PRODUCTION ENGINEERING 2 (PEIN 202)

TUTORIAL 1- LEAN SUPPLY CHAINS

1. A supplier of instrument gauge clusters uses a kanban system to control material

flow. The gauge cluster housings are transported five at a time. A fabrication center
produces approximately 10 gauges per hour. It takes approximately two hours for
the housing to be replenished. Due to variations in processing times, management
has decided to keep 20 percent of the needed inventory as safety stock. How many
kanban card sets are needed? (Round up your answer to the next whole number.)

Solution

D = 10 gauges per hour

L = 2 hours
S = .20
C = 5 gauges
K = DL(1+S)/C
K = 10(2)(1+0.20) / 5 = 4.8  5 Kanban card sets

2. Transmissions are delivered to the fabrication line four at a time. It takes one hour
for transmissions to be delivered. Approximately four vehicles are produced each
hour, and management has decided that 50 percent of expected demand should be
maintained as safety stock. How many Kanban card sets are needed? (Round up
your answer to the next whole number.)

Solution

D = 4 transmissions per hour

L = 1 hour
S = .50
C = 4 transmissions
K = DL(1+S)/C
K = 4(1)(1+0.50) / 4 = 1.50  2 Kanban card sets

3. A bottling plant fills 2,400 bottles every two hours. The lead time is 40 minutes and
a container accommodates 80 bottles. The safety stock is 40 percent of expected

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 demand. How many kanban cards are needed? (Round up your answer to the next
whole number.)

Solution

D = 2,400 bottles/2 hours = 1200/60 minutes = 20 per minute

L = 40 minutes
S = .10
C = 120 bottles
K = DL(1+S)/C
K = 2(40)(1+0.10) / 120 = 7.33  8 Kanban cards

4. A JIT system uses kanban cards to authorize movement of incoming parts. In one
portion of the system, a work centre uses an average of 100 parts per hour while
running. The manager has assigned an inefficiency factor of 0.20 to the centre.
Standard containers are designed to hold six dozen parts each. The cycle time for
parts containers is about 105 minutes. How many containers are needed?

Solution

N =?
D = 100 pieces per hr.
T = 105 min. = 1.75 hr.
C = 72
X = 0.20

DL ( 1+ X ) 100 ( 1.75 )( 1.20 )

N= = =2.9∨containers
C 72

5. Meritor, a company that makes muffler assemblies for the automotive industry, is
committed to the use of kanban to pull material through its manufacturing cells.
Meritor has designed each cell to fabricate a specific family of muffler products.
Fabricating a muffler assembly involves cutting and bending pieces of pipe that are
welded to a muffler and a catalytic converter. The mufflers and catalytic converters
are pulled into the cell based on current demand. The catalytic converters are made
in a specialized cell.

Catalytic converters are made in batches of 10 units and are moved in special hand
carts to the fabrication cells. The catalytic converter cell is designed so that different

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 types of catalytic converters can be made with virtually no setup loss. The cell can
respond to an order for a batch of catalytic converters in approximately four hours.
Because the catalytic converter cell is right next to the muffler assembly fabrication
cell, transportation time is virtually zero.

The muffler assembly fabrication cell averages approximately eight assemblies per
hour. Each assembly uses the same catalytic converter. Due to some variability in
the process, management has decided to have safety stock equivalent to 10
percent of the needed inventory.

5.1 How many kanban sets are needed to manage the replenishment of the catalytic
converters?

Solution

Average number of units demanded over a given time period (D) = 8 per hour

Lead time to replenish an order (L) = 4 hours

Safety stock (S) = 10%

Container size (C) = 10 units

8× 4 (1+ 0.10 )
k= =3.52→ 4 sets
10

5.2 Meritor hires a team of consultants. The consultants suggest a partial robotic
automation as well as increase the safety stock to 12.5%. Meritor implements
these suggestions. The result is an increase in efficiency in both the fabrication of
muffler assembly and the making of catalytic converters. The muffler assembly
fabrication cell averages 16 assemblies per hour and the lead time has been
decreased to two hours’ response time for a batch of 10 catalytic converters. How
many kanban cards are needed?

