by the
subsequent process
Production > # of KB sheets must be
prohibited
When various parts are to be produced in
the preceding process , their production
should follow the original sequence in
which each kind of KB has been delivered

Kanban (KB) Rules

Rule 3: Defective products should
never be convened to the subsequent
process should withdraw
Rule 4: The number of Kanbans should

be minimized
Kanban (KB) Rules

Rule 5: KB should be used to adapt to
small fluctuations in demand
Fine-tuned production
Demand variation by about 10 % Can
be handled by changing only the
frequency of KB transfers without
revising the number of KB

INTER-PROCESS KANBAN FLOW

Market Place
D F
2 B D F
A B C D E F
A B C D E F
A B C D E F
3
4
Assembly Withdraw Post Office
Kanban Mailbox
Inter-Process
1
V1 A Kanban Post Office
5
X B
V2 B A C E
B A C E
V3 Y
C
D
V4 D
D
D
V5 Z E A C E
A C E
f
V6 fF
F
Minimizing Waste: Kanban Control System
withdrawal kanban
Bin Bin
Machine Part A Part A Assembly
Center
Line
production Material Flow

kanban
Card (signal) Flow

How many Kanbans?

Each container = minimum replenishment lot size.
Compute lead time required to produce a
"container"
Expected demand during lead time + safety stock
k=
capacity of container
dL(1 + S)
=
C
k = No. of kanbans in card set
d = Average No. of units demanded over the period
L = lead time to replenish order (same time units as
demand)
S = Safety stock as % of demand during lead time
C = Container size
Example
A switch is assembled in batches of 4 units
at an upstream work area.
delivered in a bin to a downstream
control-panel assembly area that requires 5
switch assemblies/hour.
The switch assembly area can produce a bin
of switch assemblies in 2 hours.
Safety stock = 10% of needed inventory.
Expected demand during lead time + safety stock
k=
size of container
dL (1+S) 5(2)(1.1)
= = = 2.75 or 3
C 4

"Re-engineering" & Kanban

Modern production methods
1. Modular/cell production 9 group technology).
2. Reduce set up, lead and waiting times
between procedures.
3. Flow-of-products-oriented layout of
processes & machines layout. Products flow
smoothly from start to finish, parts do not sit
waiting to be worked on, forklift trucks do not
travel kilometers to move parts from one area
of the plant to another.
4. Flexible manufacturing of mixed models
"Re-engineering" & Kanban

Modern production methods
5. Theory of Constraints - drum-rope-buffer
(Goldratt). Building in extra redundancy.
6. Total Preventive Maintenance, prevent
machines from breaking down or
malfunctioning during production time
7. Team-Work & Autonomation (decision by
worker to stop line)
8. Kaizen: Continuous improvement
9. Housekeeping

Characteristics of Lean Systems
Pull method of materials flow

Consistent quality
Small lot sizes
Uniform workstation loads
Standardized components and
work methods
Close supplier ties
Flexible workforce
Line flows
Automation
Preventive maintenance
Single-Card Kanban System

Receiving post
Kanban card for Storage
product 1 area
Kanban card for
product 2
Empty containers
Assembly line 1
O2
Fabrication
cell
O1 O3
Assembly line 2
Full containers
O2
Figure 11.2


Receiving post
product 1 area
Kanban card for
product 2
Empty containers
Assembly line 1
O2
Fabrication
cell
O1 O3
Assembly line 2
Full containers
O2
Figure 11.2

Receiving post
product 1 area
Kanban card for
product 2
Empty containers
Assembly line 1
O2
Fabrication
cell
O1 O3
Assembly line 2
Full containers
O2
Figure 11.2


Receiving post
product 1 area
Kanban card for
product 2
Empty containers
Assembly line 1
O2
Fabrication
cell
O1 O3
Assembly line 2
Full containers
O2
Figure 11.2

Receiving post
product 1 area
Kanban card for
product 2
Empty containers
Assembly line 1
O2
Fabrication
cell
O1 O3
Assembly line 2
Full containers
O2
Figure 11.2


Receiving post
product 1 area
Kanban card for
product 2
Empty containers
Assembly line 1
O2
Fabrication
cell
O1 O3
Assembly line 2
Full containers
O2
Figure 11.2

Receiving post
product 1 area
Kanban card for
product 2
Empty containers
Assembly line 1
O2
Fabrication
cell
O1 O3
Assembly line 2
Full containers
O2
Figure 11.2


9 Each container must have a card
Customer:
Supplier:
Lot Quantity:
Location:
Part Number:
9 Assembly always withdraws from
fabrication (pull system)
KANBAN
9 Containers cannot be moved
without a kanban
9 Containers should contain the
same number of parts
WS 116
Aisle 5
Bin 47
WS 83
1234567Z
9 Only good parts are passed along
9 Production should not exceed
authorization
Operational Benefits
Reduce space requirements
Reduce inventory investment
Reduce lead times
Increase labor productivity
Increase equipment utilization
Reduce paperwork and simplify
planning systems
Valid priorities for scheduling
Workforce participation
Increase service/product quality

Assembly Line Balancing

DESIGNING ASSEMBLY LINES
1. How are work elements to be assigned to work

stations?
2. Buffer Inventory or not?
If Yes
How much?
Which stations?
3. How should the line be operated?
fixed
floating
semi-fixed
4. Should parallel work stations be set up?
5. What cycle time should be employed?
demand, no. of hours worked


DATA REQUIRED
1. WORK ELEMENTS
2. ELEMENT TIMES
3. PRECEDENCE RELATIONSHIPS
4. DEMAND (OUTPUT RATE)
or
NUMBER OF WORK STATIONS

DEFINITIONS
Element (i) i = 1, 2, , I
Station (k) k = 1, 2, , K
Element Times (ai)
Station Time (ak)
Time to complete the elements in

station (k) for one unit.


STATION DELAY (dk) per cycle.
ASSEMBLY LINE CYCLE TIME
T Total Production Time

C= =
q Required Output Rate
Sometimes called CMax

CONDITIONS
ak C for k = 1, 2, , k
n k

i=1
ai = ak KC
k=1
for delay time to be a minimum

Useful for designing assembly layouts, for

processing a number of different products.
The number of workers and assembly
stations is fixed
The line is flexible for assembling
whatever product may be scheduled.
The workers will switch from one product
to another depending on the production
schedule.

Objective:
Minimize total delay time per cycle,
by manipulating the cycle time, C,
within a given number of stations.
K K
Min
k=1
dk = K (Max ak) - ak
k=1
(Convergence Procedure)

Example Assembly Line Balancing
Element i Time ai Precedence

1 1.0 min/pc -
2 0.6 min/pc 1
3 2.7 min/pc 2
4 1.2 min/pc 2
5 3.4 min/pc 4
6 0.9 min/pc 3
7 1.6 min/pc -
8 1.1 min/pc 5,6,7
I
a = 12.5
Production Volume
i=1 i q = 1300/Week
2 Shifts/day

4 5
1 2 3 6 8
The assembly line operates a day and an evening shift.

