7

Constraint Management

DISCUSSION QUESTIONS 1. Examples of everyday bottlenecks include traffic lights, drive-thru windows at the bank or fast food restaurants. On the highway merging lanes and speed zones. Maintaining constant speeds, setting traffic lights to coordinate traffic patterns and only allow highway construction after rush hour. Fast food restaurants have two windows, pull over spots and new cash card options to reduce time at the window. 2. The primary economies of scale concern spreading the instructor’s salary over a larger class and filling classrooms to capacity (and then some). Diseconomies occur when additional help is required to review homework, administer tests, and coordinate schedules of students and assistants. Growth eventually requires larger classrooms or lecture halls. If we view the product as learning, there is a possibility that diminishing returns on the amount of learning occur as class size increases. Symptoms of diseconomies of scale setting in are decreased job satisfaction for instructors and unmotivated, dissatisfied students. If close customer contact is needed for this kind of service process, diseconomies of scale tend to set in earlier. 3. When demand for the drink is large enough, there are several ways that economies of scale would benefit the boy. First, he can save on raw material costs. For example, one 32-ounce box of lemonade mix costs less than four 8-ounce boxes. Also, he could get a price break by buying ice in bulk. Second, the cost of larger iceboxes can be spread over more units (sales), keeping the cost per sale low. Text problem p. 279 also asked for conditions that might lead to diseconomies of scale. PROBLEMS 1. Bill’s Barbershop a. B3-a = 10+8+15+20+9 = 62 minutes B3-b = 10+8+10+20+9=57 minutes b. B4 c. process cycle time is 20 min./60 = 3 customers/hr. (8 hrs) = 24 customers per day

102

PART 2

Managing Processes

2. Barbara’s Boutique a. 3 [the bottleneck is step T4 at 18 minutes – 3.33 customers or 3] b. Step T6 at 22 minutes limits Type B to 22/60 = 2.73 customers/hr. 3.33(.3) + 2.73(.7) = 2.90 customers on average c. Type A customers may wait at step T4. Type B customers may wait at step T6. All customers may wait at Step T1 because the arrival rate of customers could exceed the capacity 3. CKC Station X is the bottleneck – 2600 minutes Work Station Product A Product B W 10*90=900 14*85=119 0 X 10*90=900 20*85=170 0 Y 15*90=135 11*85=935 0

Total Load 2090 2600 2285

4. CKC a. Traditional Method: Part B has the higher profit margin/unit Product A Product B Price 55.00 65.00 Raw and Purchased Parts 5.00 10.00 Labor 3.50 4.50 Profit Margin 46.50 50.5 Work Station W X Y Minutes at Start 2400 2400 2400 Mins. Left after Making 85 Bs 1210 700 1465 Mins. Left after Making 90 As 310 Can Only Make 70 As 700/10 = 70

85 parts of B and 70 parts of A (Part B will use 1700 minutes at station X leaving 700 for Part a. Part Overhea Raw Mat’l Labor Purchase Total Revenues d Parts Costs A 70 x 2 =140 70 x 3 = 210 70 x $55 = 3850 B 85 x 5 = 425 85 x 5 = 425 85 x $65 = 5525 Totals 3500 565 3 x $6 x 635 5420 9375 40 hrs = 720 Revenue – costs = profit 9375 - 5420 = 3955

Constraint Management

CHAPTER 7

103

b. Bottleneck-based approach: Part A has the higher profit margin/unit at the bottleneck Product A Product B Margin 46.50 50.50 Time at bottleneck 10 min 20 min Profit margin per minute 4.65 2.525 Work Station W X Y Minutes at Start 2400 2400 2400 Mins. Left after Making 80 As 1500 1500 1465 Mins. Left after Making 85 Bs 310 Can Only Make 75 Bs 1500/20 = 75

Make 90 units of A (900 minutes used – leaves 1500 minutes) can make 75 units of B Part Overhead Raw Mat’l Labor Purchase Total Revenues Parts Costs A 90 x 2 = 180 90 x 3 = 270 90 x $55 = 4950 B 75 x 5 = 375 75 x 5 = 375 75 x $65 = 4875 Totals 3500 555 3 x $6 x 40 hrs 640 5415 9825 = 720 Revenue – costs = profit 9825 - 5415 = 4410 c. 4410- 3955 = $455 increase using TOC 12%...