Managing strategic Operations

Syllabus and Class Assessment Structure

• Syllabus as given in Course pack
• Quiz (1)- 20%- Session11/19
• Case Analysis (1)- 20% Session13-14
• Simulation Project: 20% (session15-18)
• End-term Examination-40%

Book: Operations Management (13th e) by William J Stevenson

 Expertise from OM-I
Process & Capacity Analysis
Inventory Management
Ops, Planning & strategy
Operations Risk management

• Focus on value, volume, variety

(3V): page 47/ch-2
• Now extension to Variability
and Visibility. Hence, now 5V is
the foundation for this class.
Managing strategic operations
“The commitment to our stakeholders - employees,
shareholders, suppliers, customers and community, is of
utmost importance to us and we aspire to achieve superior
financial performance”.

Stakeholders
“n” tier
suppliers
……. 1st tier
suppliers Distributors Customers

Operations
Project Management
management
Strategic operations & Logistics
Sourcing
Supply Operations (Chain) Management
What is Role of SOM? • OM Transforms inputs to outputs
• Inputs are resources such as (5M)
• Men, Material, and Money, Method, Machine

• Outputs are goods and services

Transformation role
To add value
• Increase product value at each stage
• Value added is the net increase
between output product value and
input material value
Provide an efficient transformation
Efficiency – means performing activities
well for least possible cost
Manufacturers vs Service Operations

Services: Manufacturers:
• Intangible product • Tangible product
• Product cannot be • Product is inventoried
inventoried • Low customer contact
• High customer contact • Longer response time
• Short response time • Capital intensive
• Labor intensive
Key Decisions of Operations Managers for M&S

• What
What resources/what amounts
• When
Needed/scheduled/ordered
• Where
Work to be done
• How
Designed
• Who
To do the work
Operations value-added process
The difference between the cost of inputs
and the value or price of outputs.
Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
 Managing strategic
Transformation
External environment

Customer or client
participation
Inputs
• Workers Processes
• Managers
• Equipment Outputs
• Facilities 1 3 • Goods
• Materials 5 • Services
• Services
• Land 2 4
• Energy
 Managing Transformation
External environment

Customer or client
participation
Inputs
• Man Processes
• Machine
• Materials Outputs
• Energy 1 3 • Goods
• Services 5 • Services
• Land
2 4

Information on
performance
 Managing Transformation

Inputs
• Workers Processes
• Managers
• Equipment Outputs
• Facilities 1 3 • Goods
• Materials 5 • Services
• Services
• Land 2 4
• Energy
Class exercise:- Operations decision at automobile
company
Operations Decisions
• Process
• Quality
• Capacity
• Inventory
Productivity, efficiency, and effectiveness
Productivity measures the output produced relative to the inputs used over a
specific period. It’s about how much work gets done.
Efficiency is about minimizing resources, time, or effort to produce a given
output. It evaluates how well resources are used.
Effectiveness measures whether the desired outcome or goal is achieved,
regardless of the resources used. It focuses on quality and results.

In summary, productivity is about quantity, efficiency is about doing things right, and effectiveness is
about doing the right things.
Example
A farmer is harvesting apples from their farm and is evaluated on productivity,
efficiency, and effectiveness for their apples crop.
Total land area: 10 acres; Time spent for harvesting: 50 hours;
Workers involved: 5; Harvested apples: 10,000 Kg; Target yield: 12000 Kg;
Cost of harvesting: $2500; Budget for harvesting: $3000

(1) Productivity= Output (amount of apples)/ Labour hour worked

= 10000/(5*50)= 40 Kg/per hour /worker

(2) Efficiency= Budget/actual cost

3000/2500= 1.2 (120%)

(3) Effectiveness= (actual yield/target yield)

=(10000/12000)= 0.833 (83.3%)
Productivity (page 56-59/ch.2)

• Productivity
• A measure of the effective use of resources, usually expressed as the
ratio of output to input
• Productivity ratios are used for
• Planning workforce requirements
• Scheduling equipment
• Financial analysis
Productivity
• Partial measures
• output/(single input)
• Multi-factor measures
• output/(multiple inputs)
• Total measure
• output/(total inputs)

Outputs
Productivity =
Inputs
 Measures of Productivity

Partial Output Output Output Output

measures Labor Machine Capital Energy

Multifactor Output Output

measures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced

measure All inputs used to produce them
Example

7040 Units Produced and sold for $1.10/unit. The following input required for
above units’ production

• Cost of labor of $1,000

• Cost of materials: $520

• Cost of overhead: $2000

Ans. 2.20
 Solution

MFP = Output
Labor + Materials + Overhead

MFP = (7040 units)*($1.10) MFP = 2.20

$1000 + $520 + $2000

Why productivity management in services is difficult compared to manufacturing?

Product/Production relationships

Product parameters that are influential in determining how the products are
manufactured;
• Prod. Quantity
• Prod. Variety------hard product variety and soft product variety
• Complexity of assembles products
• Complexity of individual parts
Contd…
• Q= production quantity
• p= product variety
• Q*p= product variety and product relationships
• q= the number of units of a given part or product that and produced
annually by a plant
• Qj= annual quantity of style j
• Qf= total quantity of all parts or products made by the factory
• P= total number of different part or product styles
• Where j=1,2,3……..P P
Qf =  Qj
j =1
Contd..
• Number of component np represents the product complexity
• The number of processing steps required to produce it no
Type of Plant Np-no Description
Parts producer np=1, no>1 Produce individual component
and requires multiple
processing
Assembly plant np>1; no=1 A pure assembly plant produces
no parts
Vertically np>1, no>1 The pure plant of this type
integrated plant makes all its parts and
assemblies them into final
product
Designing factory process

n pf = total number of parts made in the factory (pcs/year)

Q j = annual quantity of product style j
n pj = number of parts in product j (pcs/product)
P
n pf =  Q j .n pj
j =1

nof = total number of operations cycles performed in factory (ops/year0

n ojk = number of processing ops for each part k, summed over the number of parts in product j, n pj
P n pj

nof =  Q j . nojk
j =1 k =1
Contd..
• If we assume the number of product design P are produced in equal
quantities Q, all products have the same number of the components np,
and all components require an equal number of processing steps no
• Then, total number of product units Q f = P.Q
• Total number of the parts produced by the factory n pf = P.Q.n p
• Total number of manufacturing operations cycles n = P.Q.n .n
of p o
 Example
• A company has designed a new product line. It will build a new plant to manufacture this
product line. The new line consists of 100 different product types. Annual production of the
company is 10,000 units each product. Every product has an average of 1000 parts. The
average number of operations required for each part is 10. All parts will be made in the
plant. Each operations takes an average of 1 minutes.
Compute
• How many products will the company produce?
• How many parts will the plant process?
• How many operations will the plant perform?
• How many workers will be needed for the plant, if it operates one shift for 250 days/yr?
Answer
The number of products P=100
Number of parts: P.Q.np
100*10000*1000= 10^9
The number of operations P.Q.np.no
100*10000*1000*10= 10^10
Workforce required
Number of operations =10^10
T=1 min/cycle D=250days/year
S=1 shift/day H=8hrs/shift nof .Tc
workers= = 83333 person
D.S .H .60
 Production Process planning
• Production capacity is defined as the maximum rate of output that a
production facility able to produce under set of assumed operating
conditions.
Plantcapacity=n.S.H.R p
n=no of work center
S= number of shift per week
H= number of hours per shift
R p =hourly production rate (pc/hours)
if each work unit is routed through n o and
each operation requires a new setup or processing on different m/c then
n.S.H.R p
PC=
no
 Example
A Pizza baking shop having six baking oven, all devoted to the production of
the same type of the pizza. The shop operates 10shifts/week. The number of
hours per shift averages 8.0. Average production rate of each oven is 17
pc/hour. Determine the weekly production capacity.

PC= 6*10*8*17= 8160 pizza/week

 Utilization
• Utilization refers to the amount of output of a production facility relative to
its capacity
• U= Q/PC
• If all ovens are able to produce only 6000 units per week and was idle
remaining time then
• U= 6000/8160=73.50 %
Process availability

• Availability is a common measure of reliability for equipment.

• Mean time between failure (MTBF)- is the average time during equipment is
running
• Mean time to repair (MTTR) is the average time required for servicing a
equipment
• %A= (MTBF-MTTR)/MTBF
• With the previous data, if a oven is availability is 90% and utilisation of oven
80% then final quantity produced
• PC.U.A= 8160*.8*.9= 5875
Work in process computation
• WIP= (A.U.PC.Lead time)/ S.H.

S= no of shifts per week

H= no of hours in a shift
Problem

A batch production plant processes all parts through 4 m/c. 25 batches are produced every
week. Average operating time is 9 minute. Average set up time is 6 hours. Average size of
batch is 40 parts. Average non-operating time per batch is 8hours/machine. There are 16
machines in the plant. The plant performs an average of 80 hours per week. The rate of scrap
is negligible. Availability of m/cs is 90%. Determine the amount of WIP and other PPM
components.
Solution
Given data
• N= 16 Qf= 25 batches= 25*40 =1000 pieces no= 4 operations
• Q=40 pcs
• Ts= 6 hours Tc=9 min Tno= 8 hours
• S= 10 shifts/week
• H= 8hours/ shift A=90%
Solution
Tb= Ts+Q.T= 6+40*(9/60)= 12 hours
Tp= Tb/Q 12/40= 0.3 hours= 18 min
Rp= 60/Tp===60/18=3.33 pieces/ hours
PC= (n.S.H.Rp)/no==(16*10*8*8.33)/4==1066.67 pc/week
U= Qf/PC
= 1000/(1066.67)= 93.75%
Manufacturing lead time= no*(Total time)= 4*(6+40*0.15+8)=80 hours
WIP= (A.U.PC. MLT)/S.H 900 pieces
 Lack of SO lead to failure
• Neglecting operations strategy
• Failing to take advantage of strengths and opportunities and/or failing to recognize
competitive threats (not to map SWOT)
• Too much emphasis on short-term goals
• Too much emphasis in product and service design and not enough on process
design and improvement
• Neglecting workforce development
• Failing to consider customer wants and needs
• ………….
 Strategy Formulation (page 50/ch-2)
• Effective strategy formulation requires taking into account:
• Core competencies
• Environmental scanning
• SWOT
• Successful strategy formulation also requires taking into account:
• Order qualifiers
• Order winners
Order qualifiers
• Characteristics that customers perceive as minimum standards of acceptability for
a product or service to be considered as a potential for purchase
Order winners
• Characteristics of an organization’s goods or services that cause it to be perceived
as better than the competition
 Operations Environmental Scanning
• Environmental scanning is necessary to identify
• Internal factors
• Strengths and weaknesses (SW)
• External factors
• Opportunities and threats (OT)
SWOT Analysis (page 46-47)

Internal factors External factors

Strengths Weaknesses Opportunities Threats

Utilise internal strengths Overcoming internal Overcoming internal

Utilise internal strengths to weaknesses with the help weaknesses and avoiding
to minimise or avoid
gain benefit from or to exploit of timely incorporation external threats
external threats and
external opportunities of external opportunities
related impacts

Fig. 4. TOWS matrix structure

 Analysis of SWOT elements (AHP method)
Step 1: Construct the problem hierarchy
Model, usually visually, the problem decision identifying relationships between criteria
and alternatives.
Step 2: Pairwise comparison of criteria
Undertake pairwise comparison between criteria, identifying decision maker preference
for criteria on which alternatives are evaluated.
Step 3: Pairwise comparison of alternatives within each criterion
Undertake pairwise comparison between alternatives based on their performance within
each criterion.
Step 4: Compute the vector of criteria weights
From a matrix of pairwise comparison results AHP utilises a variety of matrix
transformations to calculate criteria weight vectors representing normalised criteria
weightings.
 AHP
Step 5: Compute the matrix of alternative scores
From the results of the pairwise comparisons on alternatives within each criterion a nxm
(where n is the number of criteria and m is the number of alternatives) matrix is
constructed representing the normalised performance (score) of each alternative for each
criteria.

Step 6: Ranking the alternatives

Utilising the vectors of criteria weights and the matrix of alternative scores a global score
and hence ranking for each alternative is calculated using:
𝑛

𝐺𝑎 = 𝑊𝑐 × 𝑆𝑎,𝑐
𝑐=0

where: a is the alternative, c is the criteria, g is the global score of the alternative, w is the
criteria weight and s is the alternative score.
 AHP Example
Pairwise Comparisons

Within AHP pairwise comparison is the process of comparing entities in pairs so as to judge which
is preferred and by how much. Comparisons are undertaken to determine criteria weighting and
also assess the value or score of different alternatives within each criteria.
A 9-point scale to elicit the scale of preference from a decision maker:
the more preferable entity within the pair scores

1 when it is showing no preference

3 when it is showing moderate preference
5 when it is showing strong preference
7 when it is showing very strong preference
9 when it is showing extreme preference.
The less preferable entity within the pair scores the inverse, for example the less preferable entity
where the more preferable entity shows very strong preference would score 1/7.
 AHP

The results of the matrix would provide the normalised criteria weights for criteria A1 to
A4. Similar matrices would be completed for criteria B1 to B4, for C1 to C4 and also
one comparing criteria A, B and C. Finally, pairwise comparisons would be undertaken
to fill matrices for each criteria comparing the performance of each alternative within
that criteria.
 AHP
Consistency across pairwise comparisons
The consistency of the decision maker across a number of pairwise comparisons is a
significant complexity. Consider the very simple comparison of three criteria: A, B and C.
If the decision maker judges A to be more preferable than B, and
A to be less preferable than C then the decision maker must not judge B to be more
preferable than C.

In a group that contains a large number of pairwise comparisons or where the difference is
between moderate and very strong preference it can be seen that lack of consistency is a
largely inevitable consequence of complex decision processes within AHP.

The AHP method attempts to address the issue of consistency by implementing a consistency
index that is a function of opposing comparisons.
Above a threshold a lack of consistency is highlighted and no analysis results are presented.
An unfortunate consequence is that decision makers begin to fulfil pairwise comparisons not
on their actual judgements but rather in order to maintain acceptable consistency.
AHP Problem
Selecting
a New Car

Style Reliability Fuel Economy

Civic Saturn Escort Miata

Alternative courses of action
Ranking Scale for Criteria and Alternatives
 Ranking of criteria

Style Reliability Fuel Economy

Style 1 1/2 3

Reliability 2 1 4

Fuel Economy 1/3 1/4 1

 Ranking of priorities
• Consider [Ax = maxx] where
• A is the comparison matrix of size n n, for n criteria, also called the priority matrix.
• x is the Eigenvector of size n 1, also called the priority vector.
• max is the Eigenvalue.
• To find the ranking of priorities, namely the Eigen Vector X:
1) Normalize the column entries by dividing each entry by the sum of the column.
2) Take the overall row averages.