Find the optimum assembly line balance.
Following the steps suggested in the solution
procedure as follows:

1. Establish data--All the required data are stated:

the times for all elements, the precedence
requirements, and the production volume
required for a given time interval.
2. Make preliminary calculations of c, km, and cm--

These computations are helpful in establishing a
good initial feasible solution. Calculate c, Km
and Cm as follows:
(80 hr/week)(60 min/hr)

C= = 3.7 minutes/cycles; = Cmax
1,300 pcs/week
I
a
i=1 i
Km = 12.5 min/piece = 3.4 stations or 4 stations
= c 3.7 min/piece
I

i=1
ai
Cm = = 12.5 min/piece
Km 4 stations
= 3.12 minuets/cycle with 4 stations = Cmin


The computation shows: production
volume requires a minimum of four
stations. If these four stations could be
perfectly balanced, they could assemble
(80 hr/week)(60 min/hr)

= 1,540 cycles/week or 1,540 pieces/week
3.12 min/cycle

Devise a feasible arrangement--In order to
start the convergence, it is necessary to
intuitively devise an initial feasible solution to
the problem.
Depending upon the analyst ability, he may
make the solution difficult by choosing a poor
good feasible solution. For large problems
considerable computation time can be saved
by trying intuitive means to approach the
optimum
Example: Propose following feasible solution


Feasible Solution
Check Max
k=1 k=2 k=3 k=4 Sum dk dk
a1=1.0
a =1.2 a =0.9 a8=1.1
a2=0.6 a4=3.4 a6=1.6
5 7
a3=2.7 Max 4.6 2.5 min 1.1 12.5 3.5 5.9
4.3
Select max ak min ak 4.6-4.3=.3

4.6-4.6=0
4.6-2.5=2.1
max dk = max ak = min ak 4.6-1.1=3.5
K 5.9
= 3.5
dK

BETTER SOLUTION
Check Max
K=1 K=2 K=3 K=4 Sum dk dk
q1= q3= q5= q6=
q2= q7=
qr= q8= 12.5 0.9 1.9
COMMENTS


Practice Problem
Given the following information concerning the
assembly of an item:
Element No. Element Time Immediate Predecessor

1 15 sec. --
2 10 sec. 1
3 40 sec. 1
4 20 sec. 2,3
5 10 sec. 4
6 5 sec. 5
Required Output: 240,000 items/year

Production Time Available: 2000 hrs/year

What can you conclude concerning the design of
an assembly line?
1 (2000 hrs/yr)(60 min/hr) (60 sec./min) =

. 7,200,000 sec/yr.
2 7,200,000sec/yr= 30 sec/item = Max. Cycle Time
. 240,000 item/yr
3 Total Element Times = 100 sec.

.
4 Element #3 is 40 sec > Cycle Time (max)
. Therefore need 2 parallel stations here
(or cut element in half)
5 100 sec/30 sec = 4 stations?

.

Material handling for lean

manufacturing
MATERIAL HANDLING (MH)
Twenty principles of MH
Selecting MH methods
Simplifying /eliminating MH
Simple analysis techniques

Material Handling
MH adds COST, but not VALUE.

as much as 60% of total production cost

20%-30% of direct labor costs
50%-70% of indirect labor costs
Whats the best way to handle materials?

DONT!!
Goal: MINIMIZE MH COSTS
Muthers Material Handling Equation
Yes
WHY WHAT WHERE + WHEN HOW + WHO
?
No MATL MOVE METHOD
Q A
etc. D
P E
C
Type, Sink, Source Flow; Unit

Qty, Direction Flow, Volume Manpower
Characteristics Type of Move, etc. Equipment

Muthers Material Handling Equation
Use to analyze flow within and

between:
Receiving
Storage
Production
Warehousing
Shipping
The Twenty Principles of Material Handling
1. Orientation Principle: Study system relationships

before preliminary planning to identify existing
methods/problems, physical/economic constraints,
and establish future requirements/ goals.
2. Planning Principle: Establish a plan for basic

requirements, desirable options, and consideration
of contingencies for all MH/storage activities.
3. Systems Principle: Integrate those

handling/storage activities - economically viable-
into a coordinated operations: receiving,
inspection, storage, production, assembly,
packaging, warehousing, shipping /transportation.

4. Unit Load Principle: as large a unit load as practical.

5. Space Utilization Principle: effective space utilization.
6. Standardization Principle: Standardize handling
methods and equipment if possible.
7. Ergonomic Principle: Recognize human capabilities
and limitations by designing MH equipment and
procedures for effective interaction with system users.
8. Energy Principle: Include energy consumption of the
MH systems and procedures when making
comparisons or preparing economic justification.
9. Ecology Principle: Minimize adverse affects on

environment in selecting MH equipment/methods.
10. Mechanization Principle: Mechanize handling
process where feasible to increase efficiency/
economy in MH.
11. Flexibility Principle: Use methods/equipment
which can perform a variety of tasks under a
variety of operating conditions.
12. Simplification Principle: Simplify handling by
eliminating, reducing, or combining unnecessary
movements and/or equipment.

13. Gravity Principle: Utilize gravity to move material

wherever possible, while respecting limitations
concerning safety, product damage and loss.
14. Safety Principle: Provide safe MH equipment and
methods which follow existing safety codes and
regulations in addition to gained experience.
15. Computerization Principle: Consider
computerization in MH & S systems, when
circumstances warrant, for improved
material/information control.
16. System Flow Principle: Integrate data flow with
physical material flow in handling and storage.
17. Layout Principle: Prepare an operational

sequence and equipment layout for all viable
system solutions, then select the alternative
system which best integrates efficiency and
effectiveness.
18. Cost Principle: Compare the economic

justification of alternate solutions in equipment
and methods on the basis of economic
effectiveness as measured by expense per unit
handled.

19. Maintenance Principle: Prepare a plan for PM

and scheduled repairs on all material handling
equipment.
20. Obsolescence Principle: Prepare long range/

economically sound policy for replacement of
obsolete equipment/methods with special
consideration to life cycle costs.
Unit Load Principle
Follows traditional thinking
$/unit
Quantity
The greater the amount moved per trip,
the less the cost per unit moved
Maximize Unit Load


Unit Load Principle
But:
Creates more inventory
Requires expensive, heavy-duty material
handling equipment
Increases lag time between operations
poor process communication, slower
reaction to quality problems
Requires more floor space
WASTE!
Selecting Material Handling Methods
Systematic Approach
1. Define the problem
Preliminary Survey Check sheet

2. Analyze the problem

Observe activities
Obtain layouts, flow patters, schedules, etc.
Obtain information on existing material handling
equipment
Analyze situation by material handling equation,
Twenty Principles of Material Handling, and/or
forms
such as Basic Data Form
Can activities be combined, simplified, eliminated?
3. Identify possible solutions

Organize meeting with:
material handlers
machine operators
supervisors
support engineers
4. Evaluate alternatives
Meet again to rate alternatives using Factor
Analysis

