CASE STUDY – Optimization of Suppy Chain Management

INTRODUCTION

The name „Supply Chain Management“ was created as a consequence of the way we observe
the whole process supplying a customer with a product (or service) that he needs it. Namely,
observation starts from the end of the physical supply process: from purchase to the customer.
Each participant in this sequence (chain) represents one link, which connects the source of
raw materials with the customer. Thus, the term supply chain emerged from this logic. The
supply chain covers all participants and processes from raw material producer to final of the
consumer but from an operational perspectiv Management classically considers three basic
components:

 Supply
 Storage
 Distribution

The following factors have a key influence on the need for by redefining the understanding of
the chain model supply:

 Pressure from consumers and industrial customers to be products are tailored to their
individual specifications;
 Increasing product life cycle;
 Reduction of the time of access of products to the market;
 Request for improvement of services and support customer

Better planning production company incurs lower costs because better manages the flow of
material through its own production process. As the flow of material also follows the flow
information, SCM aims to advance the flow information between suppliers, businesses and
distributors. One of the essential goals of SCM systems is to improve customer satisfaction by
offering higher quality, wider product diversity and faster delivery responding to customer
requests.

Implementation of SCM has the following advantages:

 Lower shipping cost and shorter delivery time;

 Improving relations with partners;
  Improved storage management with lower ones expenses;
 Increased revenue;
 Increased flexibility;
 Higher level of customer service;
 Competitive advantage;
 Higher market value of the company.

Distribution and storage center

OPTIMIZATION OF SCM – REAL LIFE CASE

Supply-chain optimization is the application of processes and tools to ensure the optimal
operation of a manufacturing and distribution supply chain.This includes the optimal
placement of inventory within the supply chain, minimizing operating costs including
manufacturing costs, transportation costs, and distribution costs. The process often involves
the application of mathematical modelling techniques using computer software.

Real life example – Problem of flow materials

One way to optimize scm is to optimize the flow of materials within production, between
production lines. We will show such an example in a company that specializes in the
production and assembly of mini robots, as well as their layout of production machines and
the flow of materials. The company encountered a problem when submitting materials to the
workplace - the machine, because it was not determined in advance which person was doing
it, in what way and when. There are production lines where each employee goes for material
to the warehouse, and on the other hand there are material suppliers who supply the lines with
the required material.

Problem statements are :

 Long unproductive time

 Worker back tracking while bring material
 Loss in productivity
 Bad material flow
 Bad layout of machines

Now the question is, is it worth the company to hire a new employee who will bring this
material or not? Is there an opportunity to optimize the flow of materials so that workers are
independent from the delivery of materials to the production of the finished product? To solve
this problem, we need to make a calculation and a new layout for production machines to get
satisfactory results.

The production facility of the company consists of 3 assembly lines with 5 workstations. Near
the assembly lines there is a warehouse with material from which workers take the necessary
parts to assemble the robot. About 15 workers are working on one assembly line because
every assembly line has 3 or 4 installation positions, so in total company has 45 workers who
go to the storage to take materials for output product. For each position it is necessary to bring
a separate box with material in which the mass varies from 1kg to 15kg.

Below you can see the layout of assembly lines, workstations, warehouse and installation
positions where workers are located.

Layout of the assembly lines, work stations and storage of the materials
The following general terms and conditions will be used to simplify our optimization, output
results will be completely correct with a variation of 3-5% due to unexpected events such as
slower movement's speed of worker, worker can not find material at storage etc.

General terms and conditions are :

 The capacity of the lines varies from 20 to 50 products per shift. These are different
types of products
 Working hours 8.5 h daily, with lunch breaks included (30min and 2 short breaks of
10 minutes each - 460 min)
 The material in one box is enough for 10 to 20 pieces depending on the production
line (from the dimensions of the installation parts, ergonomics of the workplace) and it
is necessary to change the material several times during the shift.
 The assembly line is 15 m long, and the first workstation is 10 m from the
warehouse(storage), while the last one is 22 m.
 The average speed of walking to the warehouse(storage) and back to the workplace is
1.2 m/s. - by pushing a cart with parts.
 The assumption is that each workstation has carts that go to and from the supermarket
and hold parts on them
 1 worker per workstation

Further analysis will take place in two cases. In the first case, the process will be described
when the workers themselves supply the material, and in the second case, when the supplier
supplies the jobs with the necessary material.