Row
Normalized 0.30 0.28 0.37
1 0.5 3 ColumnSums
averages 0.32
A= 2 1 4 0.60 0.57 0.51 X= 0.56
0.33 0.25 1.0 0.10 0.15 0.12 0.12
Priority vector
Column sums 3.33 1.75 8.00 1.00 1.00 1.00
Criteria weights

❖ Style .32
❖ Reliability .56
❖ Fuel Economy .12

Selecting a New Car

1.00

Style Reliability Fuel Economy

0.32 0.56 0.12
Calculation of ConsistencyRatio
• The next stage is to calculate max to lead to the Consistency Index
and the Consistency Ratio.
• Consider [Ax = max x] where x is the Eigenvector.
A X Ax x

1 0.5 3 0.32 0.96 0.32

0.56 1.68 = 0.56
2 1 4 = max
0.12 0.36 0.12
0.333 0.25 1.0

λmax=(0.96/0.32, 1.68/0.56, 0.36/0.12}=3.00 R(λ) = ||Ax|| / ||x||

The Rayleigh quotient is used in the
Consistency index , CI is found by min-max theorem to get exact values
of all eigenvalues.

CI=(λmax-n)/(n-1)=(3.0-3)/(3-1)= 0.00
C.R. = C.I./R.I. where R.I. is the random index

C.I. = 0 n = 3
R.I. = 0.58(from table)
So, C.R. = C.I./R.I. = 0/0.58 = 0.04

C.R. ≤ 0.1 indicates sufficient consistency for decision.

Quality and lean management
Modern definition of quality

Quality is inversely proportional to variability

 Quality https://www.youtube.com/watch?v=kib6uXQsxBA
• The ability of a product or service to consistently meet or exceed customer expectations.
• Fulfill customer (market) requirement
• Fit for purpose.
• ……..

Product Quality dimensions

• Performance – main characteristics of the product
• Aesthetics – appearance, feel, smell, taste
• Special features – extra characteristics
• Conformance – how well the product conforms to design specifications
• Reliability – consistency of performance
• Durability – the useful life of the product
• Perceived quality – indirect evaluation of quality
• Serviceability – handling of complaints or repairs
• Consistency – quality doesn’t vary

TQM: A Philosophy that involves everyone in an organization in a continual effort to improve quality and achieve customer
satisfaction
Dimensions of Service Quality
• Convenience – the availability and accessibility of the service
• Assurance – knowledge exhibited by personnel and their ability to convey trust and
confidence
• Reliability – ability to perform a service dependably, consistently, and accurately
• Time – the speed with which the service is delivered
• Responsiveness – willingness to help customers in unusual situations and to deal with
problems
• Courtesy – the way employees treat customers
• Tangibles – the physical appearance of facilities, equipment, personnel, and communication
materials
• Consistency – the ability to provide the same level of good quality repeatedly
• Expectancy – meet (or exceed) customer expectations
 The Consequences of Poor Quality
• Loss of business
• Liability
• Productivity
• Costs

Costs of Quality
Failure costs - costs incurred by defective
Appraisal costs parts/products or faulty services
Costs of activities designed to ensure quality or uncover Internal failure costs
defects Costs incurred to fix problems that are
Prevention costs detected before the product/service is
All TQ training, TQ planning, customer assessment, delivered to the customer
process control, and quality improvement costs to External failure costs
prevent defects from occurring All costs incurred to fix problems that are
detected after the product/service is delivered
to the customer
Baldrige Criteria
• Leadership
• Strategic planning
• Customer focus
• Measurement, analysis, and knowledge management
• Workforce focus
• Operations focus International Organization for Standardization
• Results ISO 9000
Set of international standards on quality management
and quality assurance, critical to international business
ISO 14000
A set of international standards for assessing a
company’s environmental performance
ISO 24700
Pertains to the quality and performance of office
equipment that contains reused components
TQM Approach
1. Find out what the customer wants
2. Design a product or service that meets or
exceeds customer wants
3. Design processes that facilitate doing the job
right the first time
4. Keep track of results
5. Extend these concepts throughout the supply
chain
6. Top management must be involved and
committed
Continuous Improvement
• Continuous improvement
• Philosophy that seeks to make never-ending
improvements to the process of converting inputs into
outputs
• Kaizen
• Japanese word for continuous improvement
Six Sigma
• Six Sigma
• A business process for improving quality, reducing costs, and increasing customer satisfaction
• Statistically
• Having no more than 3.4 defects per million
• Conceptually
• Program designed to reduce defects
• Requires the use of certain tools and techniques
• Principles
• Reduction in variation is an important goal
• The methodology is data driven; it requires data validation
• Outputs are determined by inputs
• Only a critical few inputs have a significant impact on outputs

DMAIC
Define: Set the context and objectives for improvement
Measure: Determine the baseline performance and capability of the process
Analyze: Use data and tools to understand the cause-and-effect relationships of the process
Improve: Develop the modifications that lead to a validated improvement of the process
Control: Establish plans and procedures to ensure that improvements are sustained
Centered normal distribution between Six Sigma limits
Effects of a 1.5 shift
 Expertise rank of 6 sigma
1.White Belt: Basic understanding of Six Sigma concepts.
2.Yellow Belt: Contributes to projects as a team member.
3.Green Belt: Leads small-scale improvement projects.
4.Black Belt: Expert in Six Sigma tools and methodologies; leads larger
projects.
5.Master Black Belt: Oversees Six Sigma strategy, training, and mentoring.
6.Champion: Senior executive responsible for driving Six Sigma initiatives.
Basic Quality Tools (7QC) https://www.viddler.com/embed/ee24445d
Statistical Process Control (SPC)
• Quality control seeks
• Quality of conformance
• A product or service conforms to specifications

• A tool used to help in this process

• SPC
• Statistical evaluation of the output of a process
• Helps us to decide if a process is “in control” or if corrective action is needed
Process Variability
• Two basic questions: concerning variability:
1. Issue of process control
• Are the variations random? If nonrandom variation is
present, the process is said to be unstable.
2. Issue of process capability
• Given a stable process, is the inherent variability of the
process within a range that conforms to performance
criteria?
Variation
• Variation
• Random (common cause) variation:
• Natural variation in the output of a process, created by
countless minor factors
• Assignable (special cause) variation:
• A variation whose cause can be identified
• A nonrandom variation
Control Process
• Sampling and corrective action are only a part of the control
process
• Steps required for effective control:
• Define: What is to be controlled?
• Measure: How will measurement be accomplished?
• Compare: There must be a standard of comparison
• Evaluate: Establish a definition of out of control
• Correct: Uncover the cause of nonrandom variability and fix it
• Monitor: Verify that the problem has been eliminated
Control Charts: The Voice of the Process
• Control chart
• A time ordered plot of representative sample statistics obtained from an ongoing process
(e.g., sample means), used to distinguish between random and nonrandom variability
• Control limits
• The dividing lines between random and nonrandom deviations from the mean of the
distribution
• Upper and lower control limits define the range of acceptable variation
Process Control and Capability Analysis
Control Chart

Each point on the control chart represents a sample of n observations

Process Errors
• Type I error
• Concluding a process is not in control when it actually is.
• The probability of rejecting the null hypothesis when the null hypothesis is true.
• Manufacturer’s risk
• Type II error
• Concluding a process is in control when it is not.
• The probability of failing to reject the null hypothesis when the null hypothesis is
false.
• Consumer’s risk
Observations from Sample Distribution
Control Charts for Variables
• Variables generate data that are measured
• Mean control charts
• Used to monitor the central tendency of a process
• “x-bar” charts
• Range control charts k
• Used to monitor the process dispersion x i
• R charts x = i =1
k
k

R i
where
R= i =1
k x = Average of sample means
where
x i = mean of sample i
R = Average of sample ranges
Ri = Range of sample i k = number of samples
X-Bar/ range Chart: Control Limits
Used to monitor the central tendency of a process
x − chart Control Limits
UCL x = x + A2 R When sd known
UCL=x double bar+z(sigma/sqrt(n)
LCL x = x + A2 R
where
A2 = a control factor based on sample size, n
R Chart Control Limits
ULR R = D 4 R
LCL R = D3 R
where
D3 = a control chart factor based on sample size, n
D4 = a control chart factor based on sample size, n
Factors for Three Sigma Control Charts

Factors for three-sigma control limits for

x and R charts
FACTORS FOR R CHARTS FACTORS FOR R CHARTS
Number of Observations in Factor for x Lower Control Upper Control
Subgroup, n Chart, A 2 Limit, D3 Limit, D4
2.......... 1.88 0 3.27
3.......... 1.02 0 2.57
4.......... 0.73 0 2.28
5.......... 0.58 0 2.11
6.......... 0.48 0 2.00
7.......... 0.42 0.08 1.92
8.......... 0.37 0.14 1.86
9.......... 0.34 0.18 1.82
FACTORS FOR R CHARTS FACTORS FOR R CHARTS
Number of Observations in Factor for x Lower Control Upper Control
Subgroup, n Chart, A2 Limit, D3 Limit, D4

10.......... 0.31 0.22 1.78

11.......... 0.29 0.26 1.74
12.......... 0.27 0.28 1.72
13.......... 0.25 0.31 1.69
14.......... 0.24 0.33 1.67
15.......... 0.22 0.35 1.65
16.......... 0.21 0.36 1.64
17.......... 0.20 0.38 1.62
18.......... 0.19 0.39 1.61
19.......... 0.19 0.40 1.60
20.......... 0.18 0.41 1.59
Problem 1
 When sigma is unknown
• Compute R bar= (0.03+0.05+0.06+.04+0.05)/5=0.46
x − chart Control Limits
UCL x = x + A2 R
LCL x = x + A2 R
where UCL=12.11+ 0.73(0.046)= 12.14
A2 = a control factor based on sample size, n LCL= 12.11-0.73(0.046)=12.08

R Chart Control Limits

ULR R = D 4 R
LCL=0
LCL R = D3 R UCL 2.28*0.046=0.105
where
D3 = a control chart factor based on sample size, n
D4 = a control chart factor based on sample size, n
 Control Charts for Attributes
• Attributes generate data that are counted.
• p-chart
• Control chart used to monitor the proportion of defectives in a
process
• c-chart
• Control chart used to monitor the number of defects per unit
When observations can be placed into two categories
Good or bad Total number of defectives
p=
Pass or fail Total number of observations
Operate or don’t operate
When the data consists of multiple samples of several observations each
^
σp =
(
p1 − p )
n
 ^ 
UCL p = p + z  σ p 
 
 ^ 
LCLp = p − z  σ P 
 
Problem
c-chart
• Use only when the number of occurrences per unit of measure can be
counted; non-occurrences cannot be counted.
• Scratches, chips, dents, or errors per item
• Cracks or faults per unit of distance
• Breaks or tears per unit of area
• Bacteria or pollutants per unit of volume
• Calls, complaints, failures per unit of time

UCL c = C + Z C
LCL c = C − Z C
Process Capability
Once a process has been determined to be stable, it is necessary to determine if the process is capable of
producing output that is within an acceptable range
• Tolerances or specifications
• Range of acceptable values established by engineering design or customer requirements
• Process variability
• Natural or inherent variability in a process

UTL − LTL
Cp = UTL = upper tolerance (specification) limit
6 LTL = lower tolerance (specification) limit
Process Capability

Cpk
• Used when a process is not centered at its target, or nominal,
value

C pk = minC pu , C pl 
UTL − x x − LTL 
= min , 
 3σ 3σ 
 Problem
• A manager has option of using any one of the three machines for a job.
The processes and their standard deviations are listed below. Determine
which m/cs are capable if the specifications are 10.00 mm and 10.80
mm.
Process Sd Process width Cp
A 0.13 0.13*6=0.78 0.8/0.78=1.03
B 0.08 0.48 0.8/0.48=1.67
C 0.16 0.96 0.8/0.96=0.83

Cp is not a true measure for process capability; therefore, measuring Cpk is necessary to collude process capability.

Min [(USL-mean)/3sd, (mean-LSL)/3sd]

A process has a mean of 9.2 grams and the sd of 0.3 grams. The LSL is 7.5 grams and USL is 10.50 grams. Compute Cpk.

Lower index= (9.2-7.5)/3 *0.3=1.89; upper index= (10.50-9.20/3*0.3)=1.44

Min is 1.44 hence process is capable
Class practice
Process Mean Sd LSL USL
1 7.5 0.1 7 8
2 4.5 0.12 4.5 4.9
3 6.5 0.14 5.5 6.7
Determine process control nature.

As part of an insurance company’s training program, participants learn how to conduct an analysis of a
client’s insurability. The goal is to have participants achieve a time range of 30 to 45 minutes. The test results
of three managers as Ashok, a mean of 38 min. and sd 2 min; Pooja, a mean of 37 minutes and sd 0f 2.5 min;
and Jaya with mean of 37.5 and sd of 1.8 min. Compute
• Which of the participants would you judge to be capable? Explain
• Can the value of Cpk exceed the value of for given participant? Explain

A quality manager found an average of 3.9 defects in a car engine start while doing a quality check.
Managers attempt to start before delivery to the dealer, but the engine is not started in the first go. The lot
size of car is 100 and an average of 4 did not start (4%). Use a suitable control chart for modelling quality
issue.
Exercise: A hard-bake process is used in conjunction with photolithography in semiconductor manufacturing. We
wish to establish statistical control of the flow width of the resist in this process using and R charts. Twenty-five
samples, each of size five wafers, have been taken when we think the process is in control. The interval of time
between samples or subgroups is one hour. The flow width measurement data (in x microns) from these samples
are shown in Table.
Introduction to Digital
Supply Chain & Logistics
(session 9-10)
chapter-15
 Need of SCLM for business system ?
Innovative or function product
What makes Logistics and what we manage

A way to link and balance the

Supply – Demand
• Cost effective
Supply Demand
Supply Chain

3
Source: Supply Chain Management by Sunil C. & Peter M.
Evolution of SCM

Source: https://www.informit.com/articles/article.aspx?p=2166717&seqNum=5
4
All parties involved, directly or indirectly, in fulfilling a customer request
includes manufacturers, suppliers, transporters, warehouses, retailers, and
customers.

