Basic Factory Dynamics

1
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 HAL Case

Large Panel Line: produces unpopulated printed

circuit boards

Line runs 24 hr/day (but 19.5 hrs of productive time)

Recent Performance:
• throughput = 1,400 panels per day (71.8 panels/hr)
• WIP = 47,600 panels
• CT = 34 days (663 hr at 19.5 hr/day)
• customer service = 75% on-time delivery
Is HAL
lean?
What data do we need to
decide?
2
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 HAL - Large Panel Line Processes
Lamination (Cores): press copper and prepreg into core blanks
Machining: trim cores to size
Internal Circuitize: etch circuitry into copper of cores
Optical Test and Repair (Internal): scan panels optically for
defects
Lamination (Composites): press cores into multiple layer
boards
External Circuitize: etch circuitry into copper on outside of
composites
Optical Test and Repair (External): scan composites optically
for defects
Drilling: holes to provide connections between layers
Copper Plate: deposits copper in holes to establish connections
Procoat: apply plastic coating to protect boards
3
Sizing: cut panels into http://www.factory-
boards
© Wallace J. Hopp, Mark L. Spearman,
1996, 2000
physics.com
End of Line Test: final electrical test
 HAL Case - Science?

External Benchmarking

Internal Benchmarking

Need relationships between WIP, TH, CT,

service!

4
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Definitions

Workstations: a collection of one or more identical

machines.
Parts: a component, sub-assembly, or an assembly that
moves through the workstations.
End Items: parts sold directly to customers; relationship to
constituent parts defined in bill of material.
Consumables: bits, chemicals, gasses, etc., used in process
but do not become part of the product that is sold.
Routing: sequence of workstations needed to make a part.
Order: request from customer.
Job: transfer quantity on the line. 5
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Definitions (cont.)

Throughput (TH): for a line, throughput is the average

quantity of good (non-defective) parts produced per unit
time.
Work in Process (WIP): inventory between the start and
endpoints of a product routing.
Raw Material Inventory (RMI): material stocked at
beginning of routing.
Crib and Finished Goods Inventory (FGI): crib
inventory is material held in a stockpoint at the end of a
routing; FGI is material held in inventory prior to
shipping to the customer.
Cycle Time (CT): time between release of the job at the
6
beginning of the routing until it reaches an inventory
http://www.factory-
© Wallace J. Hopp, Mark L. Spearman,

point at the end of the

1996, 2000
routing.
physics.com
 Parameters

Descriptors of a Line:
1) Bottleneck Rate (rb): Rate (parts/unit time or jobs/
unit time) of the process center having the highest long-
term utilization.

2) Raw Process Time (T0): Sum of the long-term

average process times of each station in the line.

3) Congestion Coefficient (α): A unitless measure of

congestion.
Note: we won’t use α
• Zero variability case, α = 0. quantitatively,
• “Practical worst case,” α = 1. but point it out to recognize
• “Worst possible case,” α = W0that. lines
with same r b and T 0 can behave
7
© Wallace J. Hopp, Mark L. Spearman,
1996, 2000
very
http://www.factory-
physics.com
differently.
 Parameters (cont.)

Relationship:

Critical WIP (W0): WIP level in which a line

having no congestion would achieve maximum
throughput (i.e., r b) with minimum cycle time (i.e.,
T0 ).

W 0 = rb T 0

8
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab

Characteristics:
• Four identical tools in series.
• Each takes 2 hours per piece (penny).
• No variability.
• CONWIP job releases.

Parameters:
rb = 0.5 pennies/
hour
T0 = 8
hours
0.5 × 8 = 4
W0 =
α = pennies
0 (no variability, best case
conditions)

9
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab

10
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=1)

Time = 0
hours

11
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=1)

Time = 2
hours

12
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=1)

Time = 4
hours

13
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=1)

Time = 6
hours

14
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=1)

Time = 8
hours

15
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=1)

Time = 10
hours

16
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=1)

Time = 12
hours

17
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=1)

Time = 14
hours

18
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=1)

Time = 16
hours

19
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Performance

20
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=2)

Time = 0
hours

21
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=2)

Time = 2
hours

22
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=2)

Time = 4
hours

23
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=2)

Time = 6
hours

24
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=2)