Improvement of MH Systems
Cellular Manufacturing
Eliminate Handling
Eliminate Storage
Eliminate Inventory
Eliminate waste due to poor quality
KEYS:
Efficient layout, scheduling, problem
prevention
Conveyor Systems
Reduce handling costs

Better coordination of product thru processes
Design WIP level into material handling system

Simple Analysis Techniques
Queuing Analysis
Mathematical analysis of queues

(waiting lines: occur whenever current
demand for service > current capacity
to provide that service).
Simple Analysis Techniques
Queuing Analysis
Suitable for quick and dirty evaluations when
a high degree of detail is not necessary.
System
Arrivals Server (s) Departure
Arrival Rate Service Rate


Simple Systems
FIFO (FCFS)
Single Server, Single Queue - M/M/1
System
Poisson Arrivals
Exponential Service Times
Waiting Line Models

Customer
population
Figure C.1

Waiting Line Models

Customer
population
Service system
Waiting line
Service
facilities
Priority
rule
Figure C.1
Waiting Line Models

Customer
population
Service system
Waiting line
Service Served
facilities customers
Priority
rule
Figure C.1

Waiting
Line Arrangements
Service facilities
Waiting
Line Arrangements
(a) Single line

Service facilities
Waiting
Line
Arrangements
(a) Single line

Service facilities
(b) Multiple lines
Service Facility Arrangements

Service
facility
(a) Single channel, single phase
Service Service
facility 1 facility 2
(b) Single channel, multiple phase

Service
facility 1
Service
facility 2
(c) Multiple channel, single phase
Service Service
Service Service
(d) Multiple channel, multiple phase

Service Service
Service Service
Routing for : 1
124
Routing for : 2
243
Routing for : 3
3214
(e) Mixed
Probability Distributions

Customer Arrivals
Arrival rate = 2/hour
Probability that 4 customers will arrive
(T)n -T
P(n) = e
n!
Service Time
Arrival rate = 2/hour Service time = 3/hour
16 -2
P(4) = e = 0.090
24
Probability that a customer requires less than 10 minutes
P(t T) = 1 e-T

Customer Arrivals
[2(1)]4 -2(1)
P(4) = e
4!
Customer Arrivals
16 -2
P(4) = e = 0.090
24

Service Time
16 -2
P(4) = e = 0.090
24
P(t 0.167 hr) = 1 e-3(0.167)
Service Time
16 -2
P(4) = e = 0.090
24
P(t 0.167 hr) = 1 0.61 = 0.39

Operating Characteristics
Line Length
Number of
Customers in System
Waiting Time in Line
Total Time in System
Service Facility Utilization
Single-Server Model

= Average utilization
utilization of the system =

n = Probability that n customers are in the system = (1 )n
L = Average number of customers in the service system =

Lq = Average number of customers in the waiting line = L
1
W = Average time spent in the system, including service =

Wq = Average waiting time in line = W

Waiting Line Models
Waiting Line Models

Single-Channel, Single-Phase System
Arrival rate = 30/hour Service rate = 35/hour

Waiting Line Models


Utilization = =

Waiting Line Models

30
Utilization = = =
35

Waiting Line Models

30
Utilization = = = = 0.857, or 85.7%
35
Waiting Line Models

30
Utilization = = = = 0.857, or 85.7%
35
Average number in system = L =


Waiting Line Models

30
Utilization = = = = 0.857, or 85.7%
35
30
Average number in system = L = = 6 customers
35 30
Waiting Line Models

30
Utilization = = = = 0.857, or 85.7%
35
30
35 30
Average number in line = Lq = L

Waiting Line Models

30
Utilization = = = = 0.857, or 85.7%
35
30
35 30
Average number in line = Lq = 0.857(6)
Waiting Line Models

30
Utilization = = = = 0.857, or 85.7%
35
30
35 30
Average number in line = Lq = 0.857(6) = 5.14 customers

Waiting Line Models

30
Utilization = = = = 0.857, or 85.7%
35
30
35 30
1
Average time in system = W =

Waiting Line Models

30
Utilization = = = = 0.857, or 85.7%
35
30
35 30
1
Average time in system = W =
35 30

Waiting Line Models

30
Utilization = = = = 0.857, or 85.7%
35
30
35 30
1
Average time in system = W = = 0.20 hour, or 12 minutes
35 30
Waiting Line Models

30
Utilization = = = = 0.857, or 85.7%
35
30
35 30
1
35 30
Average time in line = Wq = W

Waiting Line Models

30
Utilization = = = = 0.857, or 85.7%
35
30
35 30
1
35 30
Average time in line = Wq = 0.857(0.20)
Waiting Line Models

30
Utilization = = = = 0.857, or 85.7%
35
30
35 30
1
35 30
Average time in line = Wq = 0.857(0.20) = 0.17 hour, or 10.28 minutes

Waiting Line Models

Single-Server Model
Arrival rate = = 30/hour
Average time in system = 8 minutes
Waiting Line Models

Single-Server Model
1
Average time in system = 8 minutes = W =


Waiting Line Models

Single-Server Model
1
30
Waiting Line Models

Single-Server Model
Arrival rate = = 30/hour Service rate = = 37.52/hour
1
30

Waiting Line Models

Single-Server Model
1
30
Waiting Line Models

Single-Server Model
1
30
4
Probability of more than 4 customers = = 1 n
n=0

Waiting Line Models

Single-Server Model
1
30
4
Probability of more than 4 customers = = 1 (1 )n
n=0
Waiting Line Models

Single-Server Model
1
30
4
Probability of more than 4 customers = = 1 (1 )n
n=0
30
= = 0.80
37.52

Waiting Line Models

Single-Server Model
1
30
Probability of more than 4 customers = = 1 0.2(1 + 0.8 + 0.82
+ 0.83 + 0.84)
30
= = 0.80
37.52
Waiting Line Models

Single-Server Model
1
30
Probability of more than 4 customers = = 0.328

Waiting Line Models

Single-Server Model
1
30
Service rate for

a 10% chance
of exceeding 4 = 1 (1 )(1 + + 2 + 3 + 4)
customers in
the system
Waiting Line Models

Single-Server Model
1
30
Service rate for

a 10% chance
of exceeding 4 = 1 1 2 3 4 + + 2 + 3 + 4 + 5
customers in
the system

Waiting Line Models

Single-Server Model
1
30
Service rate for

a 10% chance
of exceeding 4 = 5 or = 1/5
customers in
the system
Waiting Line Models

Single-Server Model
1
30
Service rate for

a 10% chance
of exceeding 4 = 5 or = 1/5 If = 0.10
customers in
the system

Waiting Line Models

Single-Server Model
1
30
Service rate for

a 10% chance
of exceeding 4 = 5 or = (0.10)1/5 If = 0.10
customers in
the system
Waiting Line Models

Single-Server Model
1
30
Service rate for

a 10% chance
of exceeding 4 = 5 or = 0.63 If = 0.10
customers in
the system

Waiting Line Models

Single-Server Model
1
30
Service rate for

a 10% chance 30
of exceeding 4 = 5 or = 0.63 =
customers in
the system
Waiting Line Models

