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This simulation is a modification of a simulation in Chapter 14 of:
by Eliyahu Goldratt
published by North River Press, 1992
By the way, I highly recommend to you this novel about a plant manager’s quest to improve operations at his plant to prevent its closure.
Introduce the concept of Simulation.
Understand the impact that Variance has on process flow, and then understand how to manage this impact.
What if there is just ONE Workstation?
What is the Work Station’s capacity (i.e., the average output of Finished Goods per period?
What is your prediction of the average output of Finished Goods?
Appoint one member of the team to be the team’s “Accountant”. The Accountant will enter data on the Recording Form.
Place the initial inventory into each WIP location.
The person working at “WS 1” rolls a die (or flips a coin) to determine the capacity of “WS 1”.
From the unlimited supply of “Raw Materials”, move to “WIP 12” a quantity equal to the capacity of “WS 1”.
On the Recording Form, enter the quantity moved.
The person working at “WS 2” rolls a die (or flips a coin) to determine the capacity of “WS 2”.
From “WIP 12”, move to “WIP 23” a quantity equal to the minimum of the inventory in “WIP 12” and the capacity of “WS 2”.
On the Recording Form, enter both the quantity moved by “WS 1” and the remaining inventory in “WIP 12”.
Steps 3, 4, 5, & 6
For “WS 3”, “WS 4”, “WS 5”, & “WS 6”, proceed as as in Step 2, until “WS 6” has moved units to “Finished Goods”. Begin the next period by returning to Step 1.
Go to Excel Workbook
How can we increase the Line 1’s average capacity (i.e., output of Finished Goods)?
Go to Excel Workbook
For the Base Case, suppose that, instead of only 6 Work Stations, there are 1000 Work Stations.
What do you predict about the process’s capacity?
When a process has components whose capacities vary from period to period, it is a mistake to compute the process’s capacity using only the averages of the components’ capacities.
Instead of averaging out, the variations in the components’ capacities propagate through the process in a successively negative manner and result in the process’s capacity being significantly less than the components’ average capacities.
Although increasing WIP will increase the process’s capacity, a better alternative is to decrease the variances in the capacities of the process’s components.