Managing World Class Operations by Partha Priya Datta Solutions to numericals

Sessions 1 & 2 Lean Tools and Theory of Constraints:

1. In a typical 7-day period, the planning department programmes a particular machine to work for
150 hours its loading time. Changeovers and set-ups take an average of 10 hours and breakdown
failures average 5 hours every 7 days. The time when the machine cannot work because it is waiting
for material to be delivered from other parts of the process (or IDLING) is 5 hours on average and
during the period when the machine is running, it averages 90 per cent of its rated speed. Three per
cent of the parts processed by the machine are subsequently found to be defective in some way.
What is the machines OEE?

Availability = (150-10-5)/150 = 0.9

Performance = 0.9*(135-5)/135 [0.9 because the machine loses out 10% of performance time due to
slow running speed] = 0.87
Quality = 100%-3% = 97% = 0.97
OEE=Availability X Performance X Quality = 76%

3. As local developers prepare for an increase in housing starts, they must anticipate their demand
for various materials. One such material is tile. Used in bathrooms, kitchens and for decoration, tiles
come in many shapes, colors and sizes. In order to accommodate the varying needs, the tile
manufacturer must schedule its production efficiently. Each month developers order 30000 boxes of
quarry tile, 15000 boxes of Italian mosaic tile and 45000 boxes of 4 bathroom tile. Determine a
mixed model sequence that will efficiently meet these needs. Assume 30 days a month.

Ratio of demand= Quarry:Mosaic:Bathroom = 2:1:3 (monthly)

Hypothetical calculation
Take LCM of 2, 1, 3 = 6
Find the individual frequency for each product type using the LCM as the total takt time
So in a cycle of 6 time units, Quarry needs to be produced twice, Mosaic once and Bathroom once.
Quarry release during a period of 6 time units: 0 3
Mosaic release during a period of 6 time units: 0
Bathroom release during a period of 6 time units: 0 2 4
Hence the sequence for production is: Bathroom, Quarry, Mosaic, Bathroom, Quarry and Bathroom.
In this sequence Bathroom comes first as it is the most demanded.
If we consider one piece flow, then this sequence will be repeated 15000 times per month.
However if we consider daily level production, daily 3000 units are to be produced and in ratio 2:1:3.
In that case this sequence will be repeated 500 times per day.

4. One supplier of Toyota is planning to implement Heijunka. Toyota has recommended that the
supplier cut the batch sizes from the current level of 60 down to 10. In order to achieve this, the
supplier should reduce setup time by what factor?

Q*/Q* = 60/10 = 6 (Q*= EOQ current and Q* = EOQ reduced) = (A*/A*)

A* = 36A*, Assuming setup cost is directly proportional to setup time. The setup time needs
to be reduced by a factor of 36 for batch size to be cut by 6.

5. The average daily demand for three products A,B and C are 480, 360 and 240 respectively. The
cells production rates are: 4 As in 1 minute, 10 Bs in 3 minutes and 10 Cs in 3 minutes. Assume a 8
hour daily shift of operation with two 10 minute breaks. The setup time required for each unit A, B
and C are respectively 7, 6 and 7 minutes. If we use container size of 20, 15 and 10 for A, B and C

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 Managing World Class Operations by Partha Priya Datta Solutions to numericals

respectively, how many production kanban cards are required for A, B and C assuming zero safety
factor?

A: 0.25 minutes per part, B: 0.3 minutes per part, C: 0.3 minutes per part
The total extended run time required for work cell = 480X0.25 + 360X0.3 + 240X0.3 = 300 min
Total available time per day for production = 480 minutes 20 minutes = 460 minutes
Time available for set-up = 460-300 = 160 minutes
Total Setup time for A-B-C sequence cycle = 7+6+7 = 20 minutes
The number of times the sequence cycle can be set up for A B and C = 160/20 = 8
The lot size that must be produced for each part is:
Part A lot size = 480pcs/day/8setups = 60
Part B lot size = 360pcs/day/8setups= 45
Part C lot size = 240pcs/day/8setups= 30
The manufacturing lead time for all parts is calculated as:
Part A: 7min setup + 15min run time per lot (60pcs @0.25) = 22 minutes
Part B: 6min setup + 13.5min run time per lot (45pcs @0.3) = 19.5 minutes
Part C: 7min setup + 9min run time per lot (30pcs @0.3) = 16 minutes
Hence, one sequence Mfg Lead time = 57.5 minutes (summing up the above times)= 57.5/460 =
0.125 days
Now the calculation of Kanbans is quite straightforward,
Part A= 480X0.125X(1+0)/20 = 3
Part B= 360X0.125X(1+0)/15=3
Part C=240X0.125X(1+0)/10=3

6. If lead time demand has mean of 100 and standard deviation of 6, and we want to avoid shortages
with 97.5% probability, what safety factor should we use?

Z value corresponding to 97.5% cumulative probability for a standard normal distribution = 1.96
Therefore safety stock = Z x lead time standard deviation = 1.96 x 6 = 11.76
Total inventory = lead time demand (DL) + Safety factor (S) x DL = 100 + 100 x Safety Factor
Hence, 11.76 = 100 x Safety Factor => Safety Factor = 0.12

Handout #2
1. A retail website sells a variety of products including clothes, electronics, furniture, sporting goods,
books etc. An average customer order is $47. Weekly total variable costs are $365000 and weekly
fixed costs are $85000. The company averages 18400 orders per week and 12% of all orders are
returned for a variety of reasons. 30% of all returned orders are turned around and refilled correctly
per the customers desire, but at a cost of $8 per order, while the remaining 70% of the returned
orders are lost. In addition it is estimated that half of the customers associated with lost orders will
not return to the website at a cost of $15 per order.
a) Determine the weekly cost of poor quality for the website.
b) The company can implement a quality improvement programme for $800000 a year that will
reduce the % of returned orders to 2%. Assuming 30% of all returned orders are turned around at
same cost and remaining are lost forever at the same cost as before, should the company invest in
this programme?