Maximize net value generated

Supply Chain Surplus = Customer
Value − Supply Chain Cost

5
Digital supply chain

• Digitalisation in supply chain has come to encompass digital products and

services as well as handling the supply chain processes.
• DSC is a bundle of interconnected activities with novel technologies for flow
of goods/services.
• Therefore, DSC is an intelligent, value added, novel process that utilizes new
approaches for digital transformation which create competitive value and
network effect.

6
The role of DSC in future SC

Source: Digital Supply Chains: Key Facilitator to Industry 4.0 and New Business Models; 3 rd Edition, Götz G. Wehberg 7
Supply chain integration for DSC

Source: Digital Supply Chains: Key Facilitator to Industry 4.0 and New Business Models; 3 rd Edition, Götz G. Wehberg 8
 DSC application area

• Planning
• Physical flow
• Supply chain performance
• Customer order management
• Collaboration
• SC strategy
Finally supporting to 4V of the production/supply system
V1: Value
V2: Variety
V3: Volume
V4: Variability

9
Reference architecture for digital supply chains

10
Source: Digital Supply Chains: Key Facilitator to Industry 4.0 and New Business Models; 3 rd Edition, Götz G. Wehberg
Decision Phases in a Supply Chain
1. Supply chain strategy or design
• How to structure the supply chain over the next several years?
2. Supply chain planning
• Decisions over the next quarter or year
3. Supply chain operation
• Daily or weekly operational decisions

11
Process Views of a Supply Chain
1. Cycle View: The processes in a supply chain are divided into a series of

cycles, each performed at the interface between two successive stages of the
supply chain.

2. Push/Pull View: The processes in a supply chain are divided into two

categories, depending on whether they are executed in response to a customer

order or in anticipation of customer orders.

Pull processes are initiated by a customer order, whereas

Push processes are initiated and performed in anticipation of customer orders.

12
Cycle View of Supply Chain Processes

Figure Supply Chain Process Cycles

13
Source: Supply Chain Management by Sunil C. & Peter M.
 Push/Pull View of Supply Chain Processes

• Supply chain processes fall into one of two categories depending on the
timing of their execution relative to customer demand

• Pull: execution is initiated in response to a customer order (reactive)

• Push: execution is initiated in anticipation of customer orders (speculative)

• Push/pull boundary separates push processes from pull processes

14
Push/Pull View of Supply Chains

15
Source: Supply Chain Management by Sunil C. & Peter M.
 16

Framework for Supply Chain Decisions

Source: Supply Chain Management by Sunil C. & Peter M.

Framework for Supply Chain Decisions
• Logistical Drivers
• Facilities
• Inventory
• Transportation
• Cross-Functional Drivers
• Information
• Sourcing
• Pricing
• Interactions determine overall supply chain performance

17
 ZARA case (https://toughnickel.com/industries/Business-Operations-of-Clothing-Retailer-Zara)
https://www.youtube.com/watch?v=whFsziS3x18

• Inditex, the parent company of cheap, chic-fashion chain.

• Zara, has transformed itself into Europe’s leading apparel retailer over the past
10 years and has racked up impressive results in Asia and the United States.
• Since 2000, Inditex has more than quintupled its sales and profits as it has
tripled the number of stores of its eight brands. (Zara is the biggest, accounting
for two-thirds of total revenues.)
• 21 stores in India.
• It is noted for producing over 840 million items each year through 6300 outlets
in 85 countries throughout the world.
https://www.fibre2fashion.com/industry-article/3315/apparel-supply-chain-and-
its-variants
Q1: why 2+1 strategy is winning point for Zara?
Q2: How outsourcing is efficient lever for Zara to reach on time to
market?

19
BS
• Zara’s business model is one of the most important factors in its global
expansion and unbridled success.
• It employs tactics such as vertical integration at a high level and a systematic
value chain model.
• The company’s value model focuses on integrating multiple aspects of the
business, such as design, manufacturing, distribution, and proper raw
material supply.
• The following are some of the primary strategies that the company is
developing.
• Vertical integration
• Logistics excellence
• Design and manufacturing control
•…
 Achieving Strategic Fit
1. The competitive strategy and all functional strategies must fit together to form

a coordinated overall strategy. Each functional strategy must support other

functional strategies and help a firm reach its competitive strategy goal.

2. The different functions in a company must appropriately structure their

processes and resources to be able to execute these strategies successfully.

3. The design of the overall supply chain and the role of each stage must be

aligned to support the supply chain strategy.

21
How Is Strategic Fit Achieved?
1. Understanding the customer and supply chain uncertainty
2. Understanding the supply chain capabilities
3. Achieving strategic fit

22
Step 1: Understanding the Customer and
Supply Chain Uncertainty

• Quantity of product needed in each lot

• Response time customers are willing to tolerate

• Variety of products needed

• Service level required

• Price of the product

• Desired rate of innovation in the product

23
Step 2: Understanding Supply Chain Capabilities
• How does the firm best meet demand?
• Supply chain responsiveness is the ability to
• Respond to wide ranges of quantities demanded
• Meet short lead times
• Handle a large variety of products
• Build highly innovative products
• Meet a high service level
• Handle supply uncertainty

24
Step 2: Understanding Supply Chain Capabilities
• Responsiveness comes at a cost
• Supply chain efficiency is the inverse to the cost of making and delivering
the product to the customer
• The cost-responsiveness efficient frontier curve shows the lowest possible
cost for a given level of responsiveness

25
 26

Cost-Responsiveness Efficient Frontier

Cost-Responsiveness Efficient Frontier

 27

Zone of Strategic Fit

Efficient and Responsive Supply Chains
Comparison of Efficient and Responsive Supply Chains
Blank Efficient Supply Chains Responsive Supply Chains
Primary goal Supply demand at the lowest cost Respond quickly to demand
Maximize performance at a Create modularity to allow
Product design strategy
minimum product cost postponement of product differentiation
Lower margins because price is a Higher margins because price is not a
Pricing strategy
prime customer driver prime customer driver
Lower costs through high Maintain capacity flexibility to buffer
Manufacturing strategy
utilization against demand/supply uncertainty
Maintain buffer inventory to deal with
Inventory strategy Minimize inventory to lower cost
demand/supply uncertainty
Reduce, but not at the expense of Reduce aggressively, even if the costs
Lead-time strategy
costs are significant
Select based on speed, flexibility,
Supplier strategy Select based on cost and quality
reliability, and quality
28
Affordable Customization and Variety
• Reactive vs. proactive 100 %
Custom Engineering

modes of customization

• Must consider cost, control, Change or Easy to

time constraints Modify
“Standard”
Customize

Customization
Designs and

Contribution
Processes
• Best to strive for platforms
– product and process –
that allow you to be
proactive
Standard Parts
and Modules

0%
Reactive Proactive

Adapted from: Anderson, D.M., 1997, Agile Product Development

for Mass Customization, Irwin, Chicago, IL. 29
 Commonality Index (CI)
• Commonality Index (CI) measures how well the design utilizes standardized
parts

30
 Example

Uij=1+1+1+1+1+0+1+0+0+0+1+1+1+0+1=10

CI= 10/(5*3)= .667

The Commonality Index (CI) = 0.67, meaning 67% of the component-product relationships are shared.

=4/(15)=.267

31
 Differentiation Index (DI)
The Differentiation Index (DI) is a measure used in mass customization and supply chain management to
determine where in the production process a product differentiates into its final form. It helps companies
understand how early or late in the process product variety is introduced.

DI=(X/T)
Where:
X= The point (measured in time or process steps) in the production process where differentiation occurs.
T= The total production process time or total number of steps in the process.
Interpretation:
DI = 0 → Differentiation occurs at the very beginning (e.g., fully custom-made products).
DI = 1 → Differentiation occurs at the very end (e.g., make-to-stock, standardized products).
0 < DI < 1 → Differentiation occurs somewhere in between (e.g., assemble-to-order, configure-to-order).

32
Example
A small business, "CustomWear", specializes in custom-printed T-shirts. They follow a mass
customization strategy, allowing customers to choose fabric, color, and design. The production process
consists of six key steps.

DI=4/6=0.67

Benefits:
1. Standardized upstream processes (Steps 1-3) keep production cost-efficient.
2. Flexibility in customization (Step 4) enables variety without excessive complexity.
3. Lower inventory risk since blank T-shirts can be stocked before customization.
Challenges:
1. Printing bottlenecks may delay delivery times.
2. Higher demand variability could require better production scheduling.
33
 Decision Tree Analysis for outsourcing decision
• A decision tree is a graphic device used to evaluate decisions under uncertainty.
• Decision trees with DCFs can be used to evaluate supply chain design decisions
given uncertainty in prices, demand, exchange rates, and inflation.
• The probability on an arrow is referred to as the transition probability and is the
probability of transitioning from the origin node in Period i to the end node in
Period i + 1.
• The analysis is based on Bellman’s principle, which states that for any choice of
strategy in a given state, the optimal strategy in the next period is the one that is
selected if the entire analysis is assumed to begin in the next period.
Trips International Logistics problem
• The manager must decide whether to lease warehouse space for the coming three
years and the quantity to lease.
• The manager anticipates uncertainty in demand and spot prices for warehouse space
over the coming three years.
• The long-term lease is cheaper but the space could go unused if demand is lower
than anticipated.
• The long-term lease may also end up being more expensive if future spot market
prices come down. The manager is considering three options:
1. Get all warehousing space from the spot market as needed.
2. Sign a three-year lease for a fixed amount of warehouse space and get additional
requirements from the spot market.
3. Sign a flexible lease with a minimum charge that allows variable usage of
warehouse space up to a limit, with additional requirements from the spot market
• We now discuss how the manager can evaluate each decision, taking
uncertainty into account.
• One thousand square feet of warehouse space is required for every 1,000 units
of demand, and the current demand at Trips Logistics is for 100,000 units per
year.
• The manager forecasts that from one year to the next, demand may go up by
20 percent, with a probability of 0.5, or go down by 20 percent, with a
probability of 0.5.
• The probabilities of the two outcomes are independent and unchanged from
one year to the next.
• The general manager can sign a three-year lease at a price of $1 per square
foot per year. Warehouse space is currently available on the spot market for
$1.20 per square foot per year.
Data given
1000 sq. ft. of warehouse space needed for 1000 units of demand
• Current demand = 100,000 units per year
• Binomial uncertainty: Demand can go up by 20% with
p = 0.5 or down by 20% with 1 − p = 0.5
• Lease price = $1.00 per sq. ft. per year
• Spot market price = $1.20 per sq. ft. per year
• Spot prices can go up by 10% with p = 0.5 or down by 10% with
1 − p = 0.5
• Revenue = $1.22 per unit of demand
• k = 0.1
Evaluating the Spot Market Option
• Analyze the option of not signing a lease and using the spot market
• Start with last period and calculate the profit at each node

For D = 144, p = $1.45, in Period 2:

C(D = 144, p = 1.45,2) = 144,000 × 1.45
= $208,800
P(D = 144, p = 1.45,2) = 144,000 × 1.22
− C(D = 144, p = 1.45, 2)
= 175,680 − 208,800
Net = −$33,120
Evaluating the Spot Market Option
Period 2 Calculations for Spot Market Option

Cost Profit
Blank Revenue C(D =, p =, 2) P(D =, p =, 2)
D = 144, p = 1.45 144,000 × 1.22 144,000 × 1.45 −$33,120
D = 144, p = 1.19 144,000 × 1.22 144,000 × 1.19 $4,320
D = 144, p = 0.97 144,000 × 1.22 144,000 × 0.97 $36,000
D = 96, p = 1.45 96,000 × 1.22 96,000 × 1.45 −$22,080
D = 96, p = 1.19 96,000 × 1.22 96,000 × 1.19 $2,880
D = 96, p = 0.97 96,000 × 1.22 96,000 × 0.97 $24,000
D = 64, p = 1.45 64,000 × 1.22 64,000 × 1.45 −$14,720
D = 64, p = 1.19 64,000 × 1.22 64,000 × 1.19 $1,920
D = 64, p = 0.97 64,000 × 1.22 64,000 × 0.97 $16,000
 Evaluating the Spot Market Option
• Expected profit at each node in Period 1 is the profit during Period 1 plus the present
value of the expected profit in Period 2
• Expected profit E P(D =, p =, 1) at a node is the expected profit over all four nodes in
Period 2 that may result from this node
• Present value E P(D =, p =, 1) is the present value of this expected profit and P(D =, p
=, 1), and the total expected profit, is the sum of the profit in Period 1 and the present
value of the expected profit in Period 2.
 Evaluating the Spot Market Option
• From node D = 120, p = $1.32 in Period 1, there are four possible states in Period 2
• Evaluate the expected profit in Period 2 over all four states possible from node D = 120,
p = $1.32 in Period 1 to be

E P(D = 120, p = 1.32,1) = 0.25 × [P(D = 144, p = 1.45,2)

+ P(D = 144, p = 1.19,2)
+ P(D = 96, p = 1.45,2)
+ P(D = 96, p = 1.19,2)
= 0.25 × [−33,120 + 4,320
− 22,080 + 2,880]
= −$12,000
Evaluating the Spot Market Option
The present value of this expected value in Period 1 is

EP (D = 120, p = 1.32,1)
PVEP (D = 120, p = 1.32,1) =
(1 + k )
−$12, 000
=
(1.1)
= −$10, 909
 Evaluating the Spot Market Option
The total expected profit P(D = 120, p = 1.32,1) at node D = 120, p = 1.32 in
Period 1 is the sum of the profit in Period 1 at this node, plus the present value
of future expected profits possible from this node

P (D = 120, p = 1.32,1) = (120,000  1.22 ) – (120,000  1.32 )

+PVEP (D = 120, p = 1.32,1)
= –$12,000 – $10,909 = – $22, 909
Evaluating the Spot Market Option
Period 1 Calculations for Spot Market Option

P(D =, p =, 1)
= D × 1.22 – D x p + start fraction E P at left

parenthesis D =, p =, 1 right parenthesis over left parenthesis 1 + k right parenthesis end fraction

EP (D = , p = ,1)
Node EP(D =, p =, 1) (1 + k )
D = 120, p = 1.32 −$12,000 −$22,909

