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BUS 741: Questions for The Gold Mine

Discussion 1 Questions (Chapters One & Two)

Chapter One: Profit Is King, But Cash Rules

1. Why is Phil’s company (Industrial Extreme Vacuum) running low on cash? What are the three
ways of turning around a company that is faced with a cash crunch? Have you ever worked at a
company faced with a cash crunch? If so, what approaches did the company use to deal with the
cash crunch? Did those approaches work well? Why or why not?

Chapter Two: Gold in the Flow

1. Cores need to cool down for 24 hours, thus representing 24 hours’ worth of cash tied up in
inventory. Why is this cool down time harmful to cash flow? How does this cool down time
affect cash-to-cash-cycle as described in Chapter 3 of Supply Chain Management: Strategy,
Planning, and Operation (Chopra & Meindl, 2013)?

2. Phil mentions that his company has had only five defects out of 1,000 units sold. What would
happen if your company had 5 defects out of 1,000 units sold (for a manufacturing company) or 5
out of 1,000 customers dissatisfied (for a service company)?

3. Dad discusses the concept of adding value. As defined by Meredith and Shafer (2013, p. 9) value-
added activities generally include those activities that add value to the inputs of a process. They
list four ways to add value: (a) Alter: physical (e.g., change structurally), sensual (e.g., through
heating, cooling, music, or beauty), or psychological (e.g., from feelings of worth or friendship).
(b) Transport: Locating an item somewhere other than where it is currently. (c) Store:
Maintaining an item in a protected environment for some period of time, e.g. keeping stock
certificates in a safety deposit box, keeping a pet boarded in a kennel, or providing a hotel room
for a guest. (d) Inspect: Understanding an entity’s properties (e.g., through jewelry appraisals,
medical exams, & home inspections).

Nonvalue-added activities can be necessary to provide the desired output (e.g., clerical
procedures) or not necessary (e.g., waiting for a doctor) (Meredith & Shafer, 2013, p. 182).

Provide examples from your company of each of the three types of activities: value-added,
nonvalue-added and necessary, and nonvalue-added and not necessary.

4. Provide examples from your company of the most costly of the seven types of muda waste:
overproduction, workers waiting, excess transport, overprocessing (e.g., wasted time and steps),
unnecessary inventory, unnecessary worker motions (e.g., searching, selecting, picking up,
loading/unloading, and repositioning), and defects.
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5. The Lead Time formula at the top of p. 54 is given as:

Lead Time = Total WIP / Production Rate.

This formula, known as Little’s Law, is presented in an equivalent format in Chapter 3 (p. 47) of
the Chopra and Meindl (2013) text. The format that they use follows:

Average Inventory (I) = Average Throughput (D) * Average Flow Time (T).

Note: Average Inventory is equivalent to Total WIP, Average Throughput is equivalent to

Production Rate, and Average Flow Time is equivalent to Lead Time in the Lead Time formula.

Based on Little’s Law, what are the two ways that the company (Industrial Extreme Vacuum)
could decrease the average flow time (lead time) for a mechanism in its process? Which would
you focus on first? Why?

Discussion 2 Questions (Chapter Three)

Chapter Three: Takt Time

1. On pp. 68-71, the author describes an incident concerning Dad’s suggestion to use stopwatches to
time the operators. What went wrong and why? Have you seem a similar type of incident in the
workplace? If so, describe that problem.

2. On p. 77 is the formula for takt time (time between completed mechanisms) :

Takt Time = Available Daily Production Time / Daily Customer Demand.

What would cause a decrease in takt time? What happens to the number of operators needed as
takt time decreases?

3. Describe the other two general types of waste discussed on pp. 80-81. Have you worked at a
company that has tried to address either of those two types of waste? If so, how? If not, why not?

4. Define the concept, “Zero Defects Accepted,” as discussed by Dad. What are the advantages and
disadvantages of applying this concept?

