A Process Of On-Going Improvement (POOGI) - Part 8

Once the lower level of WIP is achieved (using Theory of Constraints) which takes about two weeks, as a job is processed through milling, this triggers the release of another job to the floor to begin processing.

What is the effect?

Do you realize that the amount of work-in-process on the shop floor is directly related to production lead-time? In this example, within just a couple of weeks, lead-time dropped in half, from 4 to 2 weeks. WIP inventory dropped in half as well.

Of course, in this simple example and in the real world, dropping WIP levels will cause some work centers to go idle from time-to-time. Before, with higher WIP levels, we were just masking the reality that different work centers had different capacities. With lower WIP levels, that reality is now exposed and there is an opportunity for further process improvement.

We still haven’t addressed how Goldratt's Drum-Buffer-Rope yields additional available capacity. It does so by revealing hidden capacity on the constraint. The time a job spends waiting is reduced. With focus on the constraint resource, actions are taken that cause better utilization. When everyone knows that the constraint is what limits the net profit of the company as a whole, focus is provided that is unavailable when the shop floor is flooded with work and everything is a priority.

...to be continued.

Here's to maximizing YOUR profits!
Dr Lisa Lang
(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.

A Process Of On-Going Improvement (POOGI) - Part 7

Let’s take a simple environment as an example. Say that there are seven operations in this environment:

1. customer service receives and enters the order,
2. engineering programs the part, and when released the order processes through
3. lathes,
4. mills,
5. outside heat treat,
6. inspection, and
7. packaging/shipping.

Let’s assume the starting condition is a quoted lead-time of 4 weeks with due-date performance of 80%. Work-in-process (WIP) inventory is $100,000.

After an initial Goldratt Theory of Constraints analysis, we determine that milling is the constraint resource. In order to protect the mills from running out of work, we decide we always want a buffer of ready-to-process material in front of milling. And we want to release new work to the floor only at the rate milling is processing.

Since there is more WIP on the floor than desired, our first action is to not allow any new work to be released to the floor! We have a rule of thumb to reduce WIP to about half the level of WIP we started with. The focus is not starting new jobs, but finishing the jobs that have been started.

...to be continued.

Here's to maximizing YOUR profits!

Dr Lisa Lang

(c)Copyright 2008, Dr Lisa, Inc. All rights reserved.