D = 120, p = 1.08 $16,000 $32,073

D = 80, p = 1.32 −$8,000 −$15,273

D = 80, p = 1.08 $11,000 $21,382

 Evaluating the Spot Market Option
For Period 0, the total profit P(D = 100, p = 120,0) is the sum of the profit in Period
0 and the present value of the expected profit over the four nodes in Period 1

EP(D = 100, p = 1.20,0) = 0.25 × [P(D = 120, p = 1.32,1)

+ P(D = 120, p = 1.08,1)
+ P(D = 96, p = 1.32,1)
+ P(D = 96, p = 1.08,1)]
= 0.25 × [−22,909 + 32,073
− 15,273) + 21,382]
= $3,818
Evaluating the Spot Market Option
EP ( D = 100, p = 1.20,0 )
PVEP (D = 100, p = 1.20,1) =
(1 + k )
$3,818
= = $3,471
(1.1)
P(D = 100, p = 1.20,0) = (100,000 × 1.22) − (100,000 × 1.20)+ P V
E P(D = 100, p = 1.20,0)
= $2,000 + $3,471 = $5,471

Therefore, the expected N P V of not signing the

lease and obtaining all warehouse space from the
spot market is given by N P V (Spot Market) =
$5,471
Evaluating the Fixed Lease Option
Period 2 Profit Calculations at Trips Logistics for Fixed Lease Option

Profit P(D =, p =, 2)
Warehouse Space = D × 1.22 − (100,000 × 1
Node Leased Space at Spot Price (S) + S x p)
D = 144, p = 1.45 100,000 sq. ft. 44,000 sq. ft. $11,880
(aval. For 100k)
D = 144, p = 1.19 100,000 sq. ft. 44,000 sq. ft. $23,320
D = 144, p = 0.97 100,000 sq. ft. 44,000 sq. ft. $33,000
D = 96, p = 1.45 100,000 sq. ft. 0 sq. ft. $17,120
D = 96, p = 1.19 100,000 sq. ft. 0 sq. ft. $17,120
D = 96, p = 0.97 100,000 sq. ft. 0 sq. ft. $17,120
D = 64, p = 1.45 100,000 sq. ft. 0 sq. ft. −$21,920
D = 64, p = 1.19 100,000 sq. ft. 0 sq. ft. −$21,920
D = 64, p = 0.97 100,000 sq. ft. 0 sq. ft. −$21,920
Evaluating the Fixed Lease Option
Period 1 Profit Calculations at Trips Logistics for Fixed Lease Option

Warehouse
Space P(D =, p =, 1)
at Spot Price = D x 1.22−(100,000 x 1 + S x
Node EP(D =, p =, 1) (S) p) + EP(D =, p = ,1)(1 + k)
D = 120, p = 1.32 0.25 × [P(D = 144, p = 1.45,2) + P(D = 20,000 $35,782
144, p = 1.19,2) + P(D = 96, p = 1.45,2)
+ P(D = 96, p = 1.19,2)] = 0.25 × (11,880
+ 23,320 + 17,120 + 17,120) = $17,360

D = 120, p = 1.08 0.25 × (23,320 + 33,000 + 17,120 + 20,000 $45,382

17,120) = $22,640
D = 80, p = 1.32 0.25 × (17,120 + 17,120−21,920 − 0 −$4,582
21,920) = −$2,400
D = 80, p = 1.08 0.25 × (17,120 + 17,120 − 21,920 0 −$4,582
−21,920) = −$2,400
 Evaluating the Fixed Lease Option
Using the same approach for the lease option, NPV (Lease) = $38,364

EP(D = 100, p = 1.20,0) = 0.25 × [P(D = 120, p = 1.32,1) +

P(D = 120, p = 1.08,1) + P(D =
80, p = 1.32,1) + P(D = 80, p =
1.08,1)]
= 0.25 × [35,782 + 45,382 − 4,582
− 4,582]
= $18,000
Evaluating the Fixed Lease Option

EP ( D = 100, p = 1.20,1)
PVEP (D = 100, p = 1.20,1) =
(1 + k )
$18,000
= = $16,364
(1.1)

P(D = 100, p = 1.20,0) = (100,000 × 1.22) − (100,000 × 1)

+ PVEP(D = 100, p = 1.20,0)
= $22,000 + $16,364 = $38,364
 Evaluating the Fixed Lease Option
• Recall that when uncertainty was ignored, the N P V for the lease option was
$60,182
• However, the manager would probably still prefer to sign the three-year lease for
100,000 sq. ft. because this option has the higher expected profit
Evaluating the Flexible Lease Option
Period 2 Profit Calculations at Trips Logistics with Flexible Lease Contract

Profit P(D =, p =, 2)
Warehouse Warehouse Space = D × 1.22 − (W× 1
Node Space at $1 (W) at Spot Price (S) + S × p)
D = 144, p = 1.45 100,000 sq. ft. 44,000 sq. ft. $11,880
D = 144, p = 1.19 100,000 sq. ft. 44,000 sq. ft. $23,320
D = 144, p = 0.97 100,000 sq. ft. 44,000 sq. ft. $33,000
D = 96, p = 1.45 96,000 sq. ft. 0 sq. ft. $21,120
D = 96, p = 1.19 96,000 sq. ft. 0 sq. ft. $21,120
D = 96, p = 0.97 96,000 sq. ft. 0 sq. ft. $21,120
D = 64, p = 1.45 64,000 sq. ft. 0 sq. ft. $14,080
D = 64, p = 1.19 64,000 sq. ft. 0 sq. ft. $14,080
D = 64, p = 0.97 64,000 sq. ft. 0 sq. ft. $14,080
Evaluating the Flexible Lease Option
Period 1 Profit Calculations at Trips Logistics with Flexible Lease Contract
P(D =, p =, 1)
Warehouse = D × 1.22 − (W x
Warehouse Space 1 + S x p) + E P(D
Space at $1 at Spot =,
Node E P(D =, p =, 1) (W) Price (S) p = ,1)(1 + k)
D = 120, 0.25 × (11,880 + 100,000 20,000 $37,600
p = 1.32 23,320 + 21,120 +
21,120) = $19,360
D = 120, 0.25 × (23,320 + 100,000 20,000 $47,200
p = 1.08 33,000 + 21,120 +
21,120) = $24,640
D = 80, 0.25 × (21,120 + 80,000 0 $33,600
p = 1.32 21,120 + 14,080 +
14,080) = $17,600
D = 80, 0.25 × (21,920 + 80,000 0 $33,600
p = 1.08 21,920 + 14,080 +
Decision Tree – Trips Logistics

Option Value
All warehouse space from the spot market $5,471
Lease 100,000 sq. ft. for three years $38,364
Flexible lease to use between 60,000 and 100,000 $46,545
sq. ft.
 Project Management

McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
 Project Management
Project management is the application of processes, methods, knowledge, skills and experience to
achieve the project objectives.
-The Association of Project Management

• What is a project?
• A series of related jobs, usually directed toward some major output and requiring a
significant period of time to perform.
• What is project management?
• Planning, directing, and controlling resources (people, equipment, material, etc.) to
meet the technical, cost, and time constraints of the project.
• Why is project management important?
• At the highest levels of an organization, management often involves juggling a
portfolio of projects.
Types of Development Projects
Degree of Change

Type of
Project

Source: Chase, Shankar, Jacob, OSCM

Project Structure
Pure Project

• A self-contained team works full-time on the project.

Functional Project

• Responsibility for the project lies within one functional area of the
firm. Employees from that area work on the project, usually only
part-time.

Matrix Project

• A blend of pure and functional project structures – people from

different functional areas work on the project, possibly only part-
time.
Functional Project Structure

• A team member can work on several projects

Advantages • Technical expertise maintained in functional area

• Functional area is “home” after project completed
• Critical mass of specialized knowledge

•Aspects of the project that are not directly related to

the functional area get short-changed
Disadvantages •Motivation of team members is often weak
•Needs of the client are secondary and are responded to
slowly
Matrix Project Structure
• Better communications between functional areas
• Project manager held responsible for success
Advantages • Duplication of resources is minimized
• Functional “home” for team members
• Policies of the parent organization are followed

• Too many bosses

Disadvantages • Depends on project manager’s negotiating skills
• Potential for sub-optimization
Defining the Project
• Statement of Work
• A written description of the objectives to be achieved

• Task
• A further subdivision of a project – usually shorter than several months
and performed by a single group or organization

• Work Package
• A group of activities combined to be assignable to a single organizational
unit
Defining the Project
Continued

• Project Milestone
• Specific events in the life of the project

• Work Breakdown Structure

• Defines the hierarchy of project tasks, subtasks, and work packages

• Activities
• Pieces of work that consume time
 Project Life Cycle
• Conception: identify the need
• Feasibility analysis or study: costs
benefits, and risks
• Planning: who, how long, what to do?
• Execution: doing the project
• Termination: ending the project

Source: http://www.maxwideman.com/papers/projenviron/dimensions.htm
Work Breakdown Structure Example

Overview

Details
Work Breakdown Structure – Large Optical Scanner
Design

Overview

Details
Network-Planning Models
A project is made up of a sequence of activities that form
a network representing a project.

The path taking longest time through this network of

activities is called the “critical path.”

The critical path provides a wide range of scheduling

information useful in managing a project.

Critical path method (CPM) helps to identify the critical

path(s) in the project networks.
Question for PM

What is the total time to complete the project?

What are the scheduled start and finish dates for each specific activity?

Which activities are “critical” and must be completed exactly as scheduled to keep
the project on schedule?

How long can “noncritical” activities be delayed before they cause an increase in
the total project completion time?
 PM techniques
• The various jobs or activities required to be done to ensure the entire project is completed
on time could often be interconnected with each other.

• For example, some activities depend on the completion of other activities before they can
be started.

• Initially, CPM and PERT were two different approaches

• CPM used deterministic time estimates and allowed project crunching

• PERT used probabilistic time estimates

Contd--

• CPM offered the option of reducing activity times by adding more

workers and/or resources, usually at an increased cost.

• Thus, a distinguishing feature of CPM was that it identified trade-offs

between time and cost for various project activities.
Terminologies
• Activity - A specific task or set of tasks that are required by the project, use up
resources, and take time to complete

• Event - The result of completing one or more activities

• Network - The combination of all activities and events that define a project

• Drawn left-to-right

• Connections represent predecessors

Contd..
• Path - A series of connected activities

• Critical - An activity, event, or path which, if delayed, will delay the completion
of the project

• Critical Path - The path through the project where, if any activity is delayed, the
project is delayed

• There is always a critical path

• There can be more than one critical path

Contd--

• Sequential Activities - One activity must be completed before the

next one can begin

• Parallel Activities - The activities can take place at the same time

• Immediate Predecessor - That activity that must be completed just

before a particular activity can begin
Contd--
• Sequential Activities

AON and AOA Format

Activity network, AON format Activity network, AOA format

Critical Path Method (CPM)
The computation algorithm
• Expected project duration
Identify each activity to be done and • Slack time
• The critical path
estimate how long it will take.

Determine the required sequence and

construct a network diagram.

Determine the critical path.

Determine the early start/finish and

late start/finish schedule.
 Example

• The owner of a Shopping Center plans to modernize and expand the current
32-business shopping centre complex.

• The project is expected to provide room for 8 to 10 new businesses.

• The first step in the PERT/CPM scheduling process is to develop a list of the
activities that make up the project.
List of activities
Project Scheduling Based on Expected Activity
Times
• The sum of expected activity times is 51.

• As a result, you may think that the total time required to complete the
project is 51 weeks.
• However, two or more activities often may be scheduled concurrently
(assuming sufficient availability of other required resources), thus
shortening the completion time for the project.
Network map
Project Scheduling Based on Expected Activity
Times
E F
1 4

A D G
5 3 14

C H I
START FINISH
4 12 2

B
6
 Activity analysis
• To determine the project completion time, we have to analyze the network
and identify what is called the critical path for the network.

• A path is a sequence of connected nodes that leads from the Start node to the
Finish node.
• All paths in the network must be traversed in order to complete the project, so
we will look for the path that requires the greatest time.
Earliest time for any activity
Let:
• ES = earliest start time for an activity
• EF = earliest finish time for an activity
• t = expected activity time
Earliest Start Earliest
Time Finish Time
The earliest time for any activity is:
• EF = ES + t E 0 5
1
Forward/Backward Pass
• Because an activity cannot be started until all immediately preceding activities have
been finished, the following rule can be used to determine the earliest start time for
each activity:
“The earliest start time for an activity is equal to the largest (i.e., latest) of the earliest finish times for
all its immediate predecessors.”

• Let us apply the earliest start time rule to the portion of the network involving nodes
A, B, C, and H.

• With an earliest start time of 0 and an activity time of 6 for activity B, we show :
ES = 0 and EF = ES + t = 0 + 6 = 6 in the node for activity B.
• Looking at node C, we note that activity A is the
only immediate predecessor for activity C.

• The earliest finish time for activity A is 5, so the

earliest start time for activity C must be ES = 5.

• Thus, with an activity time of 4, the earliest finish

time for activity C is EF = ES + t = 5 + 4 = 9.
Network map
E F
1 4

A D G
5 3 14

C H I
START 4 12 2 FINISH

B
6
Backward Pass
Let
• LS = latest start time for an activity
• LF = latest finish time for an activity
• LS = LF - t

• Beginning the backward pass with activity I, we know that the latest finish time is
LF = 26 and that the activity time is t = 2.

• Thus, the latest start time for activity I is :

LS = LF - t = 26 - 2 = 24
Contd--

• The following rule can be used to determine the latest finish time for
each activity in the network:

“The latest finish time for an activity is the smallest (i.e., earliest) of the
latest start times for all activities that immediately follow the activity.”
Backward pass
E 5 6 F 6 10
1 4

A 0 5 D 5 8 G 10 24
5 3 14

C 5 9 H 9 21 I 24 26
START FINISH
4 12 2

B 0 6
6
Slack

• After we complete the forward and backward passes, we can

determine the amount of slack associated with each activity.

• Slack is the length of time an activity can be delayed without

increasing the project completion time.

• The amount of slack for an activity is computed as follows:

Slack = LS - ES = LF - EF
 Contd--

• For example, the slack associated with activity C is :

LS - ES = 8 - 5 = 3 weeks

• Hence, activity C can be delayed up to 3 weeks, and the entire project can still be
completed in 26 weeks.

