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Throughput Part 2 Effective Capacity & Throughput Leverages

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Throughput Part 2

Effective Capacity

&

Throughput Leverages

Based on the book: Managing Business Process Flows.

- Effective capacity of a resource unit is 1/Tp. Unit load Tp , is an aggregation of the productive as well as the wasted time.
- Tp includes share of each flow unit of capacity waste and detractions such as
- Resource breakdown
- Maintenance
- Quality rejects
- Rework and repetitions
- Setups between different products or batches

- We may want to turn our attention to waste elimination; and segregate the wasted capacity. Theoretical capacity is the effective capacity net of all capacity detractions.

An operating room (a resource unit) performs surgery every 30 min, Tp = 30 min. Tp includes all the distracts. We also refer to it as the Total Unit Load.

Effective capacity is 1/30 per min or 60/30 =2 per hour.

On average, 1/3 of the time is wasted (cleaning, restocking, changeover of nursing staff and fixing of malfunctioning equipment ).

Capacity Waste Factor (CWF) = 1/3.

Unit load = Theoretical Tp= Tp*(1-CWF) =30(1-1/3) = 20 min.

Tp= Unit Load = Theoretical Unit Load /(1-CWF) = 20/(1-1/3) = 30

Theoretical Capacity = c/Theoretical Unit Load; Effective Capacity = c/Unit Load.

Theoretical Capacity = 1/20 per minute or 3 per hour.

Effective Capacity = Theoretical Capacity (1-CWF)

A law firm processes (I) shopping centers and (II) medical complexes contracts. The time requirements (unit loads) for preparing a standard contract of each type along with some other information is given below. In November 2012, the firm had 150 orders, 75 of each type. Assume 20 days per month, and 8 hours per day. Capacity Waste factor at the three resource-s are 25%, 0, and 50%, respectively.

What is the effective capacity of the process (contracts /day)?

Paralegal: Theoretical Unit Load (50%Sh 50% Med): 0.5(4)+0.5(6) = 5 hrs

Theoretical Capacity = 1/5 per hr

Capacity Waste Factor (CWF) = 0.25

Unit Load = Tp = 5/(1-0.25) = 20/3 hrs

Effective Capacity = Capacity = 1/(20/3) = 3/20 per hr

Tax Lawyer: Theoretical Unit Load 0.5(1)+0.5(3) = 2 hrs

CWF = 0

Unit Load = Tp = 2 hrs

Theoretical Capacity = 1/2 per hr

Effective Capacity = Capacity = 1/2 per hr

Senior Partner: Theoretical Unit Load 0.5(1)+0.5(1) = 1 hrs.

Theoretical Capacity = 1/1 = 1 per hr

CWF = 0.5

Unit Load = Tp = 1/(1-0.5) = 2 hrs

Effective Capacity = Capacity = 1/2 per hr

- b) Compute the cycle time?
- 4.8 units in 8 hours.
- Cycle time = 8/4.8 = 1.67 hours

- c) Compute the flow time.
- Vey Theoretical Flow time = 5+2+1 = 8 !!!!!!
- Theoretical Flow Time 6.67+2+2 = 10.67
- Flow Time = 10.67 + Waiting times
- d) Compute the average inventory.
- RT=I R= 4.8 per 8 hours or 0.6 per hour
- T =10.67 hours I = 0.6(10.67) = 6.4
- e) Can the company process all 150 cases in November?
- 150/20 = 7.5. The effective capacity of 4.8 /day is not sufficient.
- f) If the firm wishes to process all the 150 cases available in November, how many professionals of each type are needed?

- Demand per day = 150/20 = 7.5
- # of paralegals required = 7.5/1.2 = 6.25
- # of tax lawyers required = 7.5/4 = 1.875
- # of tax lawyers required = 7.5/4 = 1.875
- These could be rounded up to 7, 2 and 2

Setup or Changeover: activities related to cleaning, resetting and retooling of equipment in order to process a different product.

Qp : Setup batch or lot size; the number of units processed consecutively after a setup;

Sp:Average time to set up a resource at resource pool p for a particular product

Average setup time per unit is then Sp/Qp

Sp/Qpis also included in Tp

What is the “right” lot size or the size of the set up batch? Lot Size or ?

