Predry and dry storage
The prudery and dry storage each had a cause the extent of kiln usage was dependent on the availability of the space in the dry lumber area. The insufficiency in the dry lumber storage area mainly arose because the factory did not always use dry lumber promptly. The dry storage area couldn’t be expanded because of the prohibitive extra handling costs. 2. 2 Frame Parts Production There were two areas in the frame shop: rough mill and parts machining. The frame shop employed 54 workers on the day shift and 32 workers on the night shift. Rough mill department: A full lumber was introduced into the rough mill at a time.
Boards that were brought into the rough mill varied in quality, width and length, but had same thickness. The boards were cut to one of the three standard lengths. They pieces were then planed and Jointed. These pieces were sent to the carts according to the length. There were about 70 lengths and thicknesses of boards that were produced. This was followed by a ripsaw operation which required special skills because of the varied sorting decisions and rapid pace of production. The rough mill manufactured the “core stock” which contained pieces of about 250 sizes.
The rough ill employed 17 people per shift on day and night shifts. Machining: The core stock was shaped to form finished parts which were then sent to the assembly department. For simple shapes, the ends were cut to the finished length, ripsaw to the finished width and were followed by any necessary boring. Complex parts were formed using band saws or shapers. At the end, parts that would be visible on a finished chair were sanded. Operators working in the machining department were paid piece rates. They were responsible for transportation of the materials and doing necessary machine setup.
However, the efficiency of the new machines was greater than the older machines. Chairlift purchased a shaper and a transfer machine in 1988. The new machines required a set up time of more than an hour while the older machines had a set up time of a few minutes. Chairlift employed thirty seven workers in the parts machining department on the day shift and fifteen on the night shift. A total of fifty frame styles were manufactures using five hundred different parts that were used in seven product lines. There were two assembly lines in the assembly operation: frame assembly line and upholstery assembly line.
Frame assembly line: The completed frame parts were wheeled on the carts by six material handlers to the assemblers. Each assembler built 25 frames. Lot ticketing system was used to inform the material handlers about the frame styles and quantity of each frame style in the 25 frames lot. The handlers had to rely on their memory to decide which parts were required to complete each frame style. Upholstery assembly line: More than 500 different colors and fabrics were used for chair coverings. Customers could also choose between spring or rubber upholstery. The final products numbered to several thousand models.
A small buffer was maintained between the frame assembly line and upholstery assembly line. Finished products were shipped within two days of their final assembly. Chairlift had a long-standing policy against keeping inventory of finished items. 3. Production Scheduling keeping finished goods inventory. Order booking: Every customer order contained a delivery date. Order to be shipped next month were received by the fifteenth day of the previous month. If the booking for the month reached its maximum capacity, the Manufacturing Manager would take the decision whether to increase the production ate or to close bookings for that month.
Data regarding incoming orders, existing bookings, and maximum planned production capacity was compiled daily in a three- month production report. Shipment planning: All freight costs were borne by the customers when (1) shipped units were ordered at the same time, (2) shipments that were pooled for the same geographical area. When these criterion were not met, Chairlift bore the excess shipping cost. Thus it was crucial to plan the production schedule according to these two criterion. The monthly production schedule was broken into daily schedule. Shipping plans were based on these schedules.
The traffic control clerk prepared the shipping load plans every day two to three weeks in advance. Production control was provided a shipping plan every Friday for the five- day period. Parts requirements planning: This department used the shipping load plans and the standard parts list to determine which parts were needed to assemble the chairs needed for the order. The requirements for the parts were determined weekly. The daily shipping plans were established three weeks in advance but the lead time for determining frame parts requirements was very less.
One reason for this was the fact that shipping plans were accumulated for a week and then released on Friday. This batching system was efficient but cut down the lead time for frame parts ordering. The upholstery assembly began two days before the planned shipping date and the frame assembly began two days before the upholstery assembly. This was the second reason why lead time for frame parts ordering was reduced by a week. Frame parts ordering: A Stand Ordering Quantity (SO) was established for each frame part which was 80% of the space available on the carts that were used to move work in the frame shop.
Several hundred standard order tickets were issued each week that contained information about order quantity, core stock, and routing of the ordered parts. The tickets were returned to the production control after the parts were produced. Frame parts production scheduling: This department was responsible for scheduling each frame parts order. In 1988, around 70% of the parts were produced within three days of issue and 90% were completed before its deadline. The deadline for the parts was one week. The scheduling depended on availability of proper species, quality and thickness of wood in the rough mill department. Analysis and Recommendations of problem areas: 4. 1 Lumber inventory The company keeps a high inventory of lumber. It stocks a six month supply of lumber in outdoor storage. This increases the total cost incurred by the company. Lumber is a perishable and seasonal commodity. In order to prevent the company from running out of lumber during production, the company safeguarded itself using a 6 month of additional inventory. The other reason for holding a 6 month inventory was that they procured lumber from a distant facility. This is a heavy duty good with time to save on the transportation.
The results show that the percentage exploitation of the kiln is almost 3 times that of coaching and milling. This fact emphasizes on the significant yield loss between the kiln and the machining operation. It was alluded to the fact that the 75% of the type of lumber consumed was 1 inch or 1. 5 inch, but the company at the moment does not have any mechanism of feeding the kilns with lumber in the same proportions. The company fails to have any proportions set for the procurement of lumber on the basis of thickness or grade requirements.
The kilns used for dying had an ample of capacity (80,000 board feet) but the dry lumber area for the storage of dried lumber (Reference to Exhibit). As mentioned above, the absence of any defined quantity of a specific lumber type, often resulted in a mismatch of the factory requirements. A significant area of the dry storage is occupied by lumber which is not suitable for frame machine parts required to meet the demand. This causes the machine and milling stations to have uneven loading pattern wherein most of the time it was idle and thus effect production.