• In this sense, activity C is not critical to the completion of the entire project
in 26 weeks.
Activity schedule
Class Exercise: Identify Activities and
Construct Network

C(7) F(8)

A(21) G(2)

B(5) D(2) E(5)

Determine Early Start/Early Finish and Late Start/Late
Finish Schedule
Critical 21 28 28 36
Path 1:
ACFG C(7) F(8)

21 28 28 36
0 21 36 38

A(21) G(2)
0 21 36 38
21 26 26 28 28 33

Critical B(5) D(2) E(5)

Path 2:
ABDFG 21 26 26 28 31 36
 Network Planning Techniques
• Program Evaluation & Review Technique (PERT):
• Developed to manage the Polaris missile project
• Many tasks pushed the boundaries of science & engineering (tasks’ duration =
probabilistic)

• Critical Path Method (CPM):

• Developed to coordinate maintenance projects in the chemical industry
• A complex undertaking, but individual tasks are routine (tasks’ duration =
deterministic)
 Three time estimates a,m,b
• To incorporate uncertain activity times into the
analysis, we need to obtain three time estimates for
each activity:
– Optimistic time a = the minimum activity time if
• everything progresses ideally
– Most probable time m = the most probable activity
time under normal conditions
– Pessimistic time b = the maximum activity time if
substantial delays are encountered
 Expected time for an activity
• To illustrate the PERT/CPM procedure with uncertain activity times,
let us consider the optimistic, most probable, and pessimistic time
estimates for the project activities

• Using activity A as an example, we see that the most probable time is 5 weeks, with
a range from 4 weeks (optimistic) to 12 weeks (pessimistic).
Variance of an activity
• With uncertain activity times, we can use the variance to describe the
dispersion or variation in the activity time values.
• The variance of the activity time is given by the formula
 Variability in Project Completion Time
• Knowing that the standard deviation is the square root of the variance,
we compute the standard deviation 𝜎1 for the path 1 completion time
as

𝜎1 = 𝜎 1 2 = 2.72 = 1.65

• Assuming that the distribution of the path completion time T1 follows a normal
distribution, we can compute the probability that a path of activities will be completed
within a specified time.

• For example, suppose that management allotted 20 weeks for the project.
 Contd--

• We are asking for the probability that T1 ≤ 20, which corresponds graphically to
the shaded area in the figure.
• The z-score for the normal probability distribution at T1 =20 is

• Using z = 1.82 and the table for the normal distribution, we find that the probability
of path 1 meeting the 20-week deadline is 0.9656.
Class exercise: Calculating Expected Task Times

optimistic + 4(most likely) + pessimistic

Expected time =
6
Optimistic Most likely Pessimistic Expected
Activity
time time time time
A 2 4 6 4
B 3 7 10 6.83
C 2 3 5 3.17
D 4 7 9 6.83
E 12 16 20 16
F 2 5 8 5
G 2 2 2 2
H 2 3 4 3
I 2 3 5 3.17
J 2 4 6 4
K 2 © Wiley
2 2007 2 2
Network Diagram with Expected Activity Times
Estimated Path Durations through the Network

Activities on paths Expected duration

ABDEGHJK 44.66
ABDEGIJK 44.83
ACFGHJK 23.17
ACFGIJK 23.34

ABDEGIJK is the expected critical path & the project has

an expected duration of 44.83 weeks
Adding ES and EF to Network
Gantt Chart Showing Each Activity Finished at the Earliest
Possible Start Date
Adding LS and LF to Network
Gantt Chart Showing the Latest Possible Start Times if the
Project Is to Be Completed in 44.83 Weeks
Project Activity Variance

Activity Optimistic Most Likely Pessimistic Variance

A 2 4 6 0.44
B 3 7 10 1.36
C 2 3 5 0.25
D 4 7 9 0.69
E 12 16 20 1.78
F 2 5 8 1.00
G 2 2 2 0.00
H 2 3 4 0.11
I 2 3 5 0.25
J 2 4 6 0.44
K 2 2
© Wiley 2007 2 0.00
Variances of Each Path through the Network

Path Activities on Path Variance

Number Path (weeks)
1 A,B,D,E,G,H,J,k 4.82

2 A,B,D,E,G,I,J,K 4.96

3 A,C,F,G,H,J,K 2.24

4 A,C,F,G,I,J,K 2.38
Calculating the Probability of Completing the Project in Less
Than a Specified Time

• When you know:

• The expected completion time
• Its variance
• You can calculate the probability of completing the project in “X”
weeks with the following formula:
specified time − path expected time  DT − EFP 
z= =  
path standard time  σP 
2

σPath2 = variance of path

Where DT = the specified completion date

EFPath = the expected completion time of the path
Example: Calculating the probability of finishing the project
in 48 weeks

• Use the z values in Appendix B to determine probabilities

• e.g. probability for path 1 is  48 weeks − 44.66 weeks 
z =   = 1.52
 4.82 

Path Activities on Path Path Variance z-value Probability of

Number (weeks) Completion
1 A,B,D,E,G,H,J,k 4.82 1.5216 0.9357
2 A,B,D,E,G,I,J,K 4.96 1.4215 0.9222
3 A,C,F,G,H,J,K 2.24 16.5898 1.000

4 A,C,F,G,I,J,K 2.38 15.9847 1.000

 ToC (Theory of Constraint)

Process of On-Going Improvement (POOGI)

 Introduction
• The goal of a manufacturing/service (SC) company?

• (TOC) is a management philosophy developed by Dr. Eliyahu M. Goldratt that focuses

on identifying and improving the biggest limiting factor (constraint) in a process to
enhance overall performance.
• TOC is based on the idea that every system has at least one constraint that limits its ability
to achieve its goal, and by addressing this constraint, significant improvements can be
made.
• This element in TOC is called Constraint of the system = bottleneck
Constraints and resources
Bottleneck resources: whose demand is
• Marketing Constraints more than capacity
• Demand constraints
• Production constraints Capacity constrained resource (CCR): A
• Logistical constraints resource which can be become bottleneck
when not properly scheduled
• Policy constraints
• Behavioral constraints
Exercise
A company makes a single product whose weekly demand is 100.
Identify the constraints when
(a)The company works 8-hour shifts (5 days) and takes 20 minutes to
make the product.
(b)The company takes 30 minutes to make each product
(c )The supplier can give raw materials at the rate of 15/days
(d) The supplier can give 25 units per day, but the organization takes
two days to place the order.
Solution

D=100/week
a) p=20 min>> 3/hr
• Production capacity= 3*8*5= 120/ week>> demand is constraints
b) p=30min>>2/hr
• Production capacity 2*8*5= 80 units/week >> production is constraints
c) material supply 15*5=75 >>supplier is constraints
d) 3*25= 75 >>order policy is a constraint
What is the Theory of Constraints?
• The Theory of Constraints (TOC) is a philosophy and
concept developed by Dr. Eliyahu M. Goldratt that provides
tools and roadmaps for radically improving the
performance of organisations.
• Popularized in his business novel The Goal
• TOC states that:
• every real system such as a profit-making organization must
have at least one constraint (bottleneck)
• if this were not true, then the system would produce an
infinite amount of whatever it is designed for, its goal
• In the case of a profit-making organization, the goal is profits
• The constraint alone determines the output of the
organization
Constraints in our everyday lives
Happens whenever demand exceeds capacity
Theory of Constraints

Any system can produce only as much as its

critically constrained resource

Constraint

60 units 70 units 40 units 60 units

Per day Per day Per day Per day

Maximum Throughput = 40 units per day

 Significance of Bottlenecks

• Maximum speed of the process is the speed of the slowest operation

• Any improvements will be wasted unless the bottleneck is relieved
 Theory of Constraints
• Purpose is to identify constraints and exploit them to the extent
possible
• Identification of constraints allows management to take action to alleviate the
constraint in the future
Theory of Constraints
• Assumes current constraints cannot be changed in the short-run
• What should be produced now, with current resources, to maximize profits?
• Question cannot be answered by traditional accounting methods
The Goal? Movie

To make more money now and in the future!

•Alex Rogo: manufacturing plant manager (Hero)

•Jonah: Alex's college professor

•Julie Rogo: Alex Rogo's wife

•Bill Peach: division vice-president

•Fran: Alex's secretary

•Lou: the head accountant

•Stacey: the plant inventory manager

•Bob Donovan: the production manager

•Ralph Nakamura: Data Processing Manager

•Herbie: a boy scout who comes to metaphorically symbolize the bottleneck in

the plant

•Dave: Alex's son

•Sharon: Alex's daughter

 Key Principles of TOC
• Every system has a constraint – There is always one key bottleneck that
prevents a system from achieving more of its goal
• Improving the constraint improves the entire system – Optimizing the
bottleneck increases overall efficiency
• Focus on the weakest link – Instead of optimizing all parts of the system,
focus on strengthening the constraint
 The Five Focusing Steps of TOC

1. Identify the Constraint – Find the biggest bottleneck that limits the system’s output.
2. Exploit the Constraint – Maximize the efficiency of the constraint without making
major changes.
3. Subordinate Everything Else – Adjust other processes to support the constraint’s
optimal performance.
4. Elevate the Constraint – If needed, invest in additional resources or changes to
remove the bottleneck.
5. Repeat the Process – Once a constraint is resolved, a new one will emerge, and the
cycle continues.
 Drum-Buffer-Rope (DBR) – A TOC Production
Scheduling Method
• Drum (The Constraint Sets the Pace)The bottleneck (constraint) dictates the
maximum speed at which the system can operate.
• Buffer (Protecting the Constraint from Disruptions)A small inventory buffer
is placed before the bottleneck to prevent it from running out of work.

• Rope (Controlling the Release of Work to Match Constraint Capacity)

Controls the flow of raw materials into production based on the constraint’s
capacity.
 Case Study: Rapid Replenishment in Retail
• A supermarket chain, FastMart, faces issues with stockouts on popular products
like fresh milk and snacks, while also overstocking slow-moving items. They
implement Rapid Replenishment to solve this.
Current Data (Before Rapid Replenishment)
• Daily Demand for Milk: 500 liters
•Set Buffer Stock: A 2-day stock buffer
• Order Frequency: Once per week (1000 liters) is maintained.
• Order Quantity: 3500 liters •More Frequent Deliveries: Instead of
once per week, milk is delivered daily
• Stockout Frequency: 30% of the time based on real-time sales.
• Wastage Due to Expiry: 5% of stock •Adjust Replenishment Dynamically: If
demand increases, orders are adjusted
immediately instead of waiting for the
next cycle.
Theory of Constraints steps

2. Identify the 3. Use bottlenecks

bottlenecks properly

1. Identify the 4. Synchronize all

appropriate other processes to
measures of value the bottlenecks

6. Avoid inertia and 5. Increase the

return to Step #1 bottleneck’s capacity
Steps in the TOC Process
Identify the system constraints
• Internal
• External
• Process constraints
• Material constraints
• Machine time, etc.
• Insufficient materials
• Policy constraints
• Market constraints
• No overtime, etc.
• Insufficient demand

20
Steps in the TOC Process
• Decide how to exploit the constraint
• Want it working at 100%
• How much of a buffer?
• Subordinate everything else to the preceding decision
• Plan production to keep constraint working at 100%.
• May need to change performance measures to “rope” upstream activities

• Elevate the constraint

• Determine how to increase its capacity
• Repeat the process
• Always a new constraint
Drum Buffer Rope
• Drum-Buffer-Rope for Shop Floor Control
• Drum: The Pace Setting Resource - constraint
• Buffer: The amount of protection in front of the resource
• Rope:The scheduled staggered release of material to be in line with the Drum’s
schedule.

A Pull System

Buffer

60 70 40 60

Rope Constraint
(Drum)
DBR
Lean: How DBR Supports it
Fundamentally, Don’t Build Until Needed

• Overproduction avoided because DBR is “pull” system

• Inventory minimized because only buffer at constraint

• Transportation reduced because “unbuilt material” doesn’t move

• Processing waste minimized because “unbuilt material”

• Unnecessary Motion decreased because don’t build unneeded

• Waiting is eliminated at the constraint –only place that counts

• Defects avoided because of “small lot”, non conformance, and corrective action
The Batch Size Problem

Cost per unit

Carrying cost/unit

Setup cost/unit

Batch size
Best optimum size
The Batch Size Problem
• Hidden assumptions:

• Setup costs cannot be reduced

Just-in-time

• Does setup really cost us money?

Distortion of the definition of cost

Chain Analogy

• A company can be compared to a chain.