Time = 8
hours

25
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=2)

Time = 10
hours

26
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=2)

Time = 12
hours

27
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=2)

Time = 14
hours

28
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=2)

Time = 16
hours

29
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=2)

Time = 18
hours

30
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Performance

31
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=4)

Time = 0
hours

32
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=4)

Time = 2
hours

33
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=4)

Time = 4
hours

34
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=4)

Time = 6
hours

35
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=4)

Time = 8
hours

36
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=4)

Time = 10
hours

37
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=4)

Time = 12
hours

38
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=4)

Time = 14
hours

39
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Performance

40
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=5)

Time = 0
hours

41
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=5)

Time = 2
hours

42
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=5)

Time = 4
hours

43
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=5)

Time = 6
hours

44
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=5)

Time = 8
hours

45
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=5)

Time = 10
hours

46
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 The Penny Fab (WIP=5)

Time = 12
hours

47
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Performance

48
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 TH vs. WIP: Best Case

r
b

1/
T0

W
0
49
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 CT vs. WIP: Best Case

1/
rb

T
0

W
0
50
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Best Case Performance

Best Case Law: The minimum cycle time (CT best) for
a given WIP level, w, is given by

The maximum throughput (TH best) for a given WIP

level, w is given by,

51
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Best Case Performance (cont.)

Example: For Penny Fab, rb = 0.5 and T0 = 8, so W0 = 0.5

× 8 = 4,

which are exactly the curves we plotted.

52
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 A Manufacturing Law

Little's Law: The fundamental relation between

WIP, CT, and TH over the long-term is:

Insights:
• Fundamental relationship
• Simple units transformation
• Definition of cycle time (CT = WIP/TH)

53
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two

2
hr 5 3
hr hr

10
hr
54
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two

0.
5
0.
4
0.
6
0.6
7

0.4 p/
r b = ____________ 20
T0 = ____________ 8
W 0 = ____________
hr hr pennie
s

55
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=0)

2
hr 5 3
hr hr

10
hr
56
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=2)

7
4

2
hr 5 3
hr hr

10
hr
57
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=4)

7
6
9
2
hr 5 3
hr hr

10
hr
58
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=6)

7
8
9
2
hr 5 3
hr hr

10
hr
59
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=7)
1
7

1
8 2
9
2
hr 5 3
hr hr

10
hr
60
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=8)
1
7

1
1 2
0 9
2
hr 5 3
hr hr

10
hr
61
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=9)
1
7
1
9
1
1 2
0 1
4
2
hr 5 3
hr hr

10
hr
62
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=10)
1
7
1
9
1
1 2
2 1
4
2
hr 5 3
hr hr

10
hr
63
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=12)
1
7
1
9
1 2
1 7 2
4 1
4
2
hr 5 3
hr hr

10
hr
64
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=14)
1
7
1
9
1 2
1 7 2
6 1 2
9 4
2
hr 5 3
hr hr

10
hr
65
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=16)
1
7
1
9
1 2
7 2
1 2
9 4
2
hr 5 3
hr hr

10
hr
66
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=17)
2
7
1
9
2 2 2
2 2 0
1 2
9 4
2
hr 5 3
hr hr

10
hr
67
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=19)
2
7
2
9
2 2 2
2 2 0
2 2 2
4 4 2
2
hr 5 3
hr hr

10
hr
68
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=20)
2
Note: job will 7
arrive at
bottleneck just in 2
time 9
to prevent 2 2
starvation.2 2 2
2 2 2 2
4 4 2
2
hr 5 3
hr hr

10
hr
69
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=22)
2
7
2
9
2 3 2
2 7 2 5
4 2 2
4 4
2
hr 5 3
hr hr

Note: job will

arrive at
bottleneck just in 10
time hr
to prevent 70
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
starvation.
1996, 2000
physics.com
 Penny Fab Two Simulation (Time=24)
2
7
2
9
2 3 2
7 2 5
2 3 2
9 4 7
2
hr 5 3
hr hr And so on….
Bottleneck will
just
10 stay busy; all
hr others
will starve
71
© Wallace J. Hopp, Mark L. Spearman,
1996, 2000
http://www.factory- periodically
physics.com
 Worst Case

Observation: The Best Case yields the minimum cycle

time and maximum throughput for each WIP level.