Single-Server Model
1
30
Service rate for

a 10% chance 30
customers in
the system

Waiting Line Models

Single-Server Model
1
30
Service rate for

a 10% chance 30
customers in
the system
Waiting Line Models

Single-Server Model
1
30
Service rate for

a 10% chance 30
customers in
the system

Lean Production Models
Contents
TVAL Model
Sequence Schedule in JIT
Quantitative Stock Analysis for JIT
Inventory Models

TVAL Model
Toyota Verification of Assembly Line
Measure the workload or fatigue rate of each
assembly line operation
Measuring Equation:
L = 27.03 log t + 53.78 log M 48.76
Where
L = physiological load or fatigue rate (%)
beyond L operator cannot continue
M = ratio of Electro-Motive Force (EMF) to its
max (need EMF meter)
T = sustaining time of an operation
TVAL Model
Past Equation holds regardless of posture
Another posture dependent Equation:
L = d1 log t + d2 log W 162.0
W =task load determined by handling
weight, operation posture, assembling
muscle power, pushing direction,
In a cycling operation: W = 9.31 t0.0129 M0.457
Toyota concluded: fatigue rate < 80 %
Equations would not apply to all situations
Need to develop our own

Sequence Scheduling Method for Smoothing
Mixed Assembly Line

Goal: Reduce differences in assembly
hrs among products models
Basic Logic: Two main Components
Appearance Ratio (AR) control
Continuation and Interval (CI) controls
Sequence Scheduling Method for

Smoothing (AR)
Average AR : Target for the sequence

Calculated as
Total no of certain spec product

AR =
Total no of all products
Smoothing in sequence: difficult to realize

in final 10 % of product in a day
To solve problem: use CI controls

Sequence Scheduling Method for Smoothing

Continuation and Interval (CI) controls
Continuation control: Introduce

designated maximum of certain product in
a succession in Assembly Line Example
Max of 2 cars in succession
Interval control: keeps intervals of units
between two same product within a
designated minimum interval
Why Manage Inventory?
Total $ investment on in inventories is $1.37

trillion (last quarter of 1999)
34% in Manufacturing
26% in Retail
22% in Wholesale 82% of the total
8% in Farm
10% in Other

Why Manage Inventory? - Examples

In 1998, American companies spent $898 billion in logistics-
related activities (or 10.6% of Gross Domestic Product).
Transportation 58%
Inventory 38%
Management 4%
By effectively managing inventory:
Xerox eliminated $700 million inventory from its supply
chain
Wal-Mart became the largest retail company utilizing
efficient inventory management
GM has reduced parts inventory and transportation
costs by 26% annually
Why Manage Inventory? - Examples

By not managing inventory successfully
In 1994, IBM continues to struggle with
shortages in ThinkPad line (WSJ, Oct 7, 1994)
In 1993, Liz Claiborne said its unexpected
earning decline is a result of higher excess
inventory (WSJ, July 15, 1993)
In 1993, Dell Computers predicts a loss; Stock
plunges. Dell acknowledged company was
sharply off in its forecast of demand, resulting
in inventory write downs (WSJ, August 1993)

Inventory
Why do we hold inventory?
Economies of scale
Uncertainty in supply and demand
Speculation
Transportation
Smoothing production/purchasing
Logistics
Cost of controlling inventory

Decisions to Make
We have to decide
How often we review the inventory
When we should issue a
(replenishment/production) order
How large the order should be
Characteristics of Inventory Systems
Demand
Constant (level) or variable
Deterministic (known) or Stochastic (random
or uncertain)
Lead Time
Review Time
Continuous or periodic review
Excess Demand
Backordered or lost
Changing inventory

Inventory-Related Costs
Ordering or Setup Costs

Inventory Carrying or Holding
Costs
Stockout Costs
Capacity Associated Costs
Cost of Goods
Relevant Costs
Unit value or unit variable cost (c)

Cost of making a part available for usage
Purchase + Freight + Mfg. Costs
Usually different from accounting cost
Should include more than just book value

Relevant Costs
Holding cost (cost of carrying in inv.)

Opportunity costs of the money tied to
inventory (I = ic), where i is the available rate
of return on investment (may use IRR).
Warehousing and Handling (cost of providing
space to store items, counting and moving
items in the warehouse)
Deterioration, damage, obsolescence
Insurance and taxes
W: Warehousing cost, $ per item per year
Relevant Costs
The cost of placing a purchase order from a vendor
include
Order forms
Postage
Telecommunications
Authorization
Purchase order planning
Purchase order entry time
Purchase order processing time

Relevant Costs
The cost of placing a purchase order from a vendor
include
Purchase order inspection time

Purchase order follow-up time
Purchasing management
Office space
Office supplies
Purchase order entry systems
Tracking and expediting
EOQ History
Introduced in 1913 by Ford W. Harris, How Many
Parts to Make at Once
Interest on capital tied up in wages, material and overhead

sets a maximum limit to the quantity of parts which can be
profitably manufactured at one time; set-up costs on the
job fix the minimum. Experience has shown one manager
a way to determine the economical size of lots.
Early application of mathematical modeling to Scientific

Management

Inventory Management
There are nine popular distribution inventory

control policies organized into three categories:
Manual inventory control
Two-Bin Systems (2BS)
Visual Review (VR)
Basic replenishment schemes
Re-Order Point (ROP) with Economic Order
Quantities
(EOQ) ROP/ EOQ
Source: Frazelle, Edward H. Supply Chain Strategy. McGraw-Hill Education Group, 2001
Re-Order Point (ROP) with Order Up to

Levels (OUL) ROP/ OUL
Review Time Period (RTP) with Order Up
to Levels (OUL) RTP/ OUL
Review Time Period with Re-Order Points
and Order-Up-To Levels RTP/ ROP/
OUL

Inventory Costs
Interest or
Opportunity Cost
Storage and
Handling Costs
Taxes, Insurance,
and Shrinkage

Inventory Costs
Customer Service
Ordering Cost
Setup Cost
Labor and
Equipment Utilization
Transportation Costs
Payments to Suppliers
Types of Inventory
Cycle Inventory
Q+0
Average cycle inventory =
2
Safety Stock Inventory

Anticipation Inventory
Pipeline Inventory
Pipeline inventory = DL = dL

Types of Inventory
Cycle inventory = Q/2

= 280/2
= 140 drills
Pipeline inventory = DL = dL
= (70 drills/week)(3 weeks)
= 210 drills
How
Much?
When!

Economic Order
Quantity
EOQ Modeling Assumptions

1. Production is instantaneous No capacity constraint and the
entire lot is produced simultaneously.
2. Delivery is immediate No time lag between production and
availability to satisfy demand.
3. Demand is deterministic No uncertainty about the quantity
or timing of demand.
4. Demand is constant over time represented as a straight line
- if annual demand= 365 units translates one unit/day.
5. A production run incurs a fixed setup cost independent of
lot size, the setup cost is constant.
6. Products can be analyzed singly either it is only a single
product or conditions exist to ensure products separability.

