Monday, July 18, 2011

Focus and Leverage Part 44

In this blog I want to perform a simple mental exercise to demonstrate how processing time, cycle time, throughput and WIP are interrelated. Let’s consider a simple four-step production line where the processing time (P/T) is exactly one minute for each work station (i.e. a balanced line). The figure below is an example of such a production process where raw material enters the process at Step A and then progresses to Steps B, C and finally Step D. This process is set up to produce parts in batches of 10 pieces at a time. The question is, “How long will it take to complete all 10 pieces?”

Before proceeding, let me provide some simple definitions for these four entities cycle time (C/T), processing time (P/T), throughput (TP), and work-in-process inventory (WIP).:

Cycle time (C/T) in this context will be defined as the total amount of time material spends in a production system being converted from raw material to finished product. Cycle time is measured in units of seconds, minutes, hours, days and even weeks, depending upon the product being produced.

Processing time (P/T) is the time required to process product through a single work station and, like cycle time, it too is measured in seconds, minutes, hours, days and even weeks, depending upon the product being produced.

Throughput (TP) is the rate at which material is processed through a production line and is measured in units of product per unit time (e.g. pieces per hour, units per week, etc.).

Work-in-process inventory (WIP) is the amount of work-in-process product not yet complete waiting for additional work to be done on it.

Since each piece takes 1 minute of processing time at the first station, a total of 10 minutes will be needed to process the entire batch through work station A. The batch of 10 is then transferred to work station B and 10 minutes are also required at work station B and so on until all 10 parts are completed in work station D. Therefore, ignoring transport time between steps, it would take exactly 40 minutes to process the entire batch of 10 parts through the process. Each part spends 40 minutes in the system, so the cycle time (C/T) is 40 minutes. The throughput (TH) is 10 parts every 40 minutes or 0.25 parts per minute or 15 parts per hour (i.e. 60 minutes/hour x 0.25 parts per minute = 15 parts per hour).

Suppose the factory decides to change its batch size from 10 to 4. What is the impact on cycle time and throughput? Each part still requires 1 minute of processing time at work station A, so all four parts would take four minutes total to pass through station A. Likewise, 4 minutes would be required to process the batch of four parts through stations B, C and D. Again, ignoring transport time, it would require a total of 16 minutes of cycle time to process the batch of 4 parts through this process. The throughput is 4 parts every 16 minutes or 0.25 parts per minute or 15 parts per hour, so the throughput has not changed, but the cycle time is significantly less.

This same exercise can be repeated for any batch size as seen in the table below and the results remain the same. No matter what the batch size (WIP) the throughput always remains the same, but look what happens to cycle time. Because the parts are transferred from station to station in batches, rather than one piece at a time, the cycle time for the batches grows as a function of batch size. This style of production and production control is characteristic of the mass production mindset and is referred to as batch and queue or batch and push production and represents the worst possible way to process material through a factory!
In this type of production, the level of WIP (batch size) has a pronounced effect on cycle time, but absolutely no effect on throughput! For all of you production managers who believe in or insist that it is faster and more efficient to process material in large batches, I hope this exercise has at least made you think about batch size and how it affects C/T, P/T and TP.

In my next few series of blogs I plan to expand on this exercise and introduce you to something called Little’s Law and how it can have a profound impact on your throughput.  In addition, I want to lay out why it's so important to minimize cycle times and why having a balanced line is not the best option.

Bob Sproull

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