Embed Size (px)
DESCRIPTION
Citation preview
NewGate India
Hyderbad, Andhra Pradesh- 500038
Website: www.newgate.in
Email: [email protected]
Slideshare URL : http://www.slideshare.net/newgateindia
Production & Operations Management
Case Study: Distribution Transformer Company Limited
Page | 2
Case Summary
DTCL (Distribution Transformer Company Limited) is a Transformer manufacturing
Company dealing with Power Sector. Earlier it used to concentrate mainly on the domestic
market but after facing severe financial crisis owing to delayed payments of the State
electricity Board, it channelized its efforts to tap the export market especially the South-Asian
Market which had huge scope. With Company’s export growing to INR 1 billion, they
expanded their export business to Distribution Transformer with the already existing Single
Phase Transformer. With the Company going global, the number of the Customers and their
specifications increased manifolds. The Engineering Department of the Company is thus
facing several issues with specifications of the new materials which results in increased lead-
time and also rejection of material at the last moment due to Quality Issues. Owing to these
reasons, The Company is finding it difficult to comply with the Orders in time, thereby ending
up paying huge amount as penalty.
DTCL soon realized that this will threaten their position in the global market and
competing with the World Players will be even more difficult. DTCL, thus, set up a Team to
estimate the time required for the accomplishment of an order. Thus, focusing on overall
lead time reduction to reduce cost and improve efficiency of Order fulfillment became even
easier. The team was also supposed to come up with options by which orders can be fulfilled
in a much efficient manner. The team identified the entire set of activities involves in the
order fulfillment as summarized below:-
A list of activities for execution of an order at DTCL
Activity no. Description
01 Processing and circulation of customer order
02 Preparation of customer drawings
03 Customer drawings to marketing
04 Checking and forwarding to customer
05 Getting approval from customer
05’ Customer comments
06 Preparation of manufacturing drawings
07 Issuing manufacturing drawings to planning
08 Issue from planning to other departments
08’ Revision
09 Material procurement-prototype
10 Processing tools required for manufacturing
11 Manufacturing- prototype
12 Material processing-final order execution
13 Manufacturing-final order execution
14 Organizing customer inspection through marketing
16 Dispatch
Page | 3
After the Order has been placed by the Customer, the Marketing Department reviews it
and sends it to all Departments involved. The Engineering Department starts preparing the
Electrical Design which is sent for approval from the Customers. If approved they are sent
back to the Engineering Department and if otherwise Marketing and Engineering Department
addresses the Issues within 3 days.
Along with the process of the approval, the Engineering Department parallel prepares
the Manufacturing Drawings and informs the Materials Department regarding Material
Requirements to accomplish the Order. After the Manufacturing Drawings are approved,
they are being sent to the PPC (Production Planning and Control) Department which in turn
issues the Drawings to the Concerned Department.
Revision to the Drawings and Distribution of BOMs (Bill of Materials) is followed by the
Procurement of the by the Procurement of the Materials. Based on the tentative dates of
Job-Completion, the Marketing Department is informed to organize for Customer inspection
following which the Dispatching of the Products takes place. Based on the steps discussed
above, the data was collected for a sample of 4 orders which are discussed in details later.
Assumptions taken in case
An activity named 05 was taken for Customer comments which was mentioned in the
case but not included in the table. Its time was 3 days. So a constant 3 days activity
time was assumed for all the 4 orders.
An activity named 08’ was taken for Revision which was mentioned in the case but not
included in the table. Its time was 2 days. So a constant 2 days of activity time was
assumed for all the 4 orders.
An activity named 14 named Organizing customer inspections, no time was mentioned
for it. So we assumed a time of 3 days for all the 4 orders.
The Sample of 4 orders is given below in the following table:-
Page | 4
Order execution details: a sample analysis
Activity no.
Description Domestic order
1
Domestic order
2
Average of
Domestic order
Export order
1
Export order
2
Average of Export order
01
Processing and circulation of
customer order
2
2
2
3
3
3
02
Preparation of customer drawings
30
18
24
13
16
14.5
03
Customer drawings to marketing
2
3
2.5
1
1
1
04
Checking and forwarding to
customer
2
1
1.5
3
3
3
05 Getting approval from customer
447 98 272.5 396 93 244.5
05’ Customer comments
3 3 3 3 3 3
06
Preparation of manufacturing
drawings
400
120
260
400
23
211.5
07
Issuing manufacturing
drawings to planning
2
3
2.5
17
1
9
08
Issue from planning to
other departments
1
2
1.5
2
1
1.5
08’ Revision 2 2 2 2 2 2
09,10,1
1
Material procurement-
(prototype, final order execution)
603
228
415.5
486
167
326.5
12,13
Manufacturing (prototype, final order execution)
341
160
256.5
36
5
20.5
14 Inspection 3 3 3 3 3 3
15 dispatch 8 130 69 18 15 16.5
Page | 5
Questions
Q1) Develop a network representation of the execution of an order for distribution
transformers at DTCL.
Ans : The network is drawn by both AON and PERT diagrams. The PERT chart is as follows for
the ordering.
The AON chart is as follows for the ordering.
Page | 6
Q2) Use the network and develop time estimates for execution of the order. What
are the key activities that require better managerial control?
Ans: The critical path of both the domestic order and export order are drawn. Then the
critical activities are decided from the PERT chart.
