Kevin Tame

Operations Final

Question 1
There are three different diagramming approaches of process flow that can individually
teach valuable distinct lessons about a process. Flow Charts, Value Stream Maps and Process
Nets (TOC) all serve a different purpose in making improvements to a process. One approach by
itself can improve a process but using a combination of all three can help a company make
appropriate improvement decisions.

Flow Charts (Visually Seeing the Process)

Understanding how a process works is one thing, but to understand how to improve it is
another. Visually looking at a process by creating a flow chart can help eliminate any confusion
about a process and provide opportunity for its creators to show they actually know the process.
Most importantly, visually seeing the process helps to identify areas of improvement. Flow
charts are easy to understand diagrams that help individuals see how the steps in a process fit
together and how to execute improvement. A flow chart usually uses only three types of symbols
to identify what is happening in the process. Circles are used for starting and ending points,
triangles are used for decisions points (yes/no decisions), and squares are used to describe what
action is happening in the process. The drawback to flow charts is there is no actual data that is
being gathered such as time and cost. Whereas the upside to creating a flow chart is they are easy
to create and can quickly identify problem areas. The general idea of a flow chart is that they are
designed to show the actual flow of a process.

Value Stream Maps (Creating Value to the End User)

Values stream mapping is a technique derived from the principles of lean manufacturing
and is used to depict the material and informational flow of a process. The main 5 principles of
Lean are to specify value, identify the value stream, make value steps flow, require customer pull
to activate production and strive for perfection. Value stream mapping helps with identifying the
value stream and making value steps flow. In order to create a value stream map a company must
first discover what value the customer wants. Creating a map without this in mind inhibits the
purpose of the map. Next the company needs to create a map that has all of the necessary
processes that bring value to the customer. There are three necessary steps that are set to
determine what actions are needed to bring about a product. They are problem solving,
information management and physical transformation. It is important to consider that the value
stream is a record of all value and non value added processes that are required to bring a product
from raw materials into the arms of the customer. Whereas the map is the visual tool that is used
to represent this process. The process to creating a value stream map consists of a number of
tools. First, a company must select a product family in which to work with. They must identify
all required items and processing steps and equipment. Second, a current-state map that shows
how the process is working needs to be created. This will help to show where improvements can
be made. Third, drawing the future state (the desired state) by showing the improvements and
optimal set up of the map. The pros of using the value stream maps is that the processes that truly
add value are identified and the processes that do not add value can be eliminated or minimized.
The primary focus of the VSM is to create value for the end user. The drawback of using the
VSM is that it does not focus on flow or efficiency. It strives for this but does not worry about it
as much as a process net.

Process Nets (Getting the Flow Right)

Process nets are used to help with an analysis of a process using theory of constraints
(TOC). Theory of constraints is a method geared towards helping companies achieve their
overall goal (“Make money now and in the future”). Three global performance measure are used
to measure the success of a company; Throughput, Inventory, and Operating Expense. In order
to increase these global measures a company must follow the five steps of TOC. The steps are
identify the constraint, decide how to exploit the constraint, subordinate all decisions so that they
align with the new decision, elevate the constraint, and do not let inertia become a constraint. By
closely following these steps a process can be optimized and losses can be turned into gains. A
process net is essential in guiding the process of locating constraints. It helps to see the process
and arrange the order in which things happen from raw materials to the final product. Process
nets show all products that are manufactured at a plant on the same sheet. The purpose of this is
to show how each part of the process is influenced by other processes. Flow charts and value
stream maps might only focus on one process, where as process nets must focus on every part of
the system in a plant. Process nets move the creators to establishing better flow to a process. The
pros of doing this are that it helps to optimize a process in regards to all of the constraints that
surround it. The drawback is that a process might not add value to a customer. As long as flow is
the focus then value takes a back seat. The ultimate goal of TOC is to make money, however it
sometimes forgets about the underlying principle of adding value to the end user.