CASE 1 – Workers themselves deliver material to the workplace

AL1 - Assembly line 1 consists of 5 workstations, and we have 3 different positions at each
workstation. The picture shows the required route to go from the workstation to the
warehouse, as well as the required time.
t=s/v

s1= 20 m (WS1->SM->WS1); s2= 26 m (WS2->SM->WS2);

t1= 16,6 s (WS1->SM->WS1) t2= 21,6 s (WS2->SM->WS2)

s3= 32 m (WS3->SM->WS3); s4= 38 m (WS4->SM->WS4);

t3= 26,6 s (WS3->SM->WS3) t4= 31,6 s (WS4->SM->WS4)

s5= 44 m (WS5->SM->WS5);
t5= 36,6 s (WS5->SM->WS5)

By measuring the process time, we have obtained the following assumptions:

 The process of leaving the workstation (leaving tools and other materials needed for
work, taking carts near the workplace, placing empty boxes on carts if they are not
already on carts) takes: tWS1 = 80s
 Time spent in storage : tSM=105s
 Returning to work, placing parts in designated places, picking up tools and other
activities until work begins: tWS2=135s
 SH = Number of changes in the shift = 3

Required material change time for all workstations:

tAL1=(tWS1+tSM+tWS2) * 5 + t1 + t2 + t3 + t4 + t5 = 1600 s + 133s = 1733 s (28 min 53 s)
T1/Shift=tAL1*SH =1733*3 =5199s (86 min 39 s)-Total time for 3 shifts for assembly line 1
Using the same calculation method, the results of other assembly lines are obtained :
T2/Shift= 80 min
T3/Shift= 85 min 15 s
Total unproductive time spent per shift (T1/Shift + T2/Shift + T3/Shift)
Total time/Shifts = 251 min 44s
Case 2: The material supplier supplies the production lines

By measuring the process time, we have obtained the following assumptions:

 tdAL1=65 s
 Filling carts in SM for one line: tfc= 150 s
 Material Replacement on Each Workstation: tm=30-50s
 Disposal of empty packaging in SM: tem=100s

Time required to tour the assembly line:

tAl1= tfc + tm*number WS + tem + tdAL1

tAI1 = 150 + 30 * 5 + 100 + 65 = 465 s (7 min 45 s) - 1 shift of AL1

TAL1 = 1395 s (23 min 15 s) - 3 shifts

Based on the assumptions already made, other times are calculated and obtained:

TAL2= 1030s (17 min 10s) for 2 shifts

TAL3 = 1040s (17 min 20s) for 2 shifts

Total unproductive time spent per shift (TAL1+TAL2+TAL3)

Total time/shifts = 57 min 45s
Conclusion

If we compare the results of these two cases, we can say that the savings are huge, because it
is possible to hire another person without any burden on the production lines.

When we compare the unproductive times, we see that we have savings over 3 hours, that is,
productivity and more parts production will increase.

CASE 1:

Productive time : 208 min 16s

Unproductive time : 251 min 44s

Number of products : 50 (one product every 4.16 min)

CASE 2:

Productive time : 402 min 15s

Unproductive time : 57 min 45s

Number of products : 96 (one product every 4,16 min)

In order to complete the working hours of the material supplier, additional jobs may be
assigned to it, such as:

 Securing all required quantities of materials

 Resolve various issues with material and quality
 Supply of other production lines (if any)
 Being able to work in a workplace as needed

In addition to saving time, there was also savings in transportation. In the first case, each
workstation had 1 transport trolley, while in the second case only the material supplier had to
have a trolley.

In the case of batch production, it can be said that the material delivery function to the
workplace is cost effective, whereas for batch production it is necessary to calculate and
analyze the needs in detail.