5. On p. 88, Dad discusses counting defects per million opportunities at each stage of the assembly
process (this is a Six Sigma concept). Meredith and Shafer (2013, p. 141) define Defects per
Million Opportunities (DPMO) as follows:

𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐷𝑒𝑓𝑒𝑐𝑡𝑠
𝑥 1,000,000
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑈𝑛𝑖𝑡𝑠 𝑥 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑂𝑝𝑝𝑜𝑟𝑡𝑢𝑛𝑖𝑡𝑖𝑒𝑠
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Opportunities should include defects that are meaningful to the customer and that actually have
occurred in the past.
Now, try to determine the DPMO associated with a stay at a hotel for the following scenarios.
For each scenario, you should assume that the manager took a random sample of 100
customers.

(a) The process manager defined seven categories of defects corresponding to the seven stages of
the service delivery process: Hotel Reservation, Check-in, Room Cleaning, Room Supplies,
TV, Room Service, and Checkout. There were 200 customer complaints related to the seven
categories of defects. What is the DPMO of this process?
(b) Alternatively, assume that the process manger divided the seven categories into 33 specific
types of defect opportunities that have occurred. There were 200 customer complaints related
to the 33 defect opportunities. What is the DPMO of this process now?
(c) The process manager decided to add 10 other types of defect opportunities to the list of 33,
even though these 10 defects have never occurred and are highly unlikely to occur. What is
the DPMO of this process now?

Do we want DPMO to increase or to decrease? What happens to DPMO if we include

opportunities for defects that never occur?

6. What is the relationship between minimum repeatable time and takt time?

Chapter Three: Takt Time

1. Define the concept, “Zero Defects Accepted,” as discussed by Dad. What are the advantages and
disadvantages of applying this concept?

Discussion 3 Questions (Chapters Four & Five)

Chapter Four: Standardize Work

1. What are the elements of standardized work? What are the advantages and disadvantages of
implementing standardized work?

2. Have you ever worked at a company that has tried to implement standardized work? Describe
how that implementation went.

3. What are the components of a 5S system? Why is it difficult to maintain a 5S system? How is the
5S System related to standardized work?

Chapter Five: It’s All About the People

1. What is kaizen? What is the “zero investment” rule? Have you been part of a kaizen event at
work? If so, describe that event and its results.
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2. What are the differences between cost savings and cost cutting? What are the key components to
achieving cost savings?

3. What are team leaders and what are their responsibilities?

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Discussion 4 Questions (Chapter Six)

Chapter Six: Level to Pull

1. Why is Dad opposed to running two parallel lines, instead of one line, to produce the increased
number of STR mechanisms? Why is Amy in favor of running two parallel lines?

2. What is Dave doing to cause an increase in the inventory of mechanisms? Why is he doing this?

3. How does a pull system differ from a Materials Requirements Planning (MRP) system?

4. Dad discusses how to level flow in this chapter. Dad also discusses the need to mix and match the
orders going onto the conveyor to avoid the inventory build-up. Meredith and Shafer (2013)
discuss this concept also, i.e., mixed-model assembly, a process by which items are produced
smoothly throughout the day. The approach taken by Meredith and Shafer (2013, pp. 187-188) is
based on producing some number of each product in a cycle that repeats throughout the shift. An
example of their approach follows.

Given: Company XYZ sells three products: A, B, and C. The monthly demand for these products is 800,
600, and 400 units, respectively. The company operates its assembly line 20 days per month and 2 shifts
per day. Each shift is 480 minutes, with two 15-minute breaks per shift. How should production be
scheduled?

Step 1: Determine the daily production requirements per shift. How many shifts are there per month?
Answer: 20 working days per month x 2 shifts/day = 40. Divide each product’s monthly demand by 40 to
determine the production requirements per shift.

Product A Production per Shift = 800 / 40 = 20 units.

Product B Production per Shift = 600 / 40 = 15 units.

Product C Production per Shift = 400 / 40 = 10 units.

Step 2: Find the Greatest Common Divisor of the production values from Step 1: 20, 15, & 10.

The Greatest Common Divisor = 5. There will be 5 repeating production cycles per shift.

Step 3: Divide the values from Step 1 by the Greatest Common Divisor.

Product A: 20 / 5 = 4 units per cycle.