Overview
Flow charts, value stream maps and process nets all serve a purpose. Each one is distinct
in how it drives thinking and decisions. Flow charts ultimately help creators realize what is really
going on in a process. Value stream maps show the steps that are value added and non value
added and help to optimize the value to the end user. Process nets drive the idea of flow and
show that compatibility amongst other parts and machines of the company can act as constraints.
Picking one method and implementing it to a process will provide the results that each method
typically delivers. However, combing the efforts of all methods can help a company visualize a
process, implement value added steps, and increase the efficacy of flow to the customer.
Question 2 part A

Identify
The first part of the process is involved with identifying the constraints. There are various types
of constraints and each constraint has a different effect on the system. However, they all limit the
amount of money a company can make. The types of constraints are market constraints, material
constraints, capacity constraints, logistical constraints, and managerial constraints. Constraints
such as market and material constraints are often difficult to control. Capacity, logistical, and
managerial are often easier to address but often are still difficult to identify. Simply, looking at
the process is often very difficult to determine what is actually happening and what constitutes a
constraint. Creating a process net can aid in this process and help identify constraints. Next by
taking the information that the process net provides some simple calculations can help identify
the constraints on the system. Below is a chart that contains the necessary data in which
constraints or bottlenecks on the system can be located.

Original Process and Current Utilization

Original Process

ID A B C Required Available Utilization Extra Set up Set ups

Capacity time time

M1 30 80 2400 20 60 1200 15 70 1050 4650 4800 96.9% 150.0 120.0 1.3

M2 15 80 1200 15 60 900 22 70 1540 3640 4800 75.8% 1,160.0 60.0 19.3

M3 0 80 0 50 60 3000 40 70 2800 5800 4800 120.8% -1,000.0 30.0 -33.3

M4 20 80 1600 0 60 0 10 70 700 2300 2400 95.8% 100.0 15.0 6.7

M5 35 80 2800 6 60 360 0 70 0 3160 2400 131.7% -760.0 10.0 -76.0

There is a constraint on two machines (M3 and M5). There is also no available extra time for set
ups on machine 3 and 5

Exploit

Once the market constraints and the capacity constraints are identify, the next step in the process
is to decide how to exploit the constraint and optimize profitability. First off, the products need to
be ranked on which product makes the most per minute. The below calculations show that
product A has the most money per minute ($9.42).

Money earned per minute of each product

Product A
Capacity ➔ Through Put / CU : A = (380-50)/ ⎹M3 min - M5 min⎹ = $330/ 35 = $9.42 per min
Product B
Capacity ➔ Through Put / CU : B = (440-90)/ ⎹M3 min - M5 min⎹ = $350/ 56 = $6.25 per min
Product C
Capacity ➔ Through Put / CU : C = (390-65)/ ⎹M3 min - M5 min⎹ = $325/ 40 = $8.12 per min

A makes $9.42 a minute but is not able reach 80 hours a week because the lack of available
capacity for M5. Lowering A to 68 Hours per week will give 2380 minutes on M5. This
however will result in product B being unable to be produced because of no extra available
capacity

B is not a very high producer per minute ($6.25) due to the constraints on M3 and M5. It is not
worth the cost of pulling product from C or from A because they make more per minute.
However, completely shutting B down my maximizing A will result in large losses.

C makes $8.12 per minute. It has a constraint on M3 but can take the necessary capacity away
from B in order to produce at market demand. At $8.12 it is the best option to produce at market
demand of 70 hours.

C will operate at 70 so B and A need to be adjusted to have the capacity available for each
product. Even though it is already clear that product C will provide the optimal product mix,
check figures are displayed below, by optimizing for products A and product B, in order to
eliminate any doubt the product mix that is optimized for C is the best
Subordinate

Subordinate all other processes in order to align the entire system to support the decision of
getting rid of the constraints is very important. If there is no agreement amongst processes then it
is likely that the constraints will continue to be a problem. Below are the check figures and actual
final optimal mix that will be used to increase the opportunity to make money.

Check Figures Optimizing Product A (Product Mix 1)

Adjustment of product A.
2400 available capacity and A needs 2800 to operate at 80 hours a week.
2400/35 min = 68.57 ≈ 68
At that product mix of 68 it will completely kill product B

Product Mix 1 (less product B)

Product A (68)
Product B (0)
Product C (70)

Profit of Product Mix 1

A Through Put/ hours per week = 330 68 22440

B Through Put/ hours per week = 350 0 0

C Through Put/ hours per week = 325 70 22750

OE -11000

Total Profit at A and C product mix 34,190

Product Mix 1 Results

ID A B C Required Available Utilization Extra Set up Set ups

Capacity time time

M1 30 68 2040 20 0 0 15 70 1050 3090 4800 64.4% 1,710.0 120.0 14.3

M2 15 68 1020 15 0 0 22 70 1540 2560 4800 53.3% 2,240.0 60.0 37.3

M3 0 68 0 50 0 0 40 70 2800 2800 4800 58.3% 2,000.0 30.0 66.7

M4 20 68 1360 0 0 0 10 70 700 2060 2400 85.8% 340.0 15.0 22.7

M5 35 68 2380 6 0 0 0 70 0 2380 2400 99.2% 20.0 10.0 2.0

 Check Figures Optimizing Product B (Product Mix 2)

Adjustment to product A to optimize B (M5)

2400 - [360 + 3(10)] = 2010/35 = 57.43 ≈ 57

Adjustment to product C to optimize B (M3)

4800 - [3000 + 2(30)2] = 1680/40 = 42

Product Mix 2
Product A (57)
Product B (60)
Product C (42)

Profit of Product Mix 2

A Through Put/ hours per week = 330 57 18810

B Through Put/ hours per week = 350 60 21000

C Through Put/ hours per week = 325 42 13650

OE -11000

Total Profit at A and C product mix 42,460

Product Mix B Results

ID A B C Required Available Utilization Extra Set up Set ups

Capacity time time

M1 30 57 1710 20 60 1200 15 42 630 3540 4800 73.8% 1,260.0 120.0 10.5

M2 15 57 855 15 60 900 22 42 924 2679 4800 55.8% 2,121.0 60.0 35.4

M3 0 57 0 50 60 3000 40 42 1680 4680 4800 97.5% 120.0 30.0 4.0

M4 20 57 1140 0 60 0 10 42 420 1560 2400 65.0% 840.0 15.0 56.0

M5 35 57 1995 6 60 360 0 42 0 2355 2400 98.1% 45.0 10.0 4.5

 Final Product mix Optimizing Product C (Product Mix 3)

Adjustment of product B to optimize C

4800 - [2800 + 2(30)2] = 1880/50 = 37.6 ≈ 37

Usage of M5 for Product B with new Product B adjustment

(6)(37) = 222 minutes required of M5 to produce Product B at product mix 37

Adjustment of Product A to optimize C and B

2400- [222+ 3(10)] = 2148 minutes for Product A to use
2148/35 min = 61.37 ≈ 61

Product Mix 3
Product A (61)
Product B (38)
Product C (70)

Profit of Product Mix 3

A Through Put/ hours per week = 330 61 20130

B Through Put/ hours per week = 350 37 12950

C Through Put/ hours per week = 325 70 22750

OE -11000

Total Profit at A and C product mix 44,830

Product Mix C Results

ID A B C Required Available Utilization Extra Set up Set ups

Capacity time time

M1 30 61 1830 20 37 740 15 70 1050 3620 4800 75.4% 1,180.0 120.0 9.8

M2 15 61 915 15 37 555 22 70 1540 3010 4800 62.7% 1,790.0 60.0 29.8

M3 0 61 0 50 37 1850 40 70 2800 4650 4800 96.9% 150.0 30.0 5.0

M4 20 61 1220 0 37 0 10 70 700 1920 2400 80.0% 480.0 15.0 32.0

M5 35 61 2135 6 37 222 0 70 0 2357 2400 98.2% 43.0 10.0 4.3

The optimal product mix is A = 61 B = 38 and C = 70. Doing it this way the company is able to
make a profit of $44,830.
Question 2 part B

Elevate
In order to elevate the constraint it is recommended that the device that decreases time by 10%
be purchased. In order to determine which product mix and which machine is suited for the
upgrade various combinations of check figures have been implemented below. The ideal set up
has mostly revealed itself through previous calculations but once again in order to confirm
intuition check figures have been provided.