• The activities businesses perform is really a “chain” of dependent
events.
• That is to say that we don’t ship parts until they are packaged, and we
don’t package parts until they are manufactured, etc.
Chain Analogy

Marketing Bidding Purchasing Production Finishing Shipping

Conventional Wisdom believes that…

•Improvement of any link is an improvement to the chain.
•Global improvement is the sum of the local improvements.
•Primary Measurement: Link Weight
Result: Every link wants/needs more resources all the time
Chain Analogy

“Take actions that will maximize any/all local operations.” (i.e. Fight constantly for scarce resources.)
MAXIMIZE

Marketing Shipping

Bidding
Finishing
Purchasing Production
Common Sense Throughput
A Lean Approach to Managing the Shop Floor

Constraint- Throughput
Based Management
Scheduling

Central
Database

DBR
Shop Floor
The Nine OPT (Optimized Production Technology)
Rules
1. Balance flow not capacity.
2. The level of utilization of a non-bottleneck is not determined by its own potential but by
some other constraint in the system.
3. Utilization and activation of a resource are not synonomous.
4. An hour lost at a bottleneck is an hour lost for the total system.
5. An hour saved at a non-bottleneck is just a mirage.
6. Bottlenecks govern both throughput and inventories.
7. The transfer batch may not and many times should not be equal to the process batch.
8. Process batches should be variable not fixed.
9. Schedules should be established by looking at all of the constraints simultaneously. Lead
times are the result of a schedule and cannot be predetermined.
Applying DBR to Different Types of Facilities: VATI
Analysis7
• Product flow diagrams for V-plants are characterized by divergence points
(hence the V-shape).
• A V-type plant is characterized by a production process where one or a few raw
materials are processed and then diverge into multiple finished products. It's a
"one-to-many" flow.
• All end items sold by the plant are processed in essentially the same way.
• Example: Refinary, Stell, meat processing, chemical plants etc.
A type plant, T shape, and I shape
• An "A-type plant" is characterized by a production process where multiple
raw materials are combined into a single finished product.
• Automobile Assembly Plants, Pharma plant, canned soup etc.
• A "T-type plant" is characterized by a production process where several
basic components are used to assemble various finished products.
• Shared Components: A key feature is the use of common components
across multiple finished products.
• Managing the inventory of shared components is challenge of T type plant
• Electronics Manufacturing (PCB boards), auto parts, furniture etc.
• An "I-type plant" is characterized by a sequential, linear flow of materials.
It's a "one-to-one" flow, where materials move through a series of steps in
a straight line.
Buffer Management
• A feedback mechanism used during the execution phase of operations,
distribution and project management that provides a means to
prioritize work, to know when to expedite, to identify where protective
capacity is insufficient, and to resize buffers when needed
JMP Case answer
•Bottleneck: Binding is the bottleneck (600 books/day).
•Throughput: 600 books/day (constrained by the bottleneck).
•Profit: (600 books * $20) - (600 books * $5) - $6000 = $3000 daily profit.
•Exploit: Prioritize binding tasks, reduce setup times, ensure no idle time, quality checks
before binding.
•Subordinate: Align printing and collating schedules with binding capacity, minimize
inventory buildup before binding.
•Elevate: Invest in additional binding equipment, train staff, improve process efficiency.
•Impact Analysis: New capacity 800 books/day. Throughput increases to 800 books/day.
profit increases to (800 books * $20) - (800 books * $5) - $6000 = $6000 daily profit.
•Inventory Impact: Work in process inventory should dramatically decrease as flow
increases.
•Strategic Implications: Focus on capacity expansion, customer lead time reduction, and
potentially market share growth.
 TOC Exercise/27.02.25

"John & Micky Publishing (JMP)" is a medium-sized company specializing in on-demand book
printing and binding. They have seen a surge in orders but are struggling to meet deadlines. Their
production process consists of four main stages:

1. Digital Printing: Printing the book pages.

2. Collating: Gathering the printed pages in the correct order.
3. Binding: Applying the book cover and binding the pages.
4. Packaging and Shipping: Preparing the finished books for delivery.

Data information

In deterministic case In uncertain case

Digital Printing: Capacity: 1,000 books/day Capacity varies based on book size and paper
type (±20%).
Collating: Capacity: 800 books/day Capacity is affected by book thickness and
paper weight (±15%).
Binding: Capacity: 600 books/day Capacity varies significantly with binding
style (±30%).
Packaging and Shipping: Capacity: 900 Capacity is impacted by order size and
shipping destinations.
books/day
New international shipping has added
complexity.
Average daily demand: 750 books/day. Daily demand fluctuates between 600 and
1,000 books.
Average raw material cost per book: $5 RM cost varies based book size and paper
type (±20%).
Average sales price per book: $20 Varies (±20%).
Operating expenses per day: $6,000 S6000-9000
Questions for class

1. Identify the Bottleneck: Which stage of the production process is the bottleneck? Justify
your answer.
2. Calculate Throughput: What is the current throughput (books/day) of JMP?
3. Calculate the current daily profit: what is the current daily profit of JMP.
4. Exploit the Bottleneck: What immediate actions can JMP take to maximize the output
of the bottleneck without significant investment? (e.g., scheduling, reducing downtime).
5. Subordinate Everything Else: How should JMP adjust the other stages of the process to
align with the bottleneck?
6. Elevate the Bottleneck: What potential long-term investments or changes could JMP
make to increase the capacity of the bottleneck?
7. Impact Analysis: If JMP increased the binding stage capacity by 200 books/day, how
would it affect throughput and profitability?
8. Inventory Impact: How would improved flow affect the amount of work in process
inventory?
9. Strategic Implications: how does identifying and managing the bottleneck impact the
overall business strategy of JMP?
Value stream mapping
page -627
 Process Mapping / VSM?

A visual representation of the flow of work in a series of steps showing the path of a
process and the relationship between the steps.
1. What you think it is...

2. What it actually is... 3. What you would like it

to be...

Adapted from Product & Process Innovations, Inc.

Why Value Stream Mapping?

Systems Approach To:

• Visualize the Entire Process Flow

• Identifies the Sources of Waste

• Basis of a Lean Implementation Plan

• Determine Future Operating State

Value Versus Non-value-added

Value-Added Activities Non-Value-Added Activities

• Waiting/sorting
• Entering order • Moving
• Ordering materials, supplies • Kitting/staging
• Preparing drawings • Counting
• Assembling • Inspecting
• Shipping to customers • Checking
• Processing customer deposits • Recording
• Examining patients • Obtaining approvals
• Filing insurance claims • Testing
• Dispensing event tickets • Reviewing
• Fueling airplane • Copying
• Filing
• Revising/reworking -Source: Charlene B. Adair & Bruce A. Murray,
Breakthrough Process Redesign
• Tracking work
About business problem
• VSM can serve as a good starting point for any enterprise that wants to be lean.
• VSM as the process of visually mapping the flow of information and material for
preparing a future state map with better methods and performance.

About problem

• A leading auto-parts manufacturing unit, located near Ludhiana, Punjab, India using
VSM, for improving production performance. The company having annual turnover
approximately Rs. 150 million (2018).
• This organization was started in 1999 and is an ISO certified company. The company
employs 300 personnel including workers, supervisors, engineers and also top
management.
• The company was using traditional manufacturing concepts before applying lean
concepts
 About industrial problem
The company is manufacturing ten different categories of products in the shop. Data
have been collected for all the product families and the most critical product families,
i.e. Weldon ball end and replacement ball were selected on the basis of the lead time.

https://www.emerald.com/insight/content/doi/10.1108/09727981311327776/full/html
• Because of traditional manufacturing set up, in-process inventory was very high.
The other reason for selection of both these products is the reduction of
manufacturing days by the customer. Previously the manufacturing days were 10
days and shipping days were 35 (by sea), i.e. products reached at the customer’s
end within 45 days after receiving the order.
• In case of failure in meeting the delivery date, either the manufacturing
organization will deliver the products by air instead of delivering by sea or
otherwise the order will be treated as canceled.
Process mapping
• Selection of critical product family
• Preparation of current state map
• Documentation of customer information
• Data collection (cycle time, available time, in-process inventory, etc.)
• Quantify production lead time and processing time
• Analysis of current state map
Current stage of process

Total WIP=1150

Total lead time

240+49=289

75

75
Data set
• Tractor linkage part demand is 300 units per shift
• Demand per month is 15000 units
• No. of effective working days 25 per month
• No of shift per day 02
• No of hours in a shift 12
• Available working time per day (in min)= 2*12*60=1440 min= 86400
sec
• TAKT time per shift = Total time available per shift/ demand per shift
=(1*12*60*60/300)= 144 second
Process Analysis
• It has been observed that the forging of this product is readily available in the market because
there are many vendors who are producing same goods for other tractor linkage part
industries.
• First step is to remove the cutting and forging operations by procuring directly the forging of
these products.
• Also, double heating furnace should be used to reduce the inventory of 750 units at heat
treatment (H/T) operations because that the demand is continuous.
• Withdrawal KANBAN should also flow from planning department to dispatch department.
• It has been observed that these products are readily available in the market as soon as the
demand raises the forging procurement takes less than two days to provide that material to
the machines.
• Thus it will help in reducing raw material inventory and also remove time-consuming
processes to decrease the cycle time
 Total WIP=210
% improvement
% improvement in lead time =(210/1150)*100=
= (71/289)*100= 24.57%
18.26%

71

% improvement in lead time 75

= (640/922)*100= 69.41%
Technology intensive operations
Sustainable and Digital Operations Management
 Operations Management 4.0

https://www.mckinsey.com/capabilities/operations/our-insights/ops-4-0-turning-digital-analytics-into-20-percent-higher-productivity
 Objective of OM 4.0

Source:https://www.mckinsey.com/~/media/mckinsey/business%20functions/mckinsey%20digital/our%20insights/a%20manufacturers%20guide%20to%20generating%20value%20at%20sca
le%20with%20iiot/leveraging-industrial-iot-and-advanced-technologies-for-digital-transformation.pdf
A digital factory operations perspective
• A digital factory is a generic term that refers to a network of digital models that
replicates aspects of a physical factory.
• It includes a range of methods and tools, all of which are managed with
integrated data management systems.
A digital factory focuses on the following:
• Improved quality of planning and economic efficacy
• Shorter go-to market time
• Clear communication
• Uniform planning standards
• Capable knowledge management
Digital Factory component https://www.youtube.com/watch?v=UdDvDKC8FVM

https://www.tibco.com/reference-center/what-is-a-digital-factory
Industry 4.0/ Factory 4.0/ Operations 4.0
 Industrial Metaverse https://www.youtube.com/watch?v=w_yX_Ih1fgE

• The “industrial metaverse” is a term commonly applied to the set of metaverse

applications designed for industrial users.
• In fact, it can be defined as a persistent 3D platform that is implemented across
an organization, value chain and product life cycle, serving as a digital reflection
of an entire organization in its operational environment.
• In its combinatory nature, it integrates processes, materials, machines and people
in a bidirectional flow between real and virtual worlds.
• It builds on enabling technologies, including extended reality (XR), robotics,
sensors and actuators as part of the internet of things (IoT), artificial intelligence
(AI), development tools, blockchain, computing and connectivity.

https://www2.deloitte.com/us/en/insights/industry/manufacturing/industrial-metaverse-applications-smart-
factory.html
https://www.adlittle.com/en/insights/report/industrial-metaverse
Digital roadmap for operations transformation
The industrial automation (Platform based)
 Production-logistics delivery model

From Shafiq, D. A., Jhanjhi, N. Z. & Abdullah, A. (2022). Load balancing techniques in cloud computing environment: A review. Journal of King Saud University-Computer and Information Sciences, 34(7), 3910e3933.
https://doi.org/10.1016/j.jksuci.2021.02.007.
IIoT for connected operations

On the design and implementation of a secure blockchain-based hybrid framework for Industrial Internet-of-Things. Information Processing & Management, 58(3), 1e15.
https://doi.org/10.1016/j.ipm.2021.102526.
Digitization of the manufacturing sector
V2 model for improving productivity
 The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0972-7981.htm

JAMR
10,1
Application of lean manufacturing
using value stream mapping in an
auto-parts manufacturing unit
72 Harwinder Singh and Amandeep Singh
Department of Mechanical Engineering, Guru Nanak Dev Engineering College,
Punjab, India

Abstract
Purpose – This paper aims to address the application of lean manufacturing using value stream
mapping (VSM) concepts in an auto-parts manufacturing organization. Using value stream concepts,
both current and future states maps of the organization’s shop floor scenarios have been discussed to
identify sources of waste between the existing state and the proposed state of the selected organization
for improving its competitiveness.
Design/methodology/approach – VSM process symbols were used to discuss lean implementation
stages in the auto-parts manufacturing unit. Current states of the selected manufacturing unit were
prepared with the help of VSM symbols and improvement areas were identified. A few modifications
in current state were made and, with these modifications, a future state map is suggested.
Findings – After comparison of the current and future states of the selected manufacturing unit, it
has been found that there was 69.41 percent reduction in cycle time, 18.26 percent reduction in work
in-process inventory and 24.56 percent reduction in production lead times for the replacement ball
product. While for Weldon ball end product 51.87 percent reduction in cycle time, 21.51 percent
reduction in work in-process inventory, 25.88 percent reduction in lead time was noted.
Research limitations/implications – The findings of this case study are valid due to limited
selection of products only.
Originality/value – This paper depicts a true picture of the implementation of lean manufacturing
tools in an organization.
Keywords Lean manufacturing, Value stream mapping, Production lead time, In-process inventory,
Cycle time, Lean production, Lead times, Distribution and inventory management,
Automotive components industry
Paper type Case study

1. Introduction
In recent times, many organizations have attempted to implement or have already
implemented lean manufacturing (LM). Some companies have implemented a few
tools/techniques/practices/procedures (i.e. “elements” in short) of LM, while others
have implemented a whole spectrum of LM elements (Gurumurthy and Kodali, 2009).
The concept LM was originated in Japan after the Second World War when it was
realized that they could not afford to invest much now. The objective of LM is to reduce
waste in every part (such as human effort, inventory, time to market and manufacturing
space) to become more responsive to customer demand while producing quality
products in the most efficient and economical manner (Womack et al., 1990).
LM encompasses many different strategies and activities that are familiar to almost
Journal of Advances in Management
all industrial engineers (Braglia et al., 2006; Chitturi et al., 2007; Mahapatra and
Research Mohanty, 2007). In many such cases, firms have reported some benefits by applying
Vol. 10 No. 1, 2013
pp. 72-84
r Emerald Group Publishing Limited
0972-7981 The authors would like to thank the Executive Editor of the journal and reviewers for improving
DOI 10.1108/09727981311327776 the contents of the paper.
lean principles; however, it is apparent that there is a need to understand the entire Lean
system in order to gain maximum benefits (Singh et al., 2010). Value stream mapping manufacturing
(VSM) acts as one of enterprise improvement tool in LM to assist in visualizing the
entire production process, representing both material and information flow. The goal is using VSM
to identify all types of waste in the value stream and to take necessary steps to
eliminate them (Rother and Shook, 1999; Sahoo et al., 2008; Seth et al., 2008). VSM
aids in the development of a “current state map” which shows a visual representation 73
of how the company is currently operating; it records process information and
information flow which can be used to identify key wastes, problems and opportunities.
Once the current state map has been analyzed the future state map can then be
produced to show how the company could operate more effectively (Pavnaskar et al.,
2003). According to the lean system, Lasa et al. (2008) showed that VSM is a valuable
tool for redesigning of the productive systems and found that there are some key points
for the establishing teams that have to take into account for designing of suitable
information systems.
One of the major challenges for manufacturing industry is to manufacture variety
products with a minimum lead time, reduced inventory and world class quality. There
is a need to help the manufacturing companies to improve their competitiveness.
Vinodh et al. (2012) applied the analytic hierarchy process typical multi-criterion
decision-making method in a manufacturing organization for improving the leanness
of the company. Many managers and researchers such as Hines et al. (1998), Hines
(1999), Abdulmalek and Rajgopal (2007), Serrano et al. (2008) and Singh et al. (2009)
applied VSM for identification and elimination of waste in production industry. In this
paper, an attempt has been made to discuss lean implementation principles using VSM
in ABC auto-parts manufacturing unit, located near Ludhiana, Punjab, India. There are
ten different categories of products. Out of which, only two products named Weldon
ball end and replacement ball is selected on the basis of lead-time problem. Current and
future state maps of both the products have been made using VSM techniques. Rest
of the paper is as follows.
Section 2 reports the concept of VSM. Section 3 explains the case study of an
organization. Finally, Section 4 concludes by narrating the contributions of the
present research.