The lumber bought by the company varies from 1 inch to 3 inch in thickness. It has been identifies that 75% of lumber used is 1 inch and 1. 5 inch. The possible solution is that they ensure a ratio of 3: 1 is maintained between he grades of lumber. This will ensure that there is enough lumber of the required type when needed and the machine and milling resources can operate at the same capacity as the kiln. We can apply the base stock model here and maintain a reorder level for the 2 kinds of lumber (the 2 kinds that are in the ratio of 3:1). Whenever the quantity depletes by one, we replace lumber from the kiln.
This will ensure that the dry lumber is always available for the subsequent Machining and Milling operations. The output of the kiln is limited by the dry storage capacity. Hence, this becomes a instant for the line wherein the production of the successive resources is limited due to the output of this. The effects of this propagates down the line and restrict the capacity of the machining operation. This whip down effect of the lumber drying capacity can be counter measured by effectively planning the inventory level in the lumber drying area by developing FIFO lines with min Max control over the inventory.
Recommendations to avoid variability in part inventories (Defined in the layout below) FIFO lanes creation for lumber storage maintaining a fixed min and Max base stock bevel at the dry storage area. This will eliminate workers relying on memory to pick up parts since each parts will be having designated area. Each shop inventory calculation can be designated by adding extra column such as Rough Machine Shop in (ARM IN), Rough Machine Shop Out (ARM OUT). This can help in tracking out the particular inventory level at each location on real time basis.
As we can see from the sales data, Chairlift is seeing a 13-15% increase in sales data/year basis. Therefore, Chairlift can think of investing in RIFF tagging of parts bin and area. This will help in proper tracking of parts. The other issue was the piece wise rate system adopted by Chairlift Corporation. This not only caused creation of substandard parts during frame part assembly but also uneven loading of machining operation wherein worker performed work according to the ease of manufacturing setup .
Incentives associated with piece wise manufacturing motivated workers to manufacture parts without adhering to the part assembly structure which resulted in stock out of some part and excess inventory of other parts. Instead of awarding incentives on piece wise rate system, the company should reward the worker on the basis of quality. The workers should receive bonuses if they produced the right part, at the right time in accordance with the set standards of quality.
Since Chairlift Corporation is experiencing depletion of quality, the brooding and RIFF techniques can also help in traceability of the part, subsequently reducing the market quality problems. During frame assembly, the lot tickets that were used to fetch the machine parts, did not describe the parts that would be used for the assembly of a particular style of chair. Instead the handlers relied on their own memory which sometimes led selection of wrong parts. This quantity of each part to be ordered from the parts machining department was decided by Standard Order Quantity (SO) which was 80% capacity of a cart.
The Exhibit 7-A shows a clear comparison between the Economic Order Quantity (EGO) and SO. The smaller lot size in SO resulted in greater set ups hence increasing the setup time/cost. Seeing the current trend in the demand year by year, the demand should also match up with this increasing demand. EGO offers a very good solution for deterministic demand but Chairlift receives seasonal demand. EGO provides a larger batch size which reduces the set p cost. This might be useful in case of parts having higher requirement but in case of parts with comparatively lower requirement, EGO batch size will produce more than what is required.
EGO might be a good point to start but it is recommended that the company makes a gradual transition from EGO to base stock model. It can also be recommended that the company produce EGO quantities of parts that have higher requirement and produce SO batches for products with lower requirement. From the calculation shown in Exhibit 7-A, we can determine the demand for each part annually and define batches in EGO for parts with higher requirement whereas parts with lower requirement can be produces in SO batches.
Batch wise shipping plan was released only on Friday. The upholstery assembly began two days before the planned shipping date, and frame assembly began two days before final assembly. These two factors reduced lead time for ordering frame parts by a week. This increased the possibility of a part not arriving at the frame assembly at the expected time. This directly resulted in the company’s ability to meet the demand on time and the finished good inventory. The following figure shows the rent and the proposed planning time cycle for shipping load plan.
We propose that instead of releasing shipping plan on every Friday of the week, the manager issues order every day of the week. This will ensure that the lead time for frame part is increased, reducing the probability of missing parts at the assembly. Actual Planning Time Cycle Ship load plan announced here w For this week Frame Parts, Order is issued, and Frame Assembly begins for chairs in Final Assembly begins for chairs in first production is scheduled. Days shipment. Proposed Planning Time Cycle Frame Parts order is issued, ND production is scheduled.
Frame Assembly begins for chairs In first days shipment. First days shipment Finished goods inventory stocked The company had a strict policy of not keeping finished goods inventory. Considering the variable nature of the demand, the policy of no finished goods inventory increased the risks for the company in periods where demand was higher than production. We propose that the company should keep finished goods inventory at a new warehouse facility close by to counter the variability of the demand. From exhibit 2 we see that there is difference in total no. Of chairs produced and total o. F parts shipped. This difference suggest that there is overproduction of some chair types while there is underproduction of some. This kind of variability is because sizes. All these factors resulted in production dependency on the operator. Other reason may be due to making of non-standard parts which result in production of substandard chairs. 5. Conclusion The key cause of concern that was identified in Chairlift Corporation was the variability in the material flow. This directly affected the monthly production of the plant resulting in either an underproduction or overproduction of chairs.
The limited storage capacity acts as a bottle neck that restrains the production of dried lumber . The piece rate wage for the workers is another major concern that makes the production depend upon the operator’s ease and preferences. The lot sizes that are currently used result in large set ups which consequently end up in loss of opportunity costs. The storage problem has tackled by the use of an efficient base stock model for every type of lumber. The inventory of the dry lumber is replenished whenever a specific kin of lumber falls below a reorder level.