Demand Spike at Schneider UNF

N I K H I L K E J R I WA L – N I K H I L K E J R I WA L . P G P 2 0 1 3 @ I I M K A S H I P U R . A C . I N - 8 1 9 1 8 9 8 0 9 9

P R A S H A N T G A U R - P R A S H A N T. P G P 2 0 1 3 @ I I M K A S H I P U R . A C . I N – 8 1 9 1 8 9 8 0 4 0

Team - LeanMeanMen

Schneider Electricals, a global specialist in energy management

Schneider plans to launch STAR, a smart UPS in a month time

12 Central hubs across the country asked for 100% stock

Current plant capacity is 15000/month, working for 2 shifts/day and 6 days a week

37000 Units required within a month which is 700% of current production capacity

Production capacity to be revamped in order to meet new capacity

Budgetary constraints , limits investment in any additional machinery and other resources

Optimizing other processes to fulfill the spike in demand, reduce wastage and fix other problem areas

Executive Summary

Production Management

More testing machines, layout changes

3rd shift production, Lean optimization

Defect prevention and rework minimization

Vendor Management

Co-invest with suppliers

Use simple pull contracts

Form Join Ventures

Strategic Outlook

Schneider Best Practices

•A self-help methodology conceptualized and practiced at shop floor. This system provides a scope for seeking help from operators from across the lines to rebalance the workload and also maximize the output from each line through mutual help

Mutual Aid Signaling

•This denotes the level of expertise of the shop floor workers and also creates a healthy competition among them. This also raises their self-motivation to rise quickly to the level of “expert”, who also act as mentors

Color-coded Collars

Current Value Stream – Problem Area Identification

• Build line & Testing process is the bottleneck process as its cycle time is greater than the Takt time • Push type production: each process produces and pushes the material as per the schedule received from factory planner instead of the actual needs of the downstream customer process

Inventory is being observed at all the workstations .

Overproduction

More storage space is needed, hence more people are needed to handle this inventory

Storage

Due to improper online programming of microcontroller at ICT tester, defects can only be identified after the assembly

Rework

Closing the top cover of the unