Capacity management

Session 3

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Process flow chart
• Suppose Kristen and her roommate are to open a cookie shop. The cookie shop’s
process flow chart for processing a tray of one dozen cookies is as follows.
Kristen Kristen ROOMIE ROOMIE ROOMIE
OVEN OVEN
MIXER TRAY TRAY TRAY TRAY TRAY
DOUGH

LOAD SET
MIX BAKE COOL PACK PAY
TRAY OVEN

TIME: 6 2 1 9 5 2 1

• What is the flow time? Can the flow time be reduced?

• Not easy to see from the process flow chart.
• Gantt chart can be useful.

2
 Gantt chart
Activity

PAY
PACK
COOL
BAKE
SET OVEN
LOAD
MIX Time

4 8 12 16 20 24 26 28 32 36
Kristen
Resource

Oven
Tray
RM 3
 Can we decrease the flow time?
Activity

PAY
PACK
COOL
BAKE
SET OVEN
LOAD
MIX Time

4 8 12 16 20 24 26 28 32 36
Kristen
Resource

Oven
Tray
RM 4
 Can we decrease the flow time?
Activity

PAY
PACK
COOL
BAKE
SET OVEN
LOAD
MIX Time

4 8 12 16 20 24 26 28 32 36
Kristen
Resource

Oven
Tray
RM 5
 What is the capacity of the cookie shop?
Activity

PAY
PACK
COOL
BAKE
SET OVEN
LOAD 10 min
MIX Time

4 8 12 16 20 24 26 28 32 36
Kristen
Resource

Oven
Tray
RM 6
Capacity analysis
• The shop can produce a tray (one dozen of cookies) every 10 minutes.

• If Kristen and her roommate work 4 hours per day, how many trays can they
make a day?
• The first tray is produced after 25 minutes and one tray is produced per every 10 minutes
afterwards.
• 1+(240-25)/10 = 22.5 à 22 trays per day

7
Bottleneck Analysis
• The bottleneck is oven.
• The process is delayed due to the oven.

8
 What if we buy an extra oven?
Activity

PAY
PACK
COOL
BAKE
SET OVEN
LOAD 10 min
MIX Time

4 8 12 16 20 24 26 28 32 36
Kristen
Resource

Oven
Tray
RM 9
 What if we buy an extra oven?
Activity

PAY
PACK
COOL
BAKE
SET OVEN
LOAD 8 min
MIX Time

4 8 12 16 20 24 26 28 32 36
Kristen
Resource

Oven
Tray
RM 10
What if we buy an extra oven?
• With the new oven, the shop can produce a tray every 8 minutes and Kristen and
her roommate can make 27 trays per day (when working 4 hours per day).
• 1+(240-25)/8 = 27 trays
• This is 5 more trays per day compared to a single oven situation.

• Kristen and her roommate will install the new oven only when selling 5 additional
trays per day is worthy of the cost of having a new oven.

11
Flexibility
• Instead of buying equipment, can we increase the capacity of the system?

• Without buying a new oven, can Kristen and her roommate make more than 22
trays per day?
• We can by cross-training Kristen and her roommate.
• The idea is that when making a tray of cookies, Kristen puts 8 minutes of her time while her
roommate does so for only 4 minutes.
• The goal of the cross-training is to have both Kristen and her roommate equally put 6
minutes of their times in the process.
Before cross-training After cross-training
Mix Kristen 6 3
Load Kristen 2 1
Kristen and
Set oven Roommate 1 Roommate 0.5
Pack Roommate 2 1
Process payment Roommate 1 0.5
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 Flexibility
Activity

PAY
PACK
COOL
BAKE
SET OVEN
LOAD 9.5 min
MIX Time

4 8 12 16 20 24 26 28 32 36
K&R
Resource

Oven
Tray

K&R 13
Flexibility
• Instead of buying equipment, can we increase the capacity of the system?

• Without buying a new oven, can Kristen and her roommate make more than 22
trays per day?
• The first tray is produced in 19.5 minutes and afterwards every tray is made in 9.5 minutes.
• Kristen and her roommate can make 1 + (240-19.5)/9.5 = 24 trays per day.

14
Flexibility
• Flexible equipment is an equipment that can produce several different products
efficiently.

• In the past, car manufacturers generally produced only one car type in a factory.
• For decades , it was efficient for Ford to have one or two fully dedicated factories for
mainstream models such as Taurus.
• This was possible because such factories run at full capacity for years.

• In today’s setting where customers want more varieties in product line-ups,

operating dedicated factories is no longer efficient.

15
Variety and customization
• Growth of variety
• Number of automobile lines sold in U.S.
• 41 in 1971
• 65 in 1992

• Total sales per model

• 1950 Chevy Impala: 1.5 millions
• 1990 Honda Accord: 0.5 million

• To be competitive, auto manufacturers need to offer consumers many choices.

• This means assembly lines must allow for different car models.

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Advantages and disadvantages of flexibility
• Advantages
• Increasing utilization rates
• GM originally produces 4 small cars in 4 different factories.
• Producing this number is possible with one flexible facility.

• Equipment lasts longer in the sense that factory lines can be re-used for different products
instead of being completely replaced.