Economic Order Quantity

Assumptions
1. Demand rate is constant
2. No constraints on lot size
3. Only relevant costs are holding and
ordering/setup
4. Decisions for items are independent
from other items
5. No uncertainty in lead time or supply
EOQ Trade-off
Two interpretations:
If you order more (larger Q), you incur
higher inventory cost, but less setup cost
If you order less frequently, you incur larger
inventory cost, but less setup cost
The trade-off is not linear!

Receive Inventory depletion

order (demand rate)
On--hand inventory (units)
Q Average
cycle
2
inventory
On
1 cycle
Time
Total cost = HC + OC
Annual cost (dollars)
Holding cost (HC

(HC))
Ordering cost (OC

(OC))
Lot Size (Q
(Q)


Example 15.2
3000
Q D
Total cost = (H
(H) + (S
(S)
2 Q
2000
Q
Holding cost = (H
(H)
2
1000
D
Ordering cost = (S
(S)
Q
0 | | | | | | | |
50 100 150 200 250 300 350 400
Lot Size (Q
(Q)
Economic Order Quantity: Example
3000
Q D
Total cost = (H
(H) + (S
(S)
2 Q
2000
Connectors costs
Q
Holding cost = (H
(H)
D = (18 /week)(52 weeks) = 936 units 2
H = 0.25 ($60/unit) = $15
S = $45 Q = 390 units
1000
Q D D
Ordering cost = (S
(S)
C= (H) + (S) Q
2 Q
| | | | | | | |
C0
= $2925 + $108 = $3033
50 100 150 200 250 300 350 400
Lot Size (Q
(Q)


Current
cost Example
3000
Q D
Total cost = (H
(H) + (S
(S)
2 Q
2000
Connectors costs
Q
Holding cost = (H
(H)
H = 0.25 ($60/unit) = $15
S = $45 Q = 390 units
1000
Q D D
Ordering cost = (S
(S)
C= (H) + (S) Q
2 Q
| | | | | | | |
C0
= $2925 + $108 = $3033
50 100 150 200 250 300 350 400
Current
Lot Size (Q
(Q)
Q

Current
cost Example
3000
Q D
Total cost = (H
(H) + (S
(S)
2 Q
2000
Connectors costs
Q
Holding cost = (H
(H)
H = 0.25 ($60/unit) = $15
S = $45 Q = 390 units
1000
Q D D
Ordering cost = (S
(S)
C= (H) + (S) Q
2 Q
| | | | | | | |
C0
= $2925 + $108 = $3033
50 100 150 200 250 300 350 400
Current
Lot Size (Q
(Q)
Q

Economic Order Quantity :Example

Current
cost
3000
Q D
Total cost = (H
(H) + (S
(S)
2 Q
2000
Connectors costs
Q
Holding cost = (H
(H)
H = 0.25 ($60/unit) = $15
S = $45 Q = 468 units
1000
Q D D
Ordering cost = (S
(S)
C= (H) + (S) Q
2 Q
| | | | | | | |
C0
= $3510 + $90 = $3600
50 100 150 200 250 300 350 400
Current
Lot Size (Q
(Q)
Q

Current
cost Example 15.2
Connectors costs
3000
Q D
Total cost = D(H= )(18

(H + /week)(52
(S
(S) weeks) = 936 units
2 Q
H = 0.25 ($60/unit) = $15
S = $45 Q = EOQ
2000
Q
2DS Holding Q
cost = D(H
(H)
EOQ = C= (H) +2 (S)
H 2 Q
1000
D
Ordering cost = (S
(S)
Q
0 | | | | | | | |
50 100 150 200 250 300 350 400
Current
Lot Size (Q
(Q)
Q


Current
cost Example 15.2
3000 Connectors costs

Q D

(H + /week)(52
(S
2 Q
H = 0.25 ($60/unit) = $15
S = $45 Q = 75
2000
Q
2DS Holding Q
cost = D(H
(H)
EOQ = C= (H) +2 (S)
H 2 Q
1000
D
Ordering cost = (S
(S)
Q
0 | | | | | | | |
50 100 150 200 250 300 350 400
Current
Example Lot Size (Q
(Q)
Q

Current
cost Example 15.2

Q D

(H + /week)(52
(S
2 Q
H = 0.25 ($60/unit) = $15
S = $45 Q = 75
2000
Q
2DS Holding Q
cost = D(H
(H)
EOQ = C= (H) +2 (S)
H 2 Q
1000 C = $562 + $562 = $1124

D
Ordering cost = (S
(S)
Q
0 | | | | | | | |
50 100 150 200 250 300 350 400
Current
Example Lot Size (Q
(Q)
Q


Current
cost Example 15.2

Q D

(H + /week)(52
(S
2 Q
H = 0.25 ($60/unit) = $15
S = $45 Q = 75
2000
Q
2DS Holding Q
cost = D(H
(H)
EOQ = C= (H) +2 (S)
H 2 Q
1000 C = $562 + $562 = $1124

D
Lowest Ordering cost = (S
(S)
Q
cost
0 | | | | | | | |
50 100 150 200 250 300 350 400
Best Q Current
Example Lot Size (Q
(Q)
(EOQ) Q

Current
cost Example 15.2

Q D

(H + /week)(52
(S
2 Q
H = 0.25 ($60/unit) = $15
S = $45 Q = 75
2000
Q
2DS Holding Q
cost = D(H
(H)
EOQ = C= (H) +2 (S)
H 2 Q
1000 C = $562 + $562 = $1124

D
Lowest Ordering cost = (S
(S)
Q
cost
0 | | | | | | | |
50 100 150 200 250 300 350 400
Best Q Current
Example Lot Size (Q
(Q)
(EOQ) Q


Current
cost Example 15.2
Bird feeder costs
3000 Time between orders
Q D

(H + /week)(52
(S
2 Q
HTBO EOQ = $15
= 0.25 ($60/unit)
EOQ = = 75/936 = 0.080 year
S = $45 D Q = 75
2000
Q
Holding Q
cost = D(H
(H)
TBO=EOQ 2DS
EOQ = (75/936)(12)
C = = (H)
0.96+2months
(S)
H 2 Q
TBOEOQ = (75/936)(52) = 4.17 weeks
1000 C = $562 + $562 = $1124
TBOEOQ = (75/936)(365) = 29.25D days
Ordering cost = (S
S)
Lowest Ordering cost = ( )
Q
cost
0 | | | | | | | |
50 100 150 200 250 300 350 400
Best Q Current
Example Lot Size (Q
(Q)
(EOQ) Q
How
Much?
When!

up
So
Soup
Soup
Continuous Review
IP IP IP
Order Order Order Order

received received received received
On--hand inventory
Q Q Q
OH OH OH
On
R
Order Order Order
placed placed placed
L L L Time
TBO TBO TBO
up
So
Soup
Soup
Continuous Review
IP IP IP
Order Order Order Order

received received received received
On--hand inventory
Connectors
Q Q Q
R = Average demand during lead time
OH OH = (25)(4) = 100
OH cases
On
R
IP = OH + SR BO
Order Order
placed
= 10 + 200 0Order
placed
= 210 cases
placed placed
L L L Time
TBO TBO TBO
Example

