Now moving into chapter 21 of The Goal, Alex has identified the problems/bottlenecks in his

This means that stock levels of raw materials, work in progress, and even finished products are kept to a minimum. However, this system requires a very carefully planned scheduling for it to work. Inventory levels are closely monitored such that stock is only obtained when it is needed. This makes storage or warehousing easy since less space is required transportation as well.

After evaluating capacity, Team A turned our attention towards an analysis of the throughput time of the Littlefield factory to determine the optimum customer contract to offer. During the first 50 days, Littlefield management elected to accept purchase orders with a quoted lead time of 7 days at a price of $750. Littlefield was able to obtain 100% expected revenue during the first 50 days of operations and averaged a throughput time of 1.64 days (St Dev: 0.91). In order to increase the overall profitability, Littlefield can increase

company’s finished goods inventory has shot up to a 60 days supply – twice the normal level. In addition,

Reduced need for higher capacity at the supplier. This would be reduced because suppliers would not need to size their operations to deliver on the “one shot large volume order” and would be able to space these in time with orders at

The raw materials sit idle until they are ready to ship out which leads to large cost of holding

We prefer the EOQ/ ROP system as gains from reducing the order/ production size (gains in terms of less value of inventory being produced) which though lead to increase in setup cost far outweigh the gains from Blanchard’s current system (gains in terms of reduction of setup cost) while, costs are that of the value of inventory being produced.

1. Faster delivery times due to decrease in lead time causing an increase in reliability

Lead time varies significantly, which affects the inventory cycle. The plant has to set a safety stock that will protect the production against stock outs, vehicle breakdowns, weather related delays and the shortage of supply from farmers and hogs barns.

Since the beginning of the industrial revolution manufacturing organizations have followed the rules that idle time is lost time. That the only way to make money is to keep everyone and everything operating at 100 percent. When in fact a plant that runs it's resources at 100 percent all the time is actually a very inefficient plant. Most of the time the struggle to meet efficiencies is taking the organization further away from it's goal. Excess production creates excess inventories that in turn ties up money and slows down or impedes cash flows. The key to balancing production is to search out those places in the plant that slows down all the processes behind it, essentially a bottleneck. Obviously the bottleneck can't just be removed so the rest of the process must be governed by the speed at which the bottlenecks can operate. Release of materials must be staggered so that just as a batch is sent through the bottleneck another batch is waiting in front of it to be processed. No other non-bottleneck area can be allowed to operate faster than the bottlenecks can handle otherwise the inventories will begin to climb again.

To minimize total waiting time and stockpile re-handling costs (Keep operations costs as low as possible).

The manufacturing cost can be lower as the rearrangement of the production line to meet urgent order can be minimize or even eliminated.

These two bottlenecks constrained the whole process. Alex and his colleagues were happy to identify two "Hebie"s, NCX-10 and Heat Treatment Department, which bottlenecked a flow sufficient to meet demand and make money. So the only thing to do was to find more capacity. To increase the capacity of the plant was to increase the capacity of only the bottlenecks. To increase the capacity of bottlenecks did not mean to install new machine, but to find the hidden capacity. With the help of Jonah, Alex found the NCX-10 had 1-hour idle time, as the union contract stipulated that there must be a half-hour break after every four hours work. The hours lost in the breaks of NCX-10 were enormously expensive because the throughput for the entire plant had been lowered by the bottleneck. The problem of the second "Hebie", heat treat, was that they didn 't make the bottleneck work on the parts contributed to throughput and many products were unable to be shipped without the parts in pile for treatment. What was more, they only did most inspections prior to final assembly but never inspected the parts before bottleneck. It easily let defects go through bottleneck and lost time in the bottleneck could not be recovered. The cost of one hour lost in these two bottlenecks is the cost of an hour lost in the system, which is computed as the total expense of the system divided by

This is achieved by creating a system where (materials, information, customers) can be synced in a way that smooth flow can be achieved throughout operations; the very well synced system can help avoid unpredictability, which causes waste because people hold inventory, capacity or time, to protect them self’s from unpredictable event.

advantage of this is there will be no need to store large quantities which will give you the benefit of needing inventory space and will keep inventory costs low

There should be constant transmission of signals from one point to another regarding the status of production. Due to this clear and constant communication, each point of the manufacturing process will know when to order for inventory and how much to order so that it arrives just in time and in the required quantity. This is where the importance of the system lies. It ensures that there is neither wastage of time during the production process, nor there is any wastage of capital or production capacity, thus leading to faster production. When the production is fast, the finished goods reach the market fast too, thereby reducing the "waiting time for the customers.