- The higher the lot size, the lower the unit load and thus the higher the capacity.
- The higher the lot size, the higher the inventory and therefore the higher the flow time.
Reducing the size of the setup batch is one of the most effective ways to reduce the waiting part of the flow time.

Load batch: the number of units processed simultaneously. Often constrained by technological capabilities of the resource.

Setup batch: the number of units processed consecutively after a setup. Setup is determined managerially.

Product Mix:

50%-50%

Set-up time

30 min per product

Working hours

8 hours/day

10 min/unit

A

Operation

B

20 min/unit

1 machine

100% available

Compute the effective capacity under min cost strategy.

Two set-ups each for 30 min = 60 mins

An aggregate product takes (10+20)/2 = 15

Production time = 8*60-60 = 420 mins

Capacity = 420/15 = 28 aggregate units

Each aggregate unit is 0.5 A and 0.5 B (total of 14A and 14B)

Compute the capacity under min inventory strategy.

In a minimum inventory strategy, we produce one product at a time then switch to the other.

10 min/unit

A

Operation

B

20 min/unit

1 machine

100% available

Product A: 10+30 = 40

Product B: 20+30 = 50

An aggregate product takes (40+50)/2 = 45

Production time = 8*60 = 480 mins

Capacity = 480/45 = 10.66 aggregate units.

Each aggregate unit is 0.5 A and 0.5 B (total of 5.33 A and 5.33B)

Throughput ≤ Effective Capacity ≤ Theoretical Capacity

- Throughput <<< Effective Capacity – External Bottleneck
- External blockage (demand) - ↓prices, ↑quality, ↓time ↑variety ↑sales efforts, ↑ advertising budget, …….
- External starvation (supply of input) - identifying additional suppliers, more reliable suppliers, modifying the supply chain.

- Throughput = Effective Capacity – Internal Bottleneck
- Increase financial capacity - modifying the product mix.
- Increase physical capacity - ↑ c ↓ Tp
- if capacity ≈ theoretical capacity
- If capacity << theoretical capacity.

Capacity ≈ theoretical capacity Resources are efficiently utilized; increase the theoretical capacity.

- Increase the level of resources. ↑ c. buy one more oven
- Increase the size of resource units - Larger load batch - more loaves in theoven
- Increase the time of operation – ↑ Scheduled Availability, Overtime

Capacity << theoretical capacity resources are not utilized effectively; eliminate of waste; ↓ Tp or ↑ Net Availability.

- Eliminate non-value-adding activities.
- Avoid defects, rework and repetitions– These two are exactly the same as what was stated for flow time reduction. For flow time we focus on activities along the critical path. For flow rate we focus on activities performed by bottleneck resources.
- Increase Net Availability – Reduce breakdown and work stoppage by improved maintenance policies and effective problem-solving, to reduce the frequency and duration of breakdowns and maintenance outside of working hours. Reduce absenteeism.

- Reduce setup time – setup time per unit is Sp/Qp. Decrease the frequency of changeovers, reduce the time required for each setup and manage the product mix to decrease changeover time from one product to the next.
- Move some of the work to non-bottleneck resources –
This may require greater flexibility on the part of non-bottleneck resources as well as financial investments in tooling and cross-training.

- Reduce interference waste – Eliminate starvation and blockage among work-stations.

STOP

Compute the unit load and the total unit load for each Load batch of Regular tile, Jumbo tile and a product mix of 75% Regular and 25% Jumbo . Load Batches are 4 and 9 for regular and jumbo, respectively. Set-up Batches are 300 and 100 for regular and jumbo, respectively.

Theoretical Capacity of a resource unit =

(1/Unit Load) × Load Batch × Scheduled Availability

Scheduled Availability – the scheduled time period during which a resource unit is available for processing flow units.

Availability factor = Net Availability/Scheduled Availability

Effective Capacity of a resource unit =

(1/Total Unit Load) × Load Batch × Scheduled Availability

Effective Capacity of a pool =

(c/Tp) × Load Batch ×Scheduled Availability

STOP