Solution

D = 16 catalytic converters per hour

L = 2 hours
S =0.125
C = 10 catalytic converters
K = DL(1+S)/C

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K = 16(2)(1+0.125) / 10 = 3.6  4 Kanban cards

6. A local hospital wants to set up a kanban system to manage its supply of blood with
the regional blood bank. The regional blood bank delivers blood to the hospital each
day with a one-day order lead time (an order placed by 6 p.m. today will be
delivered tomorrow afternoon). Internally, the hospital purchasing group places
orders for blood each day at 5 p.m. Blood is measured by the pint and is shipped in
containers that contain six pints. For a particular blood type, the hospital uses an
average of 12 pints per day. Due to the critical nature of a blood shortage, the
hospital wants to carry a safety stock of two days’ expected supply. How many
kanban card sets should the hospital prepare?

Solution

This problem is typical of how a real application might look. Using the data given, the
variables for this problem are as follows:
D = 12 pints per day (average demand)
L = 1 day (lead time)
S = 200 percent (safety stock, as a fraction this is 2.0)
C = 6 pints (container size)
K = DL(1+S)/C=12(1+2)/6 = 6 sets
This indicates that we need to prepare six kanban card sets. Each time a new container
of blood (containing six pints) is opened, the card will be sent to purchasing and another
six pints of blood will be ordered. When the blood is received, the card will be attached
to the new container and moved to the blood storage area.

7. Compute the takt time for a system where the total time per shift is 480 minutes,
there is one shift, and workers are given two - 15 minute breaks and 45 minutes for
lunch. Daily demand is 300 units

Solution

Total time per shift = 480 minutes

Subtract rest breaks and lunch gives 480 – 75 = 405 minutes per shift
Net time available per day = 405 minutes x 1 shift per day = 405 minutes

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 Net time available per day 405
Takt time= = =1.35minutes
Daily demand 300

8. What cycle time would match capacity and demand if demand is 120 units a day,
there are two shifts of 480 minutes each, and workers are given three half – hour
breaks during each shift, one of which is for lunch or dinner.

Solution

Total time per shift = 480 minutes

Subtract rest breaks and lunch gives 480 – 90 = 390 minutes per shift
Net time available per day = 390 minutes x 2 shift per day = 780 minutes
Net time available per day 780
Takt time= = =6.5 minutes
Daily demand 120

9. Value Stream Mapping Example: Bolt Manufacturing 

A simple example will illustrate the use of value stream mapping. Exhibit 14.11 depicts a
bolt manufacturing operation that ships 7,500 bolts per week. The current state map
provides cycle time and setup time information for each of the 15 processes used, and it
provides inventory levels at each location. The map also depicts information flow
between the steel supplier, the bolt customer, and management via production
scheduling. The total value-added time, denoted as processing time, is obtained by
summing all of the individual value-added contributions at each processing step on the
time line. For the example, it equals 28.88 seconds. At each inventory location, lead
time is calculated by dividing inventory level by daily production demand, which is 1,500
bolts. Summing all of the lead time produces an overall production lead time of 66.1
days, which is the entire time it takes an individual bolt to make its way through the
plant.

There are several possibilities to optimize the current production scenario. Exhibit

14.12 provides a few of these, shown as Kaizen bursts, including eliminating several
processing steps, modifying some of the existing processes, and reducing travel
distances between processes. Exhibit 14.13, the future state map, illustrates the
incorporation of these modifications. As shown, the changes reduce production lead
time to 50.89 days, which is a 23 percent reduction. The production scenario could be
enhanced even more if pull systems were incorporated at various locations.

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9.1

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 Eliminating the queue of work dramatically quickens the time it takes a part to flow
through the system. What are the disadvantages of removing those queues?

The big consideration is whether or not these machines should operate independently
or not. The buffers allow the machines to be scheduled, at least to some extent,
independently of one another. Totally eliminating the buffers and moving to “one-piece
flow” is like setting up an assembly line in this area.

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9.2 How do you think the machine operators would react to the change?

No doubt they would not like the change since they probably enjoyed the independence
that they before.

