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Supply chain problems

Supply chain problems. Chitra Duvedi. Problem 1. A company makes water pollution control units. Each unit has three main components: Inlet system (ducting) for driving the effluent into the “scrubber”. The main scrubbing system which eliminates / reduces the pollutants.

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Supply chain problems

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  1. Supply chain problems ChitraDuvedi

  2. Problem 1 • A company makes water pollution control units. Each unit has three main components: • Inlet system (ducting) for driving the effluent into the “scrubber”. • The main scrubbing system which eliminates / reduces the pollutants. • Outlet systems for releasing the cleaned water.

  3. Problem 1 - 2 • Each Pollution control unit typically has two inlet ducts, 3 scrubbers, and one outlet system. A scrubber consists of the following main components: • electrostatic chamber for suspended particulate matter (2 NOs) • sand / water / charcoal beds (3 NOs) • The lead time for supply of the electrostatic chamber is 4 weeks. The lead time for supply of sand / water / charcoal bed is 2 weeks.

  4. The inlet system consists of one pump and a chromatograph analyser. The outlet system consists of two pumps. • Pumps are available at one week’s notice. The chromatograph analyser is available in stock. It takes 7 days to assemble the pollution control unit.

  5. Problem 1 • Make the product tree • If we want to deliver one pollution control unit in 2 months time, when should each item be ordered, and in what quantity? • What is the “critical path”?

  6. Answer – product tree PCUNIT - 1 Inlet(2) Scrubber(3) Outlet(1) 4 1 2 1 EC(2) Pump 0 Pump(2) Bed(3) Ch Ana

  7. Requirement plan

  8. Order plan

  9. Order plan

  10. Problem – II: Choice of products • The resin manufacturing division of the company need to decide on the production volume of two products – Water filtration resins(WFR) and Oil filtration resins(OFR). • The division has one machine to produce the resins. • This machine can run 24 hours. WFR takes 10 hrs, OFR takes 20 Hrs • The raw material for each resin costs Rs. 100 (WFR) and Rs. 50 (OFR) per resin. • The overall budget to purchase the inventory is Rs. 8000. • The finished resins sell for Rs. 150 and Rs. 60 respectively. • The manager knows that he can not sell more than 60 water resins in a month. • How many resins of each type should manager make in order to maximize the profit?

  11. Look at individual unit

  12. Constraints • Total machine time 720 • Total budget 8000 • Max WFR you can sell 60

  13. Pick one anchor • Profit – WFR Max profits • Constraint 1- max 60 • Can we produce? • Machine hour constraint – yes • Inventory cost constraint – yes • 60 –WFR – How many OFR? • Machine hour constraint – 6 • Inventory cost constraint – 40 • WFR – 60, OFR -6 • What is revenue and what is profit

  14. Variation • If I could sell only 40 WFR in a month then what is product mix? • If the price of OFR – 75 Rs? Excel / Linear programming

  15. Product Standardization • Your company wants to invest in R&D in order to develop standardized components. By doing so, you expect the number of components to fall from 1000 to about 750. • In particular, You want to standardize the motors that are used in all equipment to just two sizes – 10 HP and 100 HP. • All the current requirements for up to 10 HP will be standardized to 10 HP. The entire current requirement up to 100 HP will be standardized to 100 HP. • It is hoped that the inventory of motors should reduce as a result. • Each motor costs Rs. 20000. • What should be the maximum amount that the company be willing to spend on R&D? Refer to the enclosed data for the requirements.

  16. If we keep as is • Find if we were not standardizing • What would be the average inventory that we want to hold? • Average +/- 3 S.D • Find average of each HP column and sd and thus inventory reqmt. per month

  17. If we change • Find inventory reqmt per month for 10 and 100 hp • Find average and SD • Find the diff between reqmt in both case, to get average saving per month • If we want to recover R&D in 24 months, R & D spend would be -----? • What would be the negative effects of this standardization?