Uncertain Demand
IP
IP
Order
Order
Order received
received
received Order
received
On--hand inventory
Q
Q Q
OH
R
Order Order Order
On
placed placed placed
L1 L2 L3 Time
TBO1 TBO2 TBO3
Reorder Point / Safety Stock
Cycle-
Cycle-service level = 85%
Probability of stockout
(1.0 0.85 = 0.15)
Average
demand
during
lead time R
zL

Reorder Point / Safety Stock

Safety Stock/R
Safety stock = zL
= 2.33(22) = 51.3
Cycle-
Cycle-service level = 85%
= 51 boxes
Reorder point = ADDLT + SS

= 250 + 51
= 301 boxes Probability of stockout
(1.0 0.85 = 0.15)
Average
demand
during
lead time R
zL
Example
Lead Time Distributions

t = 15
t = 26
+
75
Demand for week 1
t = 15
+ 225
Demand for
75
Demand for week 2 three-
three-week lead time
t = 15
=
75
Demand for week 3


t = 15
t = 26
+ Connectors Lead Time Distribution

75
Demand for week 1
t = 1 week
t = 15 d = 18 L=2
+ L = t L =5 2 = 7.1
225
75 Safety stock = zL = 1.28(7.1)Demand
= 9.1 or
for9 units
Demand for week 2 three-
t = 15
Reorder point = dL + Safety stock
= 2(18) + 9 = 45 units
Example
=
75
Demand for week 3

t = 15
t = 26
+ Connectors Lead Time Distribution

75
Demand for week 1
t = 15
Reorder point = 2(18) + 9 = 45 units
+
C=
75
($15) +
936
($45)
225
+ 9($15)
Demand for
75
Demand for week 2
2 75 three-
t = 15
C = $562.50 + $561.60 + $135 = $1259.10
Example
=
75
Demand for week 3

Periodic Review Systems

T
IP IP IP
Order Order Order
received received received
On--hand inventory
Q3
Q1
OH Q2 OH
IP1
IP3
Order Order
On
placed placed
IP2
L L L Time
P P
Protection interval

T
IP IP TV Set - P System IP
Order Order Order
received received
IP = OH + SR BO received
On--hand inventory
Q3
Q1 Q
OH OHt = T - IPt
Q2
IP1
T = 400 BO = 5
IP3 OH = 0 SR = 0
Order Order
On
placed placed
IP2 IP = 0 + 0 5 = 5 sets
Q = 400 (5) = 405 sets
L L L Time
P P
Protection interval


T
IP IP IP
Order
Connectors Order P and T
Calculating Order
On--hand inventory
Q
t =
Q118 units L = 2 weeks cycle/service level = 90%
3
OH Q2 OH
EOQ = 75 units D = (18 units/week)(52 weeks) = 936 units
IP1
EOQ 75
IP3 P= (52) = (52) = 4.2 or 4 weeks
D 936
Order Order
On
placed P+L = P + L = 5 placed

6 = 12 units
IP2
T = Average demand during the protection interval + Safety stock
= d (P + L) + zP + L
L L L
= (18 units/week)(16 weeks) + 1.28(12 units) = 123 units Time
P P
Protection interval

T
IP IP IP
Order
Connectors Order P and T
Calculating Order
On--hand inventory
Q3
t =
Q118 units L = 2 weeks cycle/service level = 90%
OH Q2 OH
EOQ = 75 units D = (18 units/week)(52 weeks) = 936 units
IP1
P = 4 weeks T = 123 units
IP3
Order Order
On
placed 4(18) 936placed

IP2 C= ($15) + ($45) + 15($15)
2 4(18)
C = $540 + $585 + $225 = $1350

L L L Time
P P
Protection interval
Example

Comparison of Q and P Systems
P Systems
Convenient to administer
Orders may be combined
IP only required at review
Q Systems
Individual review frequencies
Possible quantity discounts
Lower, less-expensive safety stocks
EOQ Model
Assumptions:
No Stockouts
Order when no inventory
Order size determines policy
Inventory
Qavg = Q/2
Order Avg. Inventory (Qavg)

Quantity
Q

Dynamic Lot Sizing
Another EOQ assumption:

Demand is constant over time
Dynamic Lot Sizing relaxes this assumption
Demand is changing over time
But demand in each period is known (so still
deterministic).
Dynamic Lot Sizing
Examples:
MRP
Firm orders and contracts for future periods
Seasonal demand patterns
Demand with trend (increasing or decreasing over
time)

Dynamic Lot Sizing
Example:
Week 1 2 3 4 5 6 7 8 9 10
Demand 10 15 12 16 15 12 18 14 22 16
Other data
Beginning inventory: 0
Setup cost: $150
Inventory carrying cost: $2 per unit per
period
Dynamic Lot Sizing

Issues:
Determine a planning horizon
Calculate total cost over the planning horizon
Implementing decisions over time
Rolling horizon concept
Discrete demand vs. Continuous demand
Discrete Replenishments vs. Any-time
replenishments

Dynamic Lot Sizing
Quick Solutions
Order every period exactly as much as you need
Lot-for-Lot
Determine a fixed order quantity and order when
you need to order (i.e., when on-hand inventory is
less than the next periods demand)
Example: EOQ
Order constant time-supply (i.e., order the
amount sufficient to cover total demand in next
three months)
Dynamic Lot Sizing
Lot-for-lot solution:
P eriod 1 2 3 4 5 6 7 8 9 10 Total
D em an d 10 15 12 16 15 12 18 14 22 16 150
O rd er 10 15 12 16 15 12 18 14 22 16 150
B eg in n in g I. 10 15 12 16 15 12 18 14 22 16 150
E n d I. 0 0 0 0 0 0 0 0 0 0 0
H old in g C ost 10 15 12 16 15 12 18 14 22 16 150
Total Cost = 150 + 10 * 150 = $1650

Dynamic Lot Sizing
Other heuristics:
EOQ as a Time Supply
Periodic Order Quantity (POQ)
Part-Period Balancing (PPB)
Silver-Meal (or Least Period Cost)
Dynamic Lot Sizing
Example
Week 1 2 3 4 5 6 7 8 9 10
Demand 10 15 12 16 15 12 18 14 22 16
Calculate EOQ:
Average demand per week = ____
Holding cost per unit per week = ____
EOQ = ____
Total Holding and Setup Cost = ____
2DS 2(150)(15)
Q =
*
= = 47.43
H 2

Dynamic Lot Sizing- EOQ
Period 1 2 3 4 5 6 7 8 9 10 Total
Demand 10 15 12 16 15 12 18 14 22 16 150
Order 48 48 48 48 192
Beginning I. 48 38 23 59 43 28 64 46 32 58
End I. 38 23 11 43 28 16 46 32 10 42
Holding Cost 86 61 34 102 71 44 110 78 42 100 728
Total Cost = 728 + 4 * 150 = $1328
Dynamic Lot Sizing - POQ

Periodic Order Quantity
Calculate EOQ using Average Demand
Calculate Time Supply and round it to the
nearest integer
In each replenishment, order to cover that
many periods demand
Fixed order interval, but different quantity in
each replenishment

Dynamic Lot Sizing - POQ
P eriod 1 2 3 4 5 6 7 8 9 10 Total
D em an d 10 15 12 16 15 12 18 14 22 16 150
O rd er 37 43 54 16 150
B eg in n in g I. 37 27 12 43 27 12 54 36 22 16
E n d I. 27 12 0 27 12 0 36 22 0 0
H old in g C os t 64 39 12 70 39 12 90 58 22 16 422
Total Cost = 422 + 4 * 150 = $1022
Dynamic Lot Sizing - PPB

Part-Period Balancing
Select the number of periods covered by the
replenishment such that the total inventory
carrying costs are as close as possible to the
setup cost.