Domestic Orders
The critical path is 1,2,3,4,6,9,10,11,7,8,8’,12,13,14,16
These are the activities which require better managerial control and can be crashed.
The time allocated with each activity can be optimized.
Total lead time = 1034 days
The real float associated for 05 is 403 days.
Export Orders
Page | 7
The critical path is 1,2,3,4,6,9,10,11,7,8,8’,12,13,14,16
These are the activities which require better managerial control and can be crashed.
The time allocated with each activity can be optimized.
Total lead time = 612 days
The real float associated with 05 is 294 days.
Q3) Can you identify activities that require immediate attention in order to reduce
execution time. How can DTCL organize the manufacture of transformers so
that there will be a significant reduction in execution lead time
Ans: AON chart is drawn. The group activities are divided into workstations. The balance
delay for both the ordering process is found out.
Domestic Orders
Domestic with 3 workstations
The three workstations are engineering drawing department, marketing department
and the production department. The AON chart is as follows
Work Station W1
(Engineering Dept.)
W2 (Manufacturing
Dept.)
W3 (Purchasing Dept.)
Activities 01,02,03,06,07 04,05,05',14,16 08,08',09,10,11,12,13
Order Time 291 349 669.5
Page | 8
Total Processing Time
Tp = 291 + 349 + 669.5
Tp = 1309.5 days
Cycle time
CL= Max (T1, T2, T3) = Max (291, 249, 669.5)
CL = 669.5 days
Balance Delay
Bd = (n CL - Tp)/ nCL X 100 = (3 X 669.5 – 1309)/ (3 X 669.5 )
Balance Delay = 34.82%
Domestic with 4 workstations
The four workstations are engineering drawing department, marketing department,
production department and the procurement department. The AON chart is as follows
Work Station W1 (Engineering
Dept.) W2 (Manufacturing
Dept.) W3 (Purchasing Dept)
W4 (Procurement Dept)
Activities 01,02,03,06,07 04,05,05',14,16 08,08',12,13 09,10,11
Order Time 291 days 349 days 254 days 415.5 days
Total Processing Time
Tp = 291 + 349 + 254 + 415.5
Tp = 1309.5 days
Page | 9
Cycle time
CL= Max (T1, T2, T3, T4) = Max (291,249,254,415.5)
CL = 415.5 days
Balance Delay
Bd = (n CL - Tp)/ nCL X 100 = (3 X 415.5 – 1309 )/ (3 X 415.5)
Balance Delay = 21.23%
Conclusion of Domestic Order
From both the AON chart it is visible that in the case of domestic orders, the number of
workstations should be four as it generates less balance delay. As the number of
workstations is increased to 4, the balance delay is decreased by 39%.
1. The activities that require immediate attention is the procurement department as it
take 415.5 days.
2. It can be done by proper vendor management which helps the following ways:
By ensuring delivery on time
Properly forecasting the expected demand
Adopting practices to reduce time on logistics
Better inventory management of raw materials with proper defined reorder level.
Export Orders
Export with 3 workstations
The three workstations are engineering drawing department, marketing department
and the production department. The AON chart is as follows
Page | 10
Work Station W1 (Engineering
Dept.) W2 (Manufacturing
Dept.) W3 (Purchasing Dept)
Activities 01,02,03,06,07 04,05,05',14,16 08,08',09,10,11,12,13
Order Time 239 days 270 days 350.5 days
Total Processing Time
Tp = 239 + 270 + 350.5
Tp = 859.5 days
Cycle time
CL= Max (T1, T2, T3) = Max(239, 270, 350.5)
CL = 350.5 days
Balance Delay
Bd = (n CL - Tp)/ nCL X 100 = (3 X 350.5 – 859.5) / (3 X 350.5)
Balance Delay = 18.26%
Export with 4 workstations
The four workstations are engineering drawing department, marketing department,
production department and the procurement department. The AON chart is as follows
Page | 11
Work Station
W1 (Engineering
Dept.)
W2 (Manufacturing Dept.)
W3 (Purchasing Dept)
W4 (Procurement Dept)
Activities 01,02,03,06,07 04,05,05',14,16 08,08',12,13 09,10,11
Order Time 239 days 270 days 330 days 20.5 days
Total Processing Time
Tp = 239 + 270 + 330 + 20.5
Tp = 859.5 days
Cycle time
CL= Max (T1, T2, T3, T4) = Max(239, 270, 330, 20.5)
CL = 330 days
Balance Delay
Bd = (n CL - Tp)/ nCL X 100 = (3 X 330 – 859.5 )/ (3 X 330.5)
Balance Delay = 34.88 %
Conclusion of Export Order
From both the AON chart it is visible that in the case of export orders, the number of
workstations should be three as it generates less balance delay. As the number of
workstations is increased to 4, the balance delay is increased by 91%.
Page | 12
1. The activities that require immediate attention is the production as it take 350.5 days.
2. It can be done by proper optimizing the process which helps in
• By avoiding abnormal wastage
• Reducing the error or failure rates
• Finding optimal product mix strategies
• Maintaining a constant lead time and safety stock
Overall Conclusion
1. More emphasis has to given to the critical activities than that of slack activities.
2. The number of workstations in domestic orders should be made four and in
export orders it should be three for better optimized use of the resources.