2. VSM
VSM is a significant tool of LM. VSM can serve as a good starting point for any
enterprise that wants to be lean. VSM was initially developed in 1995 with an
underlying rationale for the collection and use of the suite of tools as being “to help
researchers or practitioners to identify waste in individual value streams and, hence,
find an appropriate route to its removal” (Hines and Rich, 1997).
Jones and Womack (2000) defined VSM as the process of visually mapping the flow
of information and material for preparing a future state map with better methods and
performance. The VSM includes two flows. One is the flow of resources from supplier
to customer. The other is communications flow from customer back to supplier.
Taylor (2005) stated “Value Stream Maps are a very effective method for
summarizing, presenting and communicating the key features of a process within an
organization.” LM is most frequently associated with the elimination of seven
important wastes to ameliorate the effects of variability in supply, processing time
or demand (Shah and Ward, 2007). Liker and Wu (2000) defined it as a philosophy of
manufacturing that focusses on delivering the highest quality product on time and at
JAMR the lowest cost. Jones and Womack (2000) defined it as the systematic removal of waste
10,1 by all members of the organization from all areas of the value stream. Briefly, it is
called lean as it uses less, or the minimum, of everything required to produce a product
or perform a service (Lian and Van Landeghem, 2007).
Grewal (2008) used VSM techniques as lean implementation initiatives in small
bicycle manufacturing company and claimed 33.18 percent reduction in cycle time,
74 81.5 percent reduction in change over time, 81.4 percent reduction in lead time and 1.41
percent reduction in value-added time.
Singh and Sharma (2009) implemented VSM approach in an Indian manufacturing
organization and witnessed 92.58 percent reduction in lead time, 2.17 percent
reduction in processing time, 97.1 percent reduction in WIP and 26.08 percent reduction
in manpower requirement. Chowdary and George (2011) conducted a case study in a
pharmaceutical company using VSM approach. The methodology assisted the case
company in reducing lead times, cycle times and WIP inventory in the manufacturing
process. The organization was able to reduce the storage area and production staff
by 38 percent 50 percent, respectively.
Gurumurthy and Kodali (2011) presented an application of VSM with simulation
during the design of lean manufacturing systems using a case study of an
organization. Simulation studies were carried out for different scenarios such as
“before LM” (current state VSM) and “after LM” (future state VSM). It was found that
the case organization can achieve significant improvement in performance and can
meet the increasing demand without any additional resources.
Majority of researchers have done the research on implementation of LM tools in
large organizations. But in most of the nations, small and medium enterprises (SMEs)
are the lifeblood of modern economies. Almost 90 percent SMEs in most countries are
the driving forces behind a large number of innovations to the growth of national
economy. The need for organizations to remain competitive and produce high-quality
products is important not only at organizational level but also at global level. Hence,
there is a need to implement such latest tools in SMEs to improve its competitiveness.
In a nutshell, LM can be best defined as an approach to deliver the up-most value to
the customer by eliminating waste through process and human design elements (Wong
et al., 2009).
3. Case study
A case study has been carried in a leading auto-parts manufacturing unit, located near
Ludhiana, Punjab, India using VSM, having annual turnover approximately Rs. 15
million ($0.33 million). This organization was started in 1999 and is an ISO certified
company. The company employs 300 personnel including workers, supervisors,
engineers and also top management. The company was using traditional manufacturing
concepts before applying lean concepts. The following procedure is adopted for this
case study:
(1) selection of critical product family;
(2) preparation of current state map;
. documentation of customer information;
. establish process flow;
. data collection (cycle time, available time, in-process inventory, etc.);
. documentation of supplier information;
 . establish information flow; and Lean
. quantify production lead time and processing time. manufacturing
(3) analysis of current state map; using VSM
(4) preparation of future state map;
. implementation of few new processes; 75
. calculate TAKT time; and
. develop continuous flow wherever possible; and
(5) analysis of the results.
The company is manufacturing ten different categories of products in the shop. Data
have been collected for all the product families and the most critical product families,
i.e. Weldon ball end and replacement ball were selected on the basis of the lead time
of both the products was very much as compared to other products quantity to be
produced were high and in-process inventory was also high to meet customer’s
demands and delivery schedule as shown in Figure 1.
Because of traditional manufacturing set up, in-process inventory was very high.
The other reason for selection of both these products is the reduction of manufacturing
days by the customer. Previously the manufacturing days were ten and shipping
days were 35 (by sea), i.e. products reached at the customer’s end within 45 days
after receiving the order. In case of failure in meeting the delivery date, either the
manufacturing organization will deliver the products by air instead of delivering by
sea or otherwise the order will be treated as canceled.

3.1 Preparation of VSM

Current state map is prepared by taking the data from shop floor of the selected shop
and also by consulting the foremen, operators, etc. The marketing department receives
the information from customer and forecasts the exact demand. Marketing department
sends this information to the production planning and control (PPC) department which
further sends it to material requirement planning (MRP) department and supervisors,
so that they can plan their GANTT charts accordingly. VSM is different than
conventional recording approaches as it helps in visualization station cycle times,
inventory buffers at intermediate stations, uptime or utilization of resources and the
information flow in the given area. It captures the entire transformation from raw

350
Lead time in hours

300
250
200
150
100
50
0
in in in in in bly olt nd all ar
g e p tch p ing p ink p vis p sem ye b all e en b rawb
ka i l d L l e s E b D Figure 1.
Lin
H
We Top C ka n em
in ldo lac Comparison of lead time
o pL We Rep
T of various products
Products
JAMR material to the reach of finished goods. This takes care of both value-added and non-
10,1 value added activities. This is purely a pencil and paper work using icons for various
agencies to visualize the flow of material and information as a product advances.
Before mapping, one should be very clear about the lean management principles which
form the backbone of VSM. These principles are: define value from your customer’s
perspective; identify the value stream; eliminate the seven deadly wastes; make the
76 work flow; pull the work rather than push it and pursue to perfection level (Rother
and Shook, 1999; Seth and Gupta, 2005). The major steps involved in mapping
are as follows:
. An A3 size (or 11  17 inch) ledger size paper is taken and icons are drawn
representing customer, supplier and production control with sufficient space in
between them.
. Entries are made to prepare a data box below the icons to capture the monthly/
daily requirements of each product along with number of containers and
KANBAN required in unit time.
. Shipping and receiving data are entered along with the icons for the truck using
direction arrows for the movement.
. Then manufacturing/assembly operations are drawn along the bottom of the
map, with the most upstream process on the left and most downstream process
on the right.
. This follows the entry of process attributes like uptime, changeover, etc. in
proper units. It is essential to capture information flow both electronic and manual.
For this communication, arrows are drawn between the parties concerned.
. Next inventory icons are drawn along with the quantities, in places where the
inventory is stored between processes.
If a process is producing to a schedule independent of the downstream process this
indicates that push is being practiced. In this way, the mechanism serves as a starting
point to help management, engineers, suppliers and customers to recognize waste and
its sources. Taking a value stream perspective means working on the big picture and
improving the whole not just individual processes. Concepts of value stream provide
both a picture of the current state of affairs as well as a guide about the gap areas. Thus
it helps in visualizing how things would work when some improvements or changes
are incorporated.

3.2 Current state map of replacement ball

Replacement ball is a tractor linkage part which is used mostly in linkage assembly; it
is mounted on the rare side of the tractor and used to link the various parts. Its length
can be adjustable from 230 to 930 mm. The demand per month of replacement ball is
15,000 pieces; effective numbers of working days are 25 per month. Number of shifts
per day is two and working hours per shift are 12. Available working time per day in
minutes is 1,440. TAKT time comes out to be is 144 seconds:

TAKT time ¼Available work time per shift=

Customer demand per shift
¼12  60  60=300 ¼ 144 seconds
The demand comes from the customers (overseas mostly from European countries) Lean
to marketing department through some electronic media, then marketing department manufacturing
send this requirement to PPC department. Then PPC department analyses the
products and make the material requirement planning and send the material using VSM
requirement to suppliers by manually or by some electronic media. In present case, the
suppliers take ten days to deliver the material, then material moves from raw material
cutting department to finish product through number of processes like cutting, forging, 77
drilling, computer numerical control (CNC) machining, etc. Details regarding inventory,
cycle time, lead time, up time and number of shifts are shown in VSM. Current state
map is shown in Figure 2.
After studying the current state map, it has been obtained that the maximum
demand per month of replacement ball is 15,000 pieces. Actual cycle time of the
replacement ball is 922 seconds; total in-process inventory is 1,150 pieces and
maximum in-process inventory 750 pieces is at heat treatment process alone. And the
lead time of the product is 289 hours. Second mostly the contractual labor is working in
the organization. Third numbers of simultaneous families of products are in
process. Since, the contractual labor is working; their labor rates are set by the
management according to the type of the operation and quantity of the product to be
manufactured. If the quantity of the product is more then the price of its operation will
be less and if the quantity is less then the price will be more, i.e. number of units
of product they operate in a day. So the operator is not worried about the type of the
product. That is why the cycle time, work in-process inventory and production lead
time are very high.

Annual
forecast
Marketing
department
Supplies Customers
Monthly
requirement Monthly
schedule

PPC
department
Weekly
MRP
requirement
Daily
requirement

240
hours
CNC CNC
Cutting Forging Drilling Face boring turning H/T Shot blast Buffing Plating Packing

Zero 100 35 Zero 75 75 750 65 Zero 50 Zero

CT=20 CT=117 CT=89 CT=30 CT=160 CT=60 CT=127 CT=60 CT=45 CT=103 CT=96
seconds seconds seconds seconds seconds seconds seconds seconds seconds seconds seconds
Production 2-shifts 2-shifts 2-shifts 2-shifts 2-Shifts 2-shifts 2-shifts
2-shifts 2-shifts 2-shifts 20 shifts
lead uptime= uptime= uptime= uptime= uptime= uptime= uptime=
uptime= Uptime= uptime= uptime=
time 100% 100% 100% 100% 90% 100% 100%
100% 100% 100% 100%
289 hours

Processing
time
922 seconds
2 hours
1 hours 3 hours 10 hours 5 hours 2 hours 0 hours 10 hours 10 hours 4 hours 2 hours
Figure 2.
20 117 89 30 160 60 127 60 45 103 96
Current state map of
seconds seconds seconds seconds seconds seconds seconds seconds seconds seconds seconds replacement ball
JAMR 3.3 Future state map of replacement ball
10,1 After analyzing the current state map of replacement ball it has been found out that
material arrangement is wasting much time than other processes. Almost ten days are
required for the procurement of raw material only and after that time is being wasted
at the processes for cutting and forging. It has been observed that the forging of this
product is readily available in the market because there are many vendors who are
78 producing same goods for other tractor linkage part industries. So, first step is to
remove the cutting and forging operations by procuring directly the forging of these
products. Second step is to remove the CNC boring operation by broaching operation.
Also double heating furnace should be used to reduce the inventory of 750 units at heat
treatment operations because that the demand is continuous. Withdrawal KANBAN
should also flow from planning department to dispatch department. The KANBAN
system brought the necessary schedule and delivery discipline. It has been observed
that these products are readily available in the market as soon as the demand raises the
forging procurement takes less than two days to provide that material to the machines.
Thus it will help in reducing raw material inventory and also remove time-consuming
processes to decrease the cycle time. It also helped in making whole supply chain very
lean and flexible as shown in figure as shown in Figure 3.
Comparison of cycle times with the TAKT time of both current and future states of
replacement ball has been shown in Figure 4.
Great changes were found after implementing the proposed changes. Like in-
process inventory was reduced from 1,150 to 210. The lead time was reduced from 289
to 71 hours and cycle time was reduced from 922 to 640 seconds. Table I show that CNC
boring is 160 seconds and it has been replaced with broaching operation, i.e. cycle time
reduced to 30 seconds.

3.4 Current state map of Weldon ball end

Weldon ball end is also a tractor linkage part which is used in linkage assembly as
explained earlier. Linkage assemblies are of two types, i.e. top link assembly and
lower link assembly. Lower link assembly is mounted on the rare side of the tractor
with Weldon ball ends welded on both sides of the strip. Mostly both the Weldon ends
welded on the strip are of same size but sometimes these may be different according
to the requirement of the next linkage part which is yet to link with the lower link
assembly. Two lower link assemblies are mounted on the rare side of the tractor;
it means four Weldon ball ends are required on one tractor. These are used to link
the drawbar with the tractor on one side and on the other side these are linked with
linkage pins.
The demand of Weldon ball end per month is 15,000 pieces; effective numbers of
working days are 25 per month; number of shifts per day is two and working hours per
shift are 12. Available working time per day in minutes is 1,440. TAKT time comes out
to be is 144 seconds. Current state map is shown in Figure 5. Similar procedure has
been used for this product also as explained above in the current state map of
replacement ball. After receiving the order from the PPC department, MRP department
orders the raw material to various suppliers. The time taken to supply the material
to company after which production department starts the scheduled operations, i.e.
converting raw material to finished goods is ten days. Details regarding inventory,
cycle time, lead time, up time and number of shifts are shown in VSM.
After studying the current state map, it has been observed that the maximum
demand per month demand of Weldon ball end is 15,000 pieces per month.
 Annual
forecast
Lean
Marketing
manufacturing
department
Customers
using VSM
Monthly
requirement Monthly
schedule
Supplies
PPC 79
department
Weekly
MRP
requirement
Daily
requirement

Despatch
Kanban
Kanban

48 hours

Drilling Face Broaching CNCTurning H/T Shot Blast Buffing Plating Packing

35 Zero Zero 60 Zero 65 Zero 50 Zero

CT=89 CT=30 CT=60 CT=60 CT=127 CT=1 CT=30 CT=103 CT=96

seconds seconds seconds seconds seconds minute seconds seconds seconds
2-shifts 2-shifts 2-shifts 2-shifts 2-shifts 2-shifts 2-shifts 2-shifts 2-shifts
Production
lead time
uptime= uptime= uptime= uptime= uptime= uptime= uptime= uptime= uptime=
63 hours 100% 100% 95% 95% 95% 100% 95% 100% 100%

Processing
time
640 seconds
0 hour 2 hour 0 hour 1 hour 2 hour 10 hour 4 hour 2 hour 2 hour
Figure 3.
89 30 30 60 127 60 30 103 96 Future state map of
Seconds Seconds Seconds Seconds Seconds Seconds Seconds Seconds Seconds
replacement ball

After studying, it was found out that cycle time of Weldon ball end is 1,066
seconds, total in-process inventory is 1,720 pieces, maximum in-process inventory,
i.e. 1,000 pieces at stress relieving process and the production lead time comes
out to be is 282 hours. Comparison of TAKT time with station cycle time is shown
in Figure 6.