Solution:
Potential profit/wk: $47x18400-$365000-$85000=$414800

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 Managing World Class Operations by Partha Priya Datta Solutions to numericals

Actual Profit/wk (a):

Yield= Good Units + reworked units = 88%+12x0.3% = 91.6%
Total Revenue = $47x18400x0.916 = $792156.8
Total cost of rework after return = $8x18400x3.6/100=$5299.2
Total cost of lost orders = $15x18400x8.4x0.5/100 = $11592
Profit/wk = $792156.8-$365000-$85000-$5299.2-$11592=$325265.6
Hence Cost of Quality/wk =$414800 - $325265.6 = $89534

(b)
Actual Profit/wk after implementing quality improvement programme:
Yield= Good Units + reworked units = 98%+2x0.3% = 98.6%
Total Revenue = $47x18400x0.986 = $852692.8
Total cost of rework after return = $8x18400x0.6/100=$883.2
Total cost of lost orders = $15x18400x1.4/100 = $3864
Total cost of quality improvement programme/wk = $800000/50 (assuming 50wk/year) = $16000
Profit/wk = $792156.8-$365000-$85000-$883.2-$3864-$16000=$381945.6
As the profit/week in second case is larger than that in a, we must go ahead with the programme

3. Case: MBPF Doors Inc.

MBPF Inc. is a high tech manufacturer of steel doors sold to industrial warehouses as well as to those
looking for a residential garage door. They pride themselves on the high quality of their products and
their professional after-sales service and have built a strong reputation as a premier steel door
manufacturer, commanding 15% market share. Lately, however there were reports of customer
dissatisfaction from the field. The sales manager explained that, several customers were unhappy
with the door quality in terms of safety, durability and ease of operation; others were annoyed with
the higher cost and still many complained about the difficulty in getting the deliveries on time or
receiving prompt service when something went wrong with installation or operations. The CEO
concluded that it is time to proactive by identifying and elimination the root causes of customer
dissatisfaction.

Suppose the MBPF team collects data on the actual weight of 100 standard garage doors
sampled randomly from monthly production of almost 2000 doors. Suppose 5 doors from each
of the past 20 days production runs were weighed at same 2 hour time intervals (7am, 9am,
11am, 1pm, 3pm) and recorded. The average and overall standard deviation of the 20 sample
averages came out to be 82.5 kg and 4.2 kg respectively. Can you set the control limits for the
production process? Assuming a normal distribution of weights of garage door produced by the
production process, what % of samples would be falling within the control limits? How many
hours on average will pass by before an assignable cause for weight variation is detected?
Answer:
82.5+3*4.2/sqrt(5) = 88.13, 82.5-3*4.2/sqrt(5) = 76.87
Zh= (88.13-82.5)/4.2/sqrt(5)=0.6; zl= -0.6; 99.7% within control; 0.3% of samples will be
out of control =>long time to detect an out of control sample
Suppose the design engineers determine that a standard garage door weighs a minimum of 75kg
and a maximum of 85kg, specifying its design quality. Calculate process capability and explain
the state of the process. What % of doors do not fall within the specifications assuming normal
distribution for the garage door weight (with above mean and s.d.)?
Cpk = min (85-82.5/3*4.2; 82.5-75/3*4.2) = 0.1984, 0.6 sigma process. Hence it is grossly
incapable of meeting the specifications
Zh = (85-82.5)/4.2 =0.5952; Zl=(75-82.5)/4.2=-1.78, 68.7% are out of spec
If the process is correctly centered at 80kg, compute Cp and sigma capability

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 Managing World Class Operations by Partha Priya Datta Solutions to numericals

0.4, 1.2
What % of doors now conform to specifications?
76.6%
In order for the door making process to be a six sigma process what should be the standard
deviation? 0.8333
What will be the control limits once the process becomes a six sigma process? How many hours
on average will pass by before an assignable cause for weight variation is detected?
80+3*0.8333/sqrt(5)=81.12, 78.89
Same result
If the mean shifts to 82.5 now, only 0.012% will be within CL

THEORY OF CONSTRAINTS
Problem on finding the maximum weekly profit done in 3 rd session, slide 8
I hope all of you got the reason behind producing 100 P and 30 Q within the 2400 minutes weekly
assigned for each machine A B C D. So the total maximum weekly profit is:
100X45 + 30X60 6000 = $300/-

Problem on Slide 9
a)Assuming a batch size of 50
Capacity of step 1 (in units/minute): 50 units/(50x1+20m setup) =0.714285714
Capacity of step 2 (in units/minute): 50 units/ (50x2) =0.5
Capacity of step 3 (in units/minute): 50/(50x1.5)= 0.666666667
The total capacity of the process is 0.5 units per minute (30 per hour) because that is the minimum
capacity among the three process steps.

b)

Time to process 20 parts from an empty system with batch size of 50 units:

Note: All 50 parts must finish step 1 before moving to step 2, and all 50 must finish step 2 before
moving to step 3.
Time spent in step 1: 70
Time spent in step 2: 100
Time to finish 20 units in step 3: 30
Total time to finish 20 units: 200 minutes

c) Time to process 20 parts from an empty system with batch size of 50 units:
Note: Parts can move to steps 2 and 3 whenever they are done (Transfer batch size of 1)
This is exactly like the problem of computing the time to complete X units in an empty system.

Including the setup, the first unit takes 20+1+2+1.5=24.5 minutes. After that, units are finished every
2 minutes.
Time to process 20 parts: 62.5 minutes