Goods are received at dockGoods get inspectedContents match order?Somehow tell purchasingGoods are accepted?Incoming qualitychecknoyesReceiving notifies warehouse to pick upyesExample: Receiving goods to warehouse: Detailed viewno

2007 Pearson Education

Goods are received at dockGoods get inspectedContents match order?ReceivingPurchasingQuality AssuranceWarehouseSomehow tell purchasingAdvise supplier of rejectionGoods are accepted?Pick up goods from QA areaIncoming qualitychecknonoyesyes

2007 Pearson Education

Example: Receiving goods to warehouseDetailed viewReceive GoodsInspect Goods (30)Match order? (10)Supervisor Report (5)Quality Check (45)Accept? (2)Goods 4 pick upInform PurchasingYesNoYesNoWhat is the throughput time for good items?What is the capacity of each station?Where is the bottleneck?What is the cycle time?What is the throughput rate?If there are 15 orders coming in an 8 hr day, what would each stations utilization rate be?

2007 Pearson Education

Example: Receiving goods to warehouseDetailed viewReceive GoodsInspect Goods (30)Match order? (10)Supervisor Report (5)Quality Check (45)Accept? (2)Goods 4 pick upInform PurchasingYesNoNoIf we get 15 orders in an 8 hr day, what would the utilization rate be for each station?Quality Check (45)What is the throughput time for good items?What is the capacity of each station?Where is the bottleneck?What is the cycle time?What is the throughput rate?Yes

2007 Pearson Education

In class Exercise: Emergency Room CaseThe first thing patients do when they arrive into an emergency room is register with the front desk unless it is a life threatening condition that requires immediate attention. Those are taken immediately inside to one of the exam rooms where they receive care from the ER doctor and nurses to stabilize them. Almost all of these patients will be admitted to the hospital for further tests, observation, or surgery. The non-critical patients have to wait in a lounge until one of the exam rooms empties at which time a nurse invites them in, takes down their vital signs (blood pressure, temperature, heart rate) and then she documents their ailment. At their leisure the ER doctor comes in examines the patient and either orders more tests or prescribes medication and releases the patient. Those requiring more tests have to wait for the test results from the lab or radiology before receiving further treatment. Some of those patients are released while others are admitted to the hospital. Patients released have to settle their bills before heading home.

2007 Pearson Education

HOSP ADMITYESEMERGENCY ROOM FLOWCHARTNOYESNO

2007 Pearson Education

MEDEXAMNOIDEAL ER SCENARIO!YESYESNO

2007 Pearson Education

Process Throughput Time ReductionPerform activities in parallel

Change the sequence of activities

Reduce interruptions

2007 Pearson Education

7 Key PrinciplesThe focus is on balancing flow, not on balancing capacity.

Maximizing output and efficiency of every resource will not maximize the throughput of the entire system.

An hour lost at a bottleneck or constrained resource is an hour lost for the whole system. An hour saved at a non-constrained resource does not necessarily make the whole system more productive.

4. Inventory is needed only in front of the bottlenecks to prevent them from sitting idle, and in front of assembly and shipping points to protect customer schedules. Building inventories elsewhere should be avoided.

2007 Pearson Education

7 Key Principles (continued)5.Work should be released into the system only as frequently as the bottlenecks need it. Bottleneck flows should be equal to the market demand. Pacing everything to the slowest resource minimizes inventory and operating expenses.

6. Activation of non-bottleneck resources cannot increase throughput, nor promote better performance on financial measures.

7.Every capital investment must be viewed from the perspective of its global impact on overall throughput (T), inventory (I), and operating expense (OE).

2007 Pearson Education

Operational Measures & Financial MeasuresA decrease in OE leads to an increase in net profit, ROI, and cash flowsAn increase in U at the bottleneck leads to an increase in net profit, ROI, and cash flowsAn increase in T leads to an increase in net profit, ROI, and cash flowsA decrease in I leads to an increase in net profit, ROI, and cash flowThe degree to which equipment, space, or labor is currently being used, and is measured as the ratio of average output rate to maximum capacity, expressed as a %All the money the system spends to turn inventory into throughputRate at which system generates money through salesAll the money invested in the system in purchasing things that it intends to sell

444444444171717Throughput Time for good items 30 + 10 + 45/2 + 2 = 87 22 = 65 minutes = 1 hrThroughput Time for bad orders 30 + 10 + 5 = 45 minutesThroughput Time for bad quality 30 + 10 + 45 + 2 + 5 = 92 27 = 70 minutes

Inspection capacity 2 orders/ hr = 16 orders / day (assuming 8 hr day)utilization rate = 15/16 = 94%Matching orders capacity 6 orders / hr = 48 orders / day utilization rate = 15/48 = 31%Supervisor Reports capacity= 12 orders / hr = 96 orders / dayutilization rate = 15/96 = 16%Quality Check capacity = 480 / 22.5 = 21 orders / day utilization rate = 15/21 = 71%Acceptance processing capacity 30 orders / hr = 240 orders / dayutilization rate = 15/240= 6%

Bottleneck for ALL orders is inspect goodsThroughput rate is 16 orders/ day

Cycle time is 30 minutes

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