  18. Choice of vendor • You are the purchase manager for an electronics company. You are evaluating two vendors for a critical component. You need a monthly volume of 1000 units. You will give the order to only one of the two vendors. • The first vendor as quoted a price of Rs. 863 per item. The second vendor has quoted a price which is 10 % higher than the first vendor. Both have promised delivery within 1 day. • You checked with your competitors and others in the industry about the vendors’ performance. You have been told that the second vendor is costlier, but more reliable. From the data that you collected, you know that the standard deviation of delivery time is 0.5 days for first vendor, and 0.3 days for second vendor. • Which vendor will you give the order to?

  19. Solution • Average lead time – 1 day • Requirement per day 1000/30 • Z value for 99% - 2.32 • Formula for Z is = • (X- Average(X) )/ SD * Sqrt(n)

  20. Vendor 1 • Price : 863 • SD lead time – 0.5 • Additional inv reqd beyond average = • Z * SD * sqrt(reqmt per day) • Add inventory reqd = • 2.32 * 0.5 * sqrt(1000/30) = = 6.71 If inventory carrying cost was 18% Additional cost : 6.71 * 863 * 0.18 = 1043.19

  21. Vendor 2 • Price : 949.3 • SD lead time – 0.3 • Additional inv reqd beyond average = • Z * SD * sqrt(reqmt per day) • Add inventory reqd = • 2.32 * 0.3 * sqrt(1000/30) = = 4.02 If inventory carrying cost was 18% Additional cost : 4.02 * 949.3 * 0.18 = 688.51

  22. Bottleneck resource • Vijay is handling the PCB soldering operations for a large controls department in an engineering organization. He has a team of workers who complete a total of 100 boards each day. The process is as follows:

  23. Start Pick up a board and the components Fit the components on the board by hand Take the board to the wave soldering machine for soldering Test the board before packing End The process

  24. Key numbers • Average number of boards per day - 100 • Average time taken on the wave soldering machine per board - 5 minutes • Average number of tasks per hour on the soldering machine - 5.5 • Total working hours in a day (2-shift operations) -18 hours • Based on the earlier data – the arrival times for jobs is shown in Bottleneck Resource data

  25. The issue • All the team members have reported delays in their work due to the wave soldering machine. They say that they often have to wait for several minutes for a turn on the machine. This has affected their productivity, and has become a major issue in their ability to deliver PCBs. The team has suggested that another wave soldering machine will solve the problem.

  26. Boss’s version • Vijay’s boss has called him for a meeting to discuss the problem, as the delays cost about Rs. 1000 per hour per person for waiting at the machine. He says that the average utilization for the machine is only 46%. He shows his calculations as follows: • Average cycle time per task 5 min • Average inflow per hour 5.5 • Total processing time 5*5.5 = 27.5 minutes per hour • Utilization 27.5/60 = 46% • He fails to understand why should there be a delays & queues with a utilization of 46%. He has therefore refused any further investment in another machine.

  27. You the Consultant • Vijay contacted the service agent for wave soldering machine to find a solution to the problem. The agent suggested that the large automated wave soldering machine be replaced by two smaller semi-automatic machines at the same cost. He however warned that the average cycle time per task would double to 10 minutes. • Vijay is not convinced that the alternate setup is any better. He believes that the two terminals would be of no help, as the processing cycle time is also doubling. The delays and queues are likely to be the same as before. Vijay has approached you for advice. Please suggest an appropriate solution to Vijay’s problem.

  28. How to tackle • First find the gap between arrival in minutes • If there was one machine – • Job waits if machine is not free • Machine waits of job is not received • We assign the job and find waiting time • We can also find the queue length at any point of time

  29. How to tackle • average cycle time (min) - 5 min • average inflow rate (tasks per hour) -100/18 • average time gap between arrival of two tasks (min) • average utilization • Cost per hour of waiting • average time gap between arrival of two tasks (min) • average wait time (min) • Average queue length • Total waiting time (Hours)

  30. If we had two machines • See which machine is free and allocate • Calculate similar data as in one big machine • Compare

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