• Changing demands can be easily satisfied.

• Disadvantages
• Higher initial investment
• Training/learning curve

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Calculating the capacity under the product variety

• Given that the resources are flexible and each jobs may be different,
how do we calculate the process capacity?

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Example 1: multiple resources
• Calculate the capacity of the following operation.

PC Chair Paint Shop

Assembly Line
SC

Inspection

PT Table Stain Shop

ST Assembly Line

Product Demand Task Processing time

Painted chair (PC) 8 / hour Chair assembly 2 mins / task
Stained chair (SC) 11 / hour Table assembly 6 mins / task
Painted table (PT) 6 / hour Painting (chair of table) 4 mins / task
Stained table (ST) 5 / hour Staining (chair or table) 3 mins / task
Inspection (chair or table) 1 mins / task

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Example 1: multiple resources
• Capacity is calculated as the number of products generated per a unit of time.

• But, with multiple products, how do we define a product?

• We define an artificial unit as a mixture of products by keeping their demand ratios constant.
• In this problem, a unit consists of (8/30 PCs, 11/30 SCs, 6/30 PTs, 5/30 STs).
• In other words, 30 of this artificial units include 8 PCs, 11 SCs, 6 PTs, and 5 STs in them.

• Quick question: can we make 30 units in an hour?

• NO!
• This is because the process can produce only 10 tables per hour while 30 units require 11
tables.

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Example 1: multiple resources
• By defining the artificial unit, we can calculate the capacity of each resource and
therefore calculate the capacity of the system.
• Chair assembly: 1 unit / (8/30 + 11/30 chair) * 1 chair / 2 minutes = 15/19 unit / min
• Table assembly: 1 unit / (6/30 + 5/30 table) * 1 table / 6 minutes = 5/11 unit / min
• Painting: 1 unit / (8/30 + 6/30 painting) * 1 painting / 4 minutes = 15/28 unit / min
• Staining: 1 unit / (11/30 + 5/30 staining) * 1 staining / 3 minutes = 5/8 unit / min
• Inspection: 1 unit / (8/30+11/30+6/30+5/30 inspection) * 1 inspection / 1 minute = 1 unit /
min

• Table assembly is the bottleneck and its capacity governs the capacity of the
whole process.
• The capacity of the whole process = 5/11 unit / min (or 300/11 units / hour)

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Example 1: multiple resources
• (Exercise) Verify if table assembly has the highest utilization rate.
• Recall the utilization rate is given by min(1, demand/capacity)
• Chair assembly
30 units/ hour
min 1, = 63%
15
60mins/hour ∗ unit/min
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• Table assembly:
• Painting:
• Staining:
• Inspection:

• Important note: capacity calculation depends on the demand ratio among

products.
• Our answer for this example would have been different if we were given different demands.

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Example 2: yield issues
• Q Labs is a specialized laboratory that performs low volume chemical tests for
pharmaceutical companies. For one of their products, there is a two-stage
process. We have one technician for each stage, namely Carl and Tim.
• In the first stage (Centrifuge) chemicals are mixed into 125 vials and placed into a centrifuge.
For each vial, it takes Carl 1 minute to do the mixing and loading. Once all of the vials are in
the centrifuge, it is operated by Carl for 10 minutes.
• The second stage (Testing) tests the vials for purity. This testing equipment requires Tim 75
minutes to calibrate, and then Tim can test 2 vials per minute. Currently, 40% of the vials on
average fail this test; i.e, the yield is 60%. Failures are discarded. We have to recalibrate the
testing equipment after testing 125 vials.

• What is the capacity of the process in "good vials“ / hour?

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Example 2: yield issues
• Centrifuge stage
• Total processing time= 125*1 + 10 =135 mins for 125 vials
• Capacity of centrifuging= (125/135) * 60 = 55.56 "good vials“/hr

• Testing stage
• Total processing time= 75 +125*0.5 =137.5 mins for 125 vials
• 40% fail è yield=60% è only 0.6*125=75 “good vials” are produced in 137.5 mins (50 vials
are discarded)
• Capacity of testing=(75/137.5)*60=32.73 “good vials”/hr

• Testing stage is the bottleneck and

the capacity of the process is 32 “good vials”/hr.

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Example 3: machine breakdowns
• Consider the workstation in a single product example with a processing time of
10 mins/unit.

• Suppose the workstation breaks down every 5 hours, and the repair time is 60
minutes.

• What is the capacity of the workstation?

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Example 3: machine breakdowns
• When the workstation is working it produces at (1/10) * 60 = 6 units/hr

• Number of units produced between breakdowns = 6*5 = 30 units

• We produce these 30 units in 6 hours, not 5.

• Capacity = 30/6 = 5 units/hr.

• An alternative way to calculate the capacity is to consider the effective time to

make one unit.
• The machine breaks after producing 30 units and it takes 60 minutes to fix the machine.
• Each unit share 2 (=60/30) mins and therefore, it takes effectively 12 (=10+2) minutes to
produce 1 unit and the capacity is (1/12)*60 = 5 units/hr.

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Next class
• Little’s law
• Connecting the flow time and WIP

• Probability review

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