9.3 What would you do to ensure that the operators were kept busy?

This is a major issue since the cycle time for the first machine is only .5 minutes and the
second machine is 1.2 minutes. Probably you could just assign one worker to both
machines

10. Pro Fishing Boats – A Value Stream Mapping Exercise.”

 A fishing boat manufacturer, Pro Fishing Boats, is having many problems with critical
globally sourced parts. Pro fishing has two manufacturing facilities in the United States.
The firm's reliance on efficient global supply chain operations is increasing as the
manufacturers is sourcing more and more parts overseas, including critical components.
Recent problems with a number of these critical parts have caused line shutdowns. In
response, Pro fishing has mandated a six-week inventory on all globally sourced parts.
Management has asked you to evaluate whether this is the right decision.

First, you must understand Pro Fishing’s supply chain. Currently, there is very little
visibility (knowledge of the current status) of inventory in the supply chain and
communication with the supply base is minimal. In fact, the boat manufacturer does not
have any visibility past the Tier I suppliers. Adding to the complexity of this problem,
each part of the supply chain is handled by different departments within the company.

In order to understand the supply chain, Pro fishing has asked you to map their supply
chain. To do so, the company identified a critical component to follow in the supply
chain. After having the opportunity to interview supply chain participants, including
suppliers, you have collected the following information.

The component is manufacturing overseas in China by the Tier I supplier,

Manufacturing Inc. The Manufacturing Inc. production schedule is based on orders sent
via fax from the Pro Fishing warehouse. The supplier operates on a 90-60-30 day
forecast along with a weekly order.Upon completion of the component, Manufacturing
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Inc. sends component via truck to Shanghai Port where it is loaded onto a ship for
United States. Loading at the port takes 1 week and the truck transport takes 3 days.
Manufacturers Inc. holds 9-week finished goods buffer inventory. Manufacturing time for
each component is only about 3 days. The ship bound for United States takes about 14
days to travel overseas. Upon arrival in the United States, the component is unloaded at
the Los Angeles port. This takes about 5 days and customs inspects in Los Angeles.
The goods travel by train to Chicago, which takes about 7 days. Goods are held in
Chicago for about half a week. From there, the components are trucked to Pro Fishing
warehouse where 6-week inventory buffer has been mandated. Shipment to the Pro
Fishing warehouse takes 2 days. From the warehouse, the components are trucked to
plants in the United States triggered by electronic orders from each of the Pro Fishing
plants.

In talking to Manufacturers, Inc., Pro Fishing as learned that its component is made up
of two main raw materials: one from China and one from the United States. To avoid the
risk of running out of these raw materials, Manufacturers Inc. maintains 4-week buffer
on the China-based raw materials and a 12- week buffer in the U.S. based raw material.
These Tier II supplier orders are by formal purchase order only. It is interesting to note
that Manufacturers Inc. uses these suppliers to fulfill Pro Fishing’s strict supplier
qualification requirements.

10.1 Create a value stream map of this supply chain. What other information is
needed?

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Here is a simplified map. Currently, we do not know about the components using by
Manufacturing Inc. All we know is that there are 12 weeks’ worth of one component
and 4 weeks’ worth of the other.

There is about a 27.3 weeks cumulative lead time from arrival of the raw materials to
Manufacturing Inc. to the Pro Fishing Warehouse. Most of this is transportation time
and waiting delay. If we add the component shipped from the US to China this
cumulative lead time may be double this time.

The lead time analysis may not be very accurate. It might be good to actually track
some components and product through the network to see what the actual time is and
how much variability there is in the flow time. This could reveal much about how the
network actually operates.

10.2 Where is there risk for supply chain disruptions or stoppages to the flow of
materials?

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Of course, there are many all along this supply chain. The supply of parts coming from
the US could be disrupted. The plant in China could experience a problem. The
complex port operations in Shanghai and LA could be delayed. In a sense, it is
surprising that they can get away with only 6 weeks of inventory in the Pro Fishing
warehouse.

10.3 Where do opportunities reside in improving supply chain operations and how has
VSM helped to reveal these?

There may be some significant opportunities to reduce cost in this supply chain. Pro
Fishing could analyze the total cost of the network, not just the cost of parts quoted by
Manufacturing, Inc. They should also look at the efficiency (cost) of the 2 nd tier
suppliers in the network.