Check Figures Optimizing Product B (Product Mix 4) with 10% Decrease of Machine 3 PC

Adjustment to product A to optimize B (M5)

2400 - [360 + 3(10)] = 2010/35 = 57.43 ≈ 57

Adjustment to product C to optimize B (M3)

4800 - [3000 + 2(30)2] = 1680/36 = 46.6 ≈ 46

Product Mix 4
Product A (57)
Product B (60)
Product C (46)

Profit of Product Mix 4

A Through Put/ hours per week = 330 57 18810

B Through Put/ hours per week = 350 60 21000

C Through Put/ hours per week = 325 46 14950

OE -11000

Total Profit at A and C product mix 43,760

Product Mix 4 Results with 10% Decrease of Machine 3 (Product C)

ID A B C Required Available Utilization Extra Set up Set ups

Capacity time time

M1 30 57 1710 20 60 1200 15 46 690 3600 4800 75.0% 1,200.0 120.0 10.0

M2 15 57 855 15 60 900 22 46 1012 2767 4800 57.6% 2,033.0 60.0 33.9

M3 0 57 0 50 60 3000 36 46 1656 4656 4800 97.0% 144.0 30.0 4.8

M4 20 57 1140 0 60 0 10 46 460 1600 2400 66.7% 800.0 15.0 53.3

M5 35 57 1995 6 60 360 0 46 0 2355 2400 98.1% 45.0 10.0 4.5

Check Figures Optimizing Product C (Product Mix 5) with 10% Decrease of Machine 3 PB

Adjustment of product B to optimize C

4800 - [2800 + 2(30)2] = 1880/45 = 41.7 ≈ 41

Usage of M5 for Product B with new Product B adjustment

(6)(41) = 258 minutes required of M5 to produce Product B at product mix 41

Adjustment of Product A to optimize C

2400- [258+ 3(10)] = 2112 minutes for Product A to use
2112/35 min = 60.34 ≈ 60

Product Mix 5
Product A (60)
Product B (41)
Product C (70)

Profit of Product Mix 5

A Through Put/ hours per week = 330 60 19800

B Through Put/ hours per week = 350 41 14350

C Through Put/ hours per week = 325 70 22750

OE -11000

Total Profit at A and C product mix 45,900

Product Mix 5 Results with 10% Decrease of Machine 3 (Product B)

ID A B C Required Available Utilization Extra Set up Set ups

Capacity time time

M1 30 60 1800 20 41 820 15 70 1050 3670 4800 76.5% 1,130.0 120.0 9.4

M2 15 60 900 15 41 615 22 70 1540 3055 4800 63.6% 1,745.0 60.0 29.1

M3 0 60 0 45 41 1845 40 70 2800 4645 4800 96.8% 155.0 30.0 5.2

M4 20 60 1200 0 41 0 10 70 700 1900 2400 79.2% 500.0 15.0 33.3

M5 35 60 2100 6 41 246 0 70 0 2346 2400 97.8% 54.0 10.0 5.4

 Check Figures Optimizing Product A (Product Mix 6) with 10% decrease of Machine 5

Adjustment of product A.
2400 available capacity and A needs 2800 to operate at 80 hours a week.
2400/31.5 min = 76.1 ≈ 76
At that product mix of 75 it will completely kill product B

Product Mix 6 (Less Product B)

Product A (76)
Product B (0)
Product C (70)

Profit of Product Mix 6

A Through Put/ hours per week = 330 76 25080

B Through Put/ hours per week = 350 0 0

C Through Put/ hours per week = 325 70 22750

OE -11000

Total Profit at A and C product mix 36,830

Product Mix 6 Results With 10% Decrease on Machine 5

ID A B C Required Available Utilization Extra Set up Set ups

Capacity time time

M1 30 76 2280 20 0 0 15 70 1050 3330 4800 69.4% 1,470.0 120.0 12.3

M2 15 76 1140 15 0 0 22 70 1540 2680 4800 55.8% 2,120.0 60.0 35.3

M3 0 76 0 50 0 0 40 70 2800 2800 4800 58.3% 2,000.0 30.0 66.7

M4 20 76 1520 0 0 0 10 70 700 2220 2400 92.5% 180.0 15.0 12.0

M5 31.5 76 2394 5.4 0 0 0 70 0 2394 2400 99.8% 6.0 10.0 0.6

 Optimizing Product B (Product Mix 7) with 10% Decrease of Machine 5

Adjustment to product A to optimize B (M5)

2400 - [360 + 3(10)] = 2010/31.5 = 63.81 ≈ 63

Adjustment to product C to optimize B (M3)