Product B: 15 / 5 = 3 units per cycle.

Product C: 10 / 5 = 2 units per cycle.

The production cycle will repeat 5 times per shift. Each cycle will include 4 units of A, 3 units of B, and 2
units of C. Given that each shift consists of 450 minutes actual working time and the production rate per
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shift must equal 45 units, the takt time will equal 10 minutes/unit (450 minutes / 45 units). Each cycle will
take 90 minutes (9 units x 10 minutes/unit).

Step 4: Schedule production for each cycle.

Option 1: AAAABBBCC. Advantage: Fewer changeovers. Disadvantage: Still builds up inventory.

Option 2: Try spreading out the different products as much as possible using trial and error and front-load
the schedule with the products requiring the greatest number of units of production.

For example, one schedule could be as follows:

ABABCABAC

The key to achieving this schedule is eliminating changeovers, which should be possible if the products
are very similar.

Example 2 for Discussion:

Given: Company XYZ sells three products: A, B, and C. The monthly demand for these products is 200,
400, and 600 units, respectively. The company operates its assembly line 20 days per month and 2 shifts
per day. Each shift is 480 minutes, with two 15-minute breaks per shift.

How should production be scheduled in each cycle to minimize inventory of each product? Use judgment
(trial and error) to create a mixed-model schedule. What will the takt time equal?

5. How is delivery related to WIP stock and changeovers?

6. The Toyota rule allocates 10% of available production time to changeovers. What are the
advantages and disadvantages of using this rule?

7. What is a perfect customer? How does Dad suggest creating a perfect customer? What are the
advantages of creating shipping lanes?

Discussion 5 Questions (Chapters Seven & Eight)

Chapter Seven: Kanban Rules

1. What is a kanban card? For what purpose is a kanban card used? What are the six kanban rules?

2. How does a production kanban differ from a withdrawal kanban? What is the purpose of reducing
the number of kanbans over time?

3. Why does Harry suggest firing the logistics man (Kevin Morgan)? Have you ever worked with a
person similar to Kevin Morgan? If so, describe that person’s actions (use a fictitious name).
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Chapter Eight: Gemba Attitude

1. What is SMED? How is SMED accomplished?

2. What is Total Productive Maintenance (TPM)? Why is TPM hard?

3. What are the “Five Whys”? Provide an example of how you could apply the “Five Whys” at your
company.

4. What is Gemba? Why is it important for a manager to go out to Gemba when trying to solve a
problem? Have you ever worked at a place where managers hid from Gemba? If so, describe that
experience.

5. What are supermarkets? How will supermarkets be replenished?

6. Why should the company be able to reduce the number of forklifts after implementing Lean
material handling?

Discussion 6 Questions (Chapters Nine & Ten)

Chapter 9: The Heijunka Way

1. What are Dad’s five principles of Lean? Which principle would be most challenging to
implement in a service business? Why?

2. For what purpose would a Lean manufacturing company continue using the MRP module of its
Enterprise Resource Planning (ERP) system?

3. Why will Cost of Goods Sold increase when a company starts using Lean principles?

4. What information is included in a Value Stream Map? What is the primary benefit of creating a
Value Stream Map?

5. At the top of p. 306, Dad re-visits the issue of leveling. Based on Dad’s description, is a Lean
system extremely flexible to handling changes (variation)? Why or why not?

Chapter Ten: Kaizen Forever

1. Why does Dad argue that it is good to lose people when implementing Lean?

2. Why does Tanaka argue that the plant has too much inventory and that the managers do not care
about quality?

3. Jidoka is the process of not allowing defects to proceed in a process. How does Dad suggest
implementing jidoka?
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4. How does Dad suggest keeping the momentum going on the Lean implementation?

Additional References:

Chopra, S., & Meindl, P. (2013). Supply Chain Management: Strategy, Planning and Operation (5th ed.).
Boston, MA: Pearson.

Meredith, J. R., & Shafer, S. M. (2013). Operations Management for MBAs (5th ed.). Hoboken, NJ: John
Wiley & Sons.