Question: What conditions would cause the maximum

cycle time and minimum throughput?

Experiment:
• set average process times same as Best Case (so r b and
T0 unchanged)
• follow a marked job through system
• imagine marked job experiences maximum queueing

72
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Worst Case Penny Fab

Time = 0
hours

73
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Worst Case Penny Fab

Time = 8
hours

74
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Worst Case Penny Fab

Time = 16
hours

75
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Worst Case Penny Fab

Time = 24
hours

76
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Worst Case Penny Fab

Note:
Time = 32
CT = 32 hours
hours
= 4× 8 = wT 0
TH = 4/32 = 1/8 = 1/
T0
77
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 TH vs. WIP: Worst Case

Best
r Case
b

Worst Case
1/
T0

W
0
78
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 CT vs. WIP: Worst Case

Worst Case

Best
Case
T
0

W
0
79
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Worst Case Performance

Worst Case Law: The worst case cycle time for a

given WIP level, w, is given by,

CTworst = w T0

The worst case throughput for a given WIP level,

w, is given by,

THworst = 1 / T0

80
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Practical Worst Case

Observation: There is a BIG GAP between the Best

Case and Worst Case performance.

Question: Can we find an intermediate case that:

• divides “good” and “bad” lines, and
• is computable?

Experiment: consider a line with a given rb and T 0 and:

• single machine stations
• balanced lines
• variability such that all WIP configurations (states) are
equally likely

81
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 PWC Example – 3 jobs, 4 stations

82
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Practical Worst Case

Let w = jobs in system, N = no. stations in line,

and t = process time at all stations:

CT(single) = (1 + (w-1)/N) t
CT(line) = N [1 + (w-1)/N] t
= Nt + (w-1)t
= T0 + (w-1)/r b

TH = WIP/CT From Little’s

= [w/(w+W 0 -1)]r b Law

83
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Practical Worst Case Performance

Practical Worst Case Definition: The practical

worst case (PWC) cycle time for a given WIP level,
w, is given by,

The PWC throughput for a given WIP level, w, is

given by,

where W 0 is the critical WIP.

84
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 TH vs. WIP: Practical Worst Case

Best
r Case
b
Good
PW
(lean) C
Bad (fat) Worst Case
1/
T0

W
0
85
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 CT vs. WIP: Practical Worst Case

Worst Case PW
C
Bad (fat)
Best
Goo
(leand Case
T )
0

W
0
86
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Penny Fab Two Performance

Note:
Best Case
rb process
times in
y PF2
Penn
Fab 2 have var
t equal
ca l Wors
Practi to PWC.
Case
But…
unlike
PWC, it has
1/T 0
Worst
unbalance
Case d
line and
W multi
0 machine
87
© Wallace J. Hopp, Mark L. Spearman, http://www.factory- stations.
1996, 2000
physics.com
 Penny Fab Two Performance (cont.)

Worst
Case t
ors
a lW
a c tic
Pr e nn
y
s Pe 2
Ca b 1/
Fa
rb

T0
Best Case

W
0
88
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Back to the HAL Case - Capacity Data

89
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 HAL Case - Situation

Critical WIP: rbT0 = 114 × 33.9 = 3,869

Actual Values:
• CT = 34 days = 663 hours (at 19.5 hr/day)
• WIP = 47,600 panels
• TH = 71.8 panels/hour

Conclusions:
• Throughput is 63% of capacity
• WIP is 12.3 times critical WIP
• CT is 24.1 times raw process time

90
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 HAL Case - Analysis

TH Resulting from PWC with WIP =

47,600?
Much higher
than actual
TH!

WIP Required for PWC to Achieve TH = 0.63rb?

Much lower
than
actual WIP!
Conclusion: actual system is much worse
than PWC!
91
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 HAL Internal Benchmarking Outcome

“Lean"
Region

“Fat"
Region

92
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com
 Factory Dynamics Takeaways

Performance Measures:
• throughput
• WIP
• cycle time
• service
Range of Cases:
• best case
• practical worst case
• worst case
Diagnostics:
• simple assessment based on rb, T0, actual WIP,actual TH
• evaluate relative to practical worst case

93
© Wallace J. Hopp, Mark L. Spearman, http://www.factory-
1996, 2000
physics.com