OR

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The supply chain starts at the Pro Fishing warehouse. From here, weekly orders and
monthly forecasts will be send via fax to the tier I supplier. As this happens via fax, we
can speak of an electronic information flow. The tier I supplier will get its raw materials
from the tier II suppliers. One of the suppliers is settled in the United States and the
other one in China. Tier I will give the orders via formal purchase orders only which
means it is a written document and therefore we cannot speak of an electronic
information flow but rather of a manual information flow. Because the transport of the
raw materials from the United States to China takes more time than the transport
between the companies in China, the buffer for raw materials from the United States is
12 weeks whereas the buffer from the Chinese supplier is 4 weeks. The production of
the components which tier I makes takes three days. After this process, the
components will be transported every week to the Pro Fishing Boats’ warehouse in the
United States. The components will first be trucked to the port of Shanghai, which takes
three days. At the port, the components will be loaded on a ship which will take seven
days. After the loading process, the components will be shipped overseas to the port of
Los Angeles which will take fourteen days. At this port, the components will be
unloaded which takes approximately five days. Afterwards, the components will be
loaded on a train which will head towards Chicago in a time-lapse of seven days. Once
arrived in Chicago, the products will be stored for another three and a half days.
Afterwards, the components will be send from Chicago to the Pro Fishing Boats’
warehouse which takes around two days. Finally, the components will be trucked from
the warehouse to the plants. However, it is unclear how much time this takes. The total
time of the shipping process is at least 41,5 days since the transportation time from the
warehouse to the plants is not counted as it is not mentioned. Analyzing this value
stream map, we can state that it is incomplete. Firstly, as mentioned, the transportation
time from the warehouse to the plants is unclear. Secondly, it is unclear what the
capacity per shipment is. Furthermore, in the text it is mentioned that Pro Fishing Boats
has strict qualification requirements for the suppliers. However, it is not explained what
these requirements are. Additionally, the transportation costs and the production costs
are unclear. Moreover, the number of materials that are needed for the production of
Pro Fishing Boats are not mentioned

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In the second question, we had to locate parts of the supply chain where risks could
occur for supply chain disruptions or stoppages to the flow of materials. Our first finding
is related to the shipment of the components overseas. Pirates could be active on the
route of the ship which transports the components and these pirates can steal the
components which will disrupt the supply chain. Another risk for the flow of materials is
that if another company who needs these components as well offers a higher price for
these components, the supplier (tier I) may consider to sell its components to the other
company. If this would happen, Pro Fishing Boats has to look for another supplier which
will take some time. In this period, no raw materials will be supplied and therefore the
production of boats will stagnate. Furthermore, the weather has its influence as well. If
there is a storm expected, ships may have to stay in the ports as it is too dangerous for
them to go to sea. Moreover, if the demand for components raises above two per week,
tier I will not be able to fulfill this demand as its capacity is 2,33 (7/3) components per
week because it takes three days to make one component. However, this is only
relevant if we are talking about the long-term demand because on the short-term the
buffer of finished products can be added to the demand. Lastly, if employees in one the
supply processes will go on strike, the complete supply process will be disrupted. The
production of components or the shipment of the raw materials will therefore stagnate.

In question three we had to come up with opportunities to improve supply chain

operations and how value stream mapping helped us revealing these. As mentioned at
the beginning of the text, there is a lack of communication between the supply base and
Pro Fishing Boats. Additionally, as mentioned in the text as well, the communication is
complex because each part of the supply chain is managed by different departments
within the company. Therefore, we recommend that Pro Fisher Boats introduces a new
division which focuses only on managing the supply chain. If succeeding in this, the
communication will be clearer and this will resolve the problem regarding the lack of
communication as well. Furthermore, we recommend that Pro Fishing boats keeps a 6-
week buffer of finished products. In case of disruptions within the supply chain, Pro
Fishing Boats can therefore still sell boats for a certain amount of time. The value
stream map showed us that the shipping process is highly time-consuming. In Chicago,
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for example, the components are stored for 3,5 days for no reason which is in our
opinion a waste. By improving communication, the shipping time can be reduced and
this will have a decreasing effect on the transporting costs.

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