3.5 Future state map of Weldon ball end

Lean production system has been implemented, i.e. nothing is to be produced until it is
needed. After procuring the goods, single minute exchange die method has been
initiated in coining and ball clamping process. After analyzing the cycle times of
various operations (like rough and final boring) were quite high as compared with that
of TAKT time. The rough boring and final boring operations has been done on the
simple lathes which were having copy turning attachments. So these operations were
replaced by drilling and CNC boring, respectively. Moreover, on lathe machines the tool
JAMR 180

10,1 160

Cycle time in seconds

140
120
100

80 80
60
40
20
0
g

g
Br ace

ot t

ng

Pa g
t

g
g

as
Figure 4.
lin
tin

in

in

in

in

in
in

ffi
rg

ch

at
bl

ck
r

m
ea turn
ril

F
ut

bo

Bu

Pl
Fo

at
Comparison of cycle time
D

oa
C

re
C

Sh
C
N

tt
of current and future

N
C

C
H
states for replacement ball
Processes

Cycle time In-process inventory Production lead time

(in seconds) (number) (in hours)
Processes Current Future Current Future Current Future

Material arrangement 0 240

Forging arrangement 0 0 0 48
Cutting 20 0 0 1
Forging 117 0 100 3
Drilling 89 89 35 35 10 2
Face 30 30 0 0 5 0
Broaching 30 0
CNC boring 160 75 0 2
CNC turning 75 75 75 60 0 1
Heat treatment 127 127 750 0 10 2
Shot blast 60 60 65 65 10 10
Buffing 45 30 0 0 4 4
Plating 103 103 50 50 2 2
Table I. Packing 96 96 0 0 2 2
Current and future states Total 922 640 1,150 210 289 71
of replacement ball Percentage reduction 69.41 18.26 24.57

wear was very high and surface finish was also not very fine. Work instruction sheets
have been introduced; daily production and rejection reports have been checked by the
concerned engineer to ensure its daily production run. Thus it will help in reducing
raw material inventory and also eliminating time consuming processes to assist in
decreasing the cycle time as shown in Figure 7.
After implementing VSM, the cycle time has been reduced to 553 seconds instead of
1,066 seconds, in-process inventory was reduced to 370 units from 1,720 units and
production lead time now is 73 hours. Earlier, it was 282 hours. Replacement of rough
boring operation with CNC boring has reduced cycle times from 300 to 117 seconds as
depicted in Table II.
 Annual
forecast
Lean
Marketing
department
manufacturing
Customers
Supplies
Monthly
requirement
using VSM
Monthly
schedule
PPC
department
Weekly
requirement
MRP
Daily 81
department

240
hours

Cutting Forging Stressrelieving Coining Roughboring Finalboring Face Chamfer Shotblast Ball clamping Packing

200 1000 20 100 130 Zero Zero 100 70 100

CT=20 CT=3 CT=40 CT=20 CT=300 CT=230 CT=30 CT=30 CT=1 CT=1 CT=96
seconds minute seconds seconds seconds seconds seconds seconds minute minute seconds
Production 2-shifts 2-shifts 2-shifts 2-shifts 2-shifts 2-shifts 2-shifts 2-shifts 2-shifts 2-shifts 2-shifts
lead time uptime= uptime= uptime= uptime= uptime= uptime= uptime= uptime= uptime= uptime= uptime=
282 hours
95% 100% 100% 95% 95% 100% 100% 95% 100% 95% 100%

Proceesing
time
1066 seconds
1 hour 5 hours 12 hours 3 hours 4 hours 0 hour 2 hours 0 hour 5 hours 5 hours 5 hours Figure 5.
Current state map of
20 180 40 20 300 230 30 30 1 1 96
seconds seconds seconds seconds seconds seconds seconds seconds minute minute seconds Weldon ball end

350
300
Cycle time in seconds

250
200
150
100
50
0
ng

ng
D g

cl ast
Ba ot b r
g

g
lb g

Pa ing
C id

C ce

g
Sh mfe
n
tin

in
na rin

in
ac
gi

illi
ni

Fa

p
or

ck
ut

or

Fi bo
oi

am
ha
in

Figure 6.
C

gh
ng

Comparison of cycle time

ou

ll
vi
lie

of current and future

re
ss

states for Weldon ball end

re

Processes
St

4. Conclusions
Most of the organizations are very keen to adopt latest techniques, namely VSM. It is a
very powerful tool to highlight the process inefficiencies and improvement areas.
In this case study, it has been illustrated with the help of VSM technique. Current state
map and future state map have been prepared and analyzed to highlight the benefits of
a lean system in a small company. In replacement ball, there is 69.41 percent reduction
in cycle time, 18.26 percent reduction in work in process inventory and 24.56 percent
JAMR Annual
forecast
10,1 Marketing
Supplies department Customers
Monthly
requirement
Monthly
schedule

82 PPC
department
Daily
requirement MRP
Daily
requirement

48 Kanban Kanban Despatch

hours

Coining Drilling Final boring Face Chamfer Shot blast Ball clamping Packing

20 10 70 Zero Zero 100 70 50

CT=20 sec CT=117 CT=140 CT=30 CT=30 CT=1 CT=1 min CT=96
2-shifts seconds seconds seconds seconds minute 2-shifts seconds
Processing uptime= 2-shifts 2-shifts 2-shifts 2-shits 2-shifts uptime= 2-shifts
lead time 95% uptime= uptime= uptime= uptime= uptime= 100% uptime=
73 hours 100% 95% 100% 100% 95% 100%

Processing
time
553 seconds
10 hours 1 hour 2 hours 2 hours 0 hour 5 hours 5 hours 0 hour
Figure 7.
Future state map of
20 117 140 30 30 96
Weldon ball end seconds seconds seconds seconds seconds
1 minute 1 minute
seconds

Cycle time In-process inventory Production lead time

(in seconds) (number) (in hours)
Processes Current Future Current Future Current Future

Material arrangement 0 240

Forging arrangement 0 48
Cutting 20 0 1
Forging 180 200 5
Stress relieving in acid 40 1,000 12
Coining 20 20 20 20 3 10
Drilling 117 10 1
Rough Boring 300 100 4
Final boring 230 140 130 70 0 2
Face 30 30 0 0 2 2
Chamfer 30 30 0 0 0 0
Shot blast 60 60 100 100 5 5
Ball clamping 60 60 70 70 5 5
Table II. Packing 96 96 100 100 5 0
Current and future state Total 1,066 553 1,720 370 282 73
of Weldon ball end Percentage reduction 51.88 21.51 25.89
reduction in production lead times. In Weldon ball end, there is 51.87 percent reduction Lean
in cycle time, 21.51 percent reduction in work in process inventory, 25.88 percent manufacturing
reduction in lead time after future state map application.
using VSM
References
Abdulmalek, F.A. and Rajgopal, J. (2007), “Application of VSM to process industry”,
International Journal of Production Economics, Vol. 107 No. 1, pp. 223-236. 83
Braglia, M., Carmignani, G. and Zammori, F. (2006), “A new value stream mapping approach for
complex production systems”, International Journal of Production Research, Vol. 44 No. 18,
pp. 3929-3952.
Chitturi, R.M., Glew, D.J. and Paulls, A. (2007), “Value stream mapping in a jobshop”, International
Conference on Agile Manufacturing, Durham University, Durham, 9-11 July, pp. 142-147.
Chowdary, B.V. and George, D. (2011), “Improvement of manufacturing operations at a
pharmaceutical company: a lean manufacturing approach”, Journal of Manufacturing
Technology Management, Vol. 23 No. 1, pp. 56-75.
Grewal, C.S. (2008), “An initiative to implement lean manufacturing using value stream mapping
in a small company”, International Journal of Manufacturing Technology and
Management, Vol. 15 Nos 3/4, pp. 404-417.
Gurumurthy, A. and Kodali, R. (2009), “Application of benchmarking for assessing the lean
manufacturing implementation”, Benchmarking: An International Journal, Vol. 16 No. 2,
pp. 274-308.
Gurumurthy, A. and Kodali, R. (2011), “Design of lean manufacturing systems using value
stream mapping with simulation: a case study”, Journal of Manufacturing Technology
Management, Vol. 22 No. 4, pp. 444-473.
Hines, P. (1999), “Value stream management: next frontier in supply chain”, Logistics Focus, Vol. 1
No. 3, pp. 36-39.
Hines, P. and Rich, N. (1997), “The seven value stream mapping tools”, International Journal of
Operations and Production Management, Vol. 17 No. 1, pp. 46-64.
Hines, P., Rich, N., Bicheno, J., Brunt, D., Taylor, D., Butterworth, C. and Sullivan, J. (1998), “Value stream
management”, The International Journal of Logistics Management, Vol. 9 No. 1, pp. 25-42.
Jones, D. and Womack, J. (2000), Seeing the Whole: Mapping the Extended Value Stream, Lean
Enterprise Institute.
Lasa, I.S., Laburu, C.O. and de Castro, V.R. (2008), “An evaluation of the value stream mapping
tool”, Business Process Management Journal, Vol. 14 No. 1, pp. 39-52.
Lian, Y.H. and Van Landeghem, H. (2007), “Analyzing the effects of lean manufacturing using a
value stream mapping-based simulation generator”, International Journal of Production
Research, Vol. 45 No. 13, pp. 3037-3058.
Liker, J.K. and Wu, Y.C. (2000), “Japanese automakers, US suppliers and supply-chain
superiority”, Sloan Management Review, Vol. 42 No. 1, pp. 81-93.
Mahapatra, S.S. and Mohanty, S.R. (2007), “Lean manufacturing in continuous process industry:
an empirical study”, Journal of Scientific and Industrial Research, Vol. 66 No. 1, pp. 19-27.
Pavnaskar, S.J., Gershenson, J.K. and Jambekar, A.B. (2003), “Classification scheme for lean
manufacturing tools”, International Journal of Production Research, Vol. 41 No. 13, pp. 3075-3090.
Rother, M. and Shook, J. (1999), Learning to See: Value Stream Mapping to Create Value and
Eliminate Muda, Lean Enterprise Institute, Cambridge, MA.
Sahoo, A.K., Singh, N.K., Shankar, R. and Tiwari, M.K. (2008), “Lean philosophy: implementation
in a forging company”, International Journal of Advanced Manufacturing Technology,
Vol. 36 Nos 5/6, pp. 451-462.
JAMR Serrano, I., Ochoa, C. and de Castro, R. (2008), “Evaluation of value stream mapping in
manufacturing system redesign”, International Journal of Production Research, Vol. 46
10,1 No. 16, pp. 4409-4430.
Seth, D. and Gupta, V. (2005), “Application of value stream mapping for lean operations and cycle
time reduction: an Indian case study”, Production Planning and Control, Vol. 16 No. 1,
pp. 44-59.
84 Seth, D., Seth, N. and Goel, D. (2008), “Application of value stream mapping (VSM) for
minimization of wastes in the processing side of supply chain of cottonseed oil industry in
Indian context”, Journal of Manufacturing Technology Management, Vol. 19 No. 4, pp. 529-550.
Shah, R. and Ward, P.T. (2007), “Defining and developing measures of lean production”, Journal
of Operations Management, Vol. 25 No. 4, pp. 785-805.
Singh, B. and Sharma, S.K. (2009), “Value stream mapping a versatile tool for lean
implementation: an Indian case study of a manufacturing industry”, Journal of Measuring
Business Excellence, Vol. 13 No. 3, pp. 58-68.
Singh, B., Garg, S.K. and Sharma, S.K. (2009), “Lean can be a survival strategy during
recessionary times”, International Journal of Productivity and Performance Measurement,
Vol. 58 No. 8, pp. 803-808.
Singh, B., Garg, S.K., Sharma, S.K. and Grewal, C. (2010), “Lean implementation and its benefits
to production industry”, International Journal of Lean Six Sigma, Vol. 1 No. 2, pp. 157-168.
Taylor, D.H. (2005), “Value chain analysis: an approach to supply chain improvements in
agri-food chains”, International Journal of Physical Distribution and Logistics Management,
Vol. 35 No. 10, pp. 744-761.
Vinodh, S., Shivraman, K.R. and Viswesh, S. (2012), “AHP-based lean concept selection in a
manufacturing organization”, Journal of Manufacturing Technology Management, Vol. 23
No. 1, pp. 124-136.
Womack, J., Jones, D.T. and Roos, D. (1990), The machine that changed the world, Macmillan,
New York, NY.
Wong, C.Y., Wong, Y.K. and Ali, A. (2009), “A study on lean manufacturing implementation in the
Malaysian electrical and electronics industry”, European Journal of Scientific Research,
Vol. 38 No. 4, pp. 521-535.

Further reading
Gurumurthy, A. and Kodali, R. (2007), “Performance value analysis for the justification of lean
manufacturing systems”, Proceedings of International Conference on Industrial
Engineering and Engineering Management, Vol. 1 No. 1, pp. 377-381.

About the authors

Harwinder Singh holds a Bachelor’s degree in Mechanical Engineering, Master’s degree in
Business Administration, Master’s degree in Production Engineering and PhD in Mechanical
Engineering. Currently, he is working as Associate Professor in the Department of Mechanical
Engineering at Guru Nanak Dev Engineering College, Ludhiana, Punjab, India. He has
contributed a number of research papers at the international level. His present area of interest
includes optimization techniques and management of production systems. Harwinder Singh is
the corresponding author and can be contacted at: [email protected]
Amandeep Singh holds a Bachelor’s degree in Production Engineering and MTech degree in
Production Engineering from Guru Nanak Dev Engineering College, Ludhiana, Punjab, India.
He has contributed around five research papers in different conferences.

To purchase reprints of this article please e-mail: [email protected]

Or visit our web site for further details: www.emeraldinsight.com/reprints