Dynamic Lot Sizing - PPB

P eriod 1 2 3 4 5 6 7 8 9 10 Total
D em an d 10 15 12 16 15 12 18 14 22 16 150
O rd er 37 43 54 16 150
B eg in n in g I. 37 27 12 43 27 12 54 36 22 16
E n d I. 27 12 0 27 12 0 36 22 0 0
H old in g C ost 64 39 12 70 39 12 90 58 22 16 422
Total Cost = 422 + 4 * 150 = $1022
Dynamic Lot Sizing - SM
Silver-Meal (SM) Heuristic

Minimize total relevant costs per unit time for the
duration of the replenishment quantity.
Replenishment quantity Q should last for an integer
number of periods: cover the total demand in
periods 1 through T (decision variable T)
Min (Setup Cost + Inv Cost through T) / T
Q = D1 + + DT
Total Relevant Cost through T: TRC(T)
Select T such that TRC(T)/T is minimized.

Silver-Meal (SM) Heuristic

Starting from T=1, compute TRC(T)/T for
increasing number of Ts
Stop when
TRC(T+1)/(T+1) > TRC(T)/T
Select T (before TRC per unit time starts
increasing)
TRC(T) = A+hD2+2hD3++(T-1)hDT
P e rio d 1 2 3 4 5 6 7 8 9 10 To ta l
D em an d 10 15 12 16 15 12 18 14 22 16 150
O rd e r 37 43 32 38 150
B e g in n in g I. 37 27 12 43 27 12 32 14 38 16
E n d I. 27 12 0 27 12 0 14 0 16 0
H o ld in g C o s t 64 39 12 70 39 12 46 14 54 16 366
Total Cost = 366 + 4 * 150 = $966

Lot Sizing for JIT
Minimum lot size to avoid

interruption
EOQ is not used in JIT
Reduce Setup to minimize lot size
Hence reduce the stock of finished
and WIP products
In JIT: Time and uncertainty
justifies keeping little inventory
Lot Sizing for JIT

Reduction of Lot Size
Under Constraint that Total operation
time does not increase
Reduce setup time
Reducing unit producing time in the

preceding stage

Lot Sizing for JIT

If time span for consuming one unit in the
subsequent process > (1+(2)/2)) t
t = time span of producing one unit in the
preceding stage
Then
Minimum lot size = quotient of:
the setup time in the preceding stage divided
by:
the difference between consumption time of
(2- (2) units and
the unit producing time in the subsequent and
preceding stages, respectively
Lot Sizing for JIT

Define
S = setup time for a lot
t = processing time of a part
aj = consumption quantity of part j
1
A = a and =
= avg time of
n
'
j =1
t
A
consuming one part in the subsequent stage
Then
S
=
(2 2 )t t
*
The min lot size q
'

Lot Sizing for JIT: Example
S= 20 min
t = 2 min
t = 6 min
q*=20/ {[2-2]6-2}=14 units
Special Inventory Models

Production quantity
Q
On--hand inventory
Demand during
production interval
On
pd
Time
Figure E.1


Production quantity
Q
On--hand inventory
Demand during
production interval
On
pd
Time
Production Demand
and demand only
TBO
Figure E.1

Production quantity
Q
On--hand inventory
Demand during
production interval
On
pd
Time
Production Demand
and demand only
TBO
Figure E.1


Production quantity
Q
On--hand inventory
Demand during
production interval
Imax
Maximum inventory
On
pd
Time
Production Demand
and demand only
TBO
Figure E.1

Production quantity
Q
On--hand inventory
Demand during
production interval
Imax
Maximum inventory
pd
Q
( )
On
Imax = (p d) = Q p
pd p
Time
Production Demand
and demand only
TBO
Figure E.1


Production quantity
Q
On--hand inventory
Demand during
production interval
Imax
Maximum inventory
Imax D
On
C= (H) + (S)
pd 2 Q
Time
Production Demand
and demand only
TBO
Figure E.1

Production quantity
Q
On--hand inventory
Demand during
production interval
Imax
Maximum inventory
Q pd
) + QD
On
pd
C =2 p ( (S)
Time
Production Demand
and demand only
TBO
Figure E.1


Production quantity
Q
On--hand inventory
Demand during
production interval
Imax
Maximum inventory
2DS p
On
ELS =
pd H pd
Time
Production Demand
and demand only
TBO
Figure E.1

Economic Production Lot Size


Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
Example

2DS p
ELS =
H pd
Example


2(10,500)($200) 190
ELS =
$0.21 190 30
Example

2(10,500)($200) 190
ELS =
$0.21 190 30
Example


2(10,500)($200) 190
ELS =
$0.21 190 30
Example

ELS = 4873.4 barrels
Example


Q pd D
C =2 p (
(H) + (S
Q (
)
S)
Example

4873.4 190 30 10,500

C=
2
(
190
)
($0.21) +
4873.4
($200)
Example


C = $430.91 + $430.91
Example

C = $861.82
Example


C = $861.82
ELS
TBOELS = (350 days/year)
D
Example

C = $861.82
4873.4
TBOELS = (350 days/year)
10,500
Example


C = $861.82
TBOELS = 162.4, or 162 days

Example

ELS
C = $861.82 Production time =
p

Example


4873.4
C = $861.82 Production time =
190

Example

C = $861.82 Production time = 25.6, or 26 days

Example


Quantity Discounts

Quantity Discounts
Total cost (dollars)
0 100 200 300

Purchase quantity (Q
(Q)
(a) Total cost curves with purchased materials added


Quantity Discounts
C for P = $4.00
C for P = $3.50
C for P = $3.00
0 100 200 300

(Q)

Quantity Discounts
C for P = $4.00
C for P = $3.50
C for P = $3.00
First Second
price price
break break
0 100 200 300
(Q)


Quantity Discounts
C for P = $4.00
C for P = $3.50
C for P = $3.00
First Second
price price
break break
0 100 200 300
(Q)

Quantity Discounts
C for P = $4.00
C for P = $3.50
C for P = $3.00
PD for
P = $4.00 PD for
P = $3.50 PD for
P = $3.00
First Second
price price
break break
0 100 200 300
(Q)


Quantity Discounts
C for P = $4.00
C for P = $3.50
C for P = $3.00

PD for
P = $4.00 PD for
P = $3.50 PD for
P = $3.00
First Second
price price
break break
0 100 200 300 0 100 200 300
(Q) Purchase quantity (Q
(Q)
(a) Total cost curves with purchased materials added (b) EOQs and price break quantities

Quantity Discounts
C for P = $4.00
C for P = $3.50
C for P = $3.00
PD for
P = $4.00 PD for
P = $3.50 PD for
P = $3.00
First Second
price price
break break
0 100 200 300 0 100 200 300
(Q)


Quantity Discounts
C for P = $4.00
C for P = $3.50
C for P = $3.00

PD for
P = $4.00 PD for
P = $3.50 PD for
P = $3.00
First Second First Second

price price price price
break break break break
0 100 200 300 0 100 200 300

(Q)

Quantity Discounts
C for P = $4.00 EOQ 4.00
C for P = $3.50 EOQ 3.50
C for P = $3.00 EOQ 3.00
PD for
P = $4.00 PD for
P = $3.50 PD for
P = $3.00
First Second First Second

price price price price
break break break break
0 100 200 300 0 100 200 300

(Q)


Quantity Discounts

Quantity Discounts
Order Quantity Price per Unit

0 299 $60.00 Annual demand = 936 units
300 499 $58.80 Ordering cost = $45
500 or more $57.00 Holding cost = 25% of unit price
Example


Quantity Discounts

300 499 $58.80 Ordering cost = $45
2DS
EOQ57.00 =
H
Example

Quantity Discounts

300 499 $58.80 Ordering cost = $45
2(936)(45)
EOQ57.00 =
0.25(57.00)
Example


Quantity Discounts

300 499 $58.80 Ordering cost = $45
2(936)(45)
EOQ57.00 =
0.25(57.00)
Example

Quantity Discounts

300 499 $58.80 Ordering cost = $45
EOQ57.00 = 77 units
Example


Quantity Discounts

300 499 $58.80 Ordering cost = $45
EOQ57.00 = 77 units
Example

Quantity Discounts

300 499 $58.80 Ordering cost = $45
EOQ57.00 = 77 units
Example


Quantity Discounts

300 499 $58.80 Ordering cost = $45
EOQ57.00 = 77 units EOQ58.80 = 76 units
Example

Quantity Discounts

300 499 $58.80 Ordering cost = $45
Example


Quantity Discounts

300 499 $58.80 Ordering cost = $45
Example

Quantity Discounts

300 499 $58.80 Ordering cost = $45
EOQ57.00 = 77 units EOQ58.80 = 76 units EOQ60.00 = 75 units
Example


Quantity Discounts

300 499 $58.80 Ordering cost = $45
Example

Quantity Discounts

300 499 $58.80 Ordering cost = $45
Example


Quantity Discounts

300 499 $58.80 Ordering cost = $45
Q D
C= (H
(H) + (S
(S) + PD
2 Q
Example

Quantity Discounts

300 499 $58.80 Ordering cost = $45
75 936
C75 = [(0.25)($60.00)] + ($45) + $60.00(936)
2 75
Example


Quantity Discounts

300 499 $58.80 Ordering cost = $45
C75 = $57,284
Example

Quantity Discounts

300 499 $58.80 Ordering cost = $45
C75 = $57,284
300 936
C300 = [(0.25)($58.80)] + ($45) + $58.80(936)
2 300
Example


Quantity Discounts

300 499 $58.80 Ordering cost = $45
C75 = $57,284
C300 = $57,382
Example

Quantity Discounts

300 499 $58.80 Ordering cost = $45
C75 = $57,284
C300 = $57,382
500 936
C500 = [(0.25)($57.00)] + ($45) + $57.00(936)
2 500 Example


Quantity Discounts

300 499 $58.80 Ordering cost = $45
C75 = $57,284
C300 = $57,382
C300 = $56,999
Example

Quantity Discounts

300 499 $58.80 Ordering cost = $45
C75 = $57,284
C300 = $57,382
C300 = $56,999
Example

Inventory

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Engineering Services

Lean Manufacturing Elimam & Gaafar 2006/1

Lean Manufacturing Elimam & Gaafar 2006/2

Elimam and Gaafar 2006 1

The objective of this training program is

Lean Manufacturing Elimam & Gaafar 2006/3

Overview of Lean Manufacturing

Lean Manufacturing Elimam & Gaafar 2006/4

Elimam and Gaafar 2006 2

Lean Manufacturing Elimam & Gaafar 2006/5

What is Lean Manufacturing?

Lean production can be traced to the 1960s

The term itself was coined by MIT

Lean Manufacturing Elimam & Gaafar 2006/6

Elimam and Gaafar 2006 3

What is Lean Manufacturing?

Two of the authors of The Machine that

Lean Manufacturing Elimam & Gaafar 2006/7

What is Lean Manufacturing?

Lean production is a term that embraces

The term "lean production" was coined

Lean Manufacturing Elimam & Gaafar 2006/8

Elimam and Gaafar 2006 4

What is Lean Manufacturing?

According to another author of The

Lean Manufacturing Elimam & Gaafar 2006/9

Mass Production vs. Lean Production

Mass Production Lean Production

Lean Manufacturing Elimam & Gaafar 2006/10

Elimam and Gaafar 2006 5

Lean Thinking roots in the Toyota Philosophy

Doing it all for the Multi-skilling

Lean Manufacturing Elimam & Gaafar 2006/11

Lean Manufacturing Elimam & Gaafar 2006/12

Elimam and Gaafar 2006 6

Lean Manufacturing Elimam & Gaafar 2006/13

What is Total Productive Maintenance ( TPM )?

Total Productive Maintenance (TPM) is a

Lean Manufacturing Elimam & Gaafar 2006/14 14

Elimam and Gaafar 2006 7

Lean Manufacturing Elimam & Gaafar 2006/15 15

Elimam and Gaafar 2006 8

Achieve Zero Defects, Zero Breakdown

Lean Manufacturing Elimam & Gaafar 2006/17 17

Elimam and Gaafar 2006 9

Lean Manufacturing Elimam & Gaafar 2006/19 19

Direct benefits of TPM

Lean Manufacturing Elimam & Gaafar 2006/20 20

Elimam and Gaafar 2006 10

Indirect benefits of TPM

Lean Manufacturing Elimam & Gaafar 2006/21 21

Lean Manufacturing Elimam & Gaafar 2006/22 22

Elimam and Gaafar 2006 11

Seiri Organization Sort

Seiton Tidiness Systematize

Seiso Cleaning Sweep

Seiketsu Standardization Standardize

Shitsuke Discipline Self - Discipline

Lean Manufacturing Elimam & Gaafar 2006/23 23

At least 2/6 months, Once

High Once Per Day Locate at the workplace

As a result of this step, the search time is reduced

Elimam and Gaafar 2006 12