4800 - [3000 + 2(30)2] = 1680/40 = 42

Product Mix 5 (Less Product B)

Product A (64)
Product B (60)
Product C (42)

Profit of Product Mix 7

A Through Put/ hours per week = 330 63 20790

B Through Put/ hours per week = 350 60 21000

C Through Put/ hours per week = 325 42 13650

OE -11000

Total Profit at A and C product mix 44,440

Product Mix 5 Results with 10% Decrease of Machine 7

ID A B C Required Available Utilization Extra Set up Set ups

Capacity time time

M1 30 63 1890 20 60 1200 15 42 630 3720 4800 77.5% 1,080.0 120.0 9.0

M2 15 63 945 15 60 900 22 42 924 2769 4800 57.7% 2,031.0 60.0 33.9

M3 0 63 0 50 60 3000 40 42 1680 4680 4800 97.5% 120.0 30.0 4.0

M4 20 63 1260 0 60 0 10 42 420 1680 2400 70.0% 720.0 15.0 48.0

M5 31.5 63 1985 5.4 60 324 0 42 0 2308.5 2400 96.2% 91.5 10.0 9.2
 Optimizing Product C (Product Mix 8) with 10% Decrease of Machine 5

Adjustment of product B (M3) to optimize C

4800 - [2800 + 2(30)2] = 1880/50 = 37.6 ≈ 37

Usage of M5 for Product B with new Product B adjustment

(5.4)(37) = 199.8 minutes required of M5 to produce Product B at product mix 37

Adjustment of Product A (M5) to optimize C and B

2400 - [199.8+ 3(10)] = 2170.2 minutes for Product A to use
2170.2/31.5 min = 68.9 ≈ 68

Product Mix 8
Product A (68)
Product B (37)
Product C (70)

Profit of Product Mix 8

A Through Put/ hours per week = 330 68 22440

B Through Put/ hours per week = 350 37 12950

C Through Put/ hours per week = 325 70 22750

OE -11000

Total Profit at A and C product mix 47,140

Product Mix 8 Results

ID A B C Required Available Utilization Extra Set up Set ups

Capacity time time

M1 30 68 2040 20 37 740 15 70 1050 3830 4800 79.8% 970.0 120.0 8.1

M2 15 68 1020 15 37 555 22 70 1540 3115 4800 64.9% 1,685.0 60.0 28.1

M3 0 68 0 50 37 1850 40 70 2800 4650 4800 96.9% 150.0 30.0 5.0

M4 20 68 1360 0 37 0 10 70 700 2060 2400 85.8% 340.0 15.0 22.7

M5 31.5 68 2142 5.4 37 200 0 70 0 2342 2400 97.6% 58.2 10.0 5.8

This product mix is the highest optimization that is possible with including a 10% increase to
machine 5. The total profit of this process is $47,140
To show that the machine is worth the purchase the calculations below show that the payback
period is 43.29 weeks. This is a very short time and moving forward with the purchase is
recommend.

Payback for Machine Add On

Without purchasing the machine the optimal product mix is:

Product A (61)
Product B (37)
Product C (70)

This product mix will produce a net profit of $44,830. By putting the machine on M5 there is a
optimal product mix of

Product A (68)
Product B (37)
Product C (70)

By adding the $100,000 add on to Machine 5 there will be an increase to Product A by 7. This
will result in the new product mix profit to be 47,140.

Payback Period of Adding 10% Decrease on Time to Machine 5

Profit Per Product A Additional Product A Total Profit Cost of Machine add on Payback Weeks

$330 7 $2310 $100,000 43.29

Paying off this machine will not take very long at all (33.29 weeks). It is recommended that the
company purchase this part and apply it to machine 5.
Notes

Assumption: I have made a few assumptions in solving this problem the biggest being that I
assumed that putting the 10% booster could only go on one machine. For example, if I had
decided to put it on machine 3 than I could only put it on one of the machines and not both of
them. Therefore, machine 3 could only been on Product B or C. With this same assumption I am
assuming that if I apply the booster to machine 5 than I can apply the 10% decrease of time to
both products A and B because there is only one machine 5.

Disclaimer: The way in which this question has been answered is a reflection of the process by
which it evolved. Even though information that is not completely pertinent to the final solution is
presented here, it was an essential function in the process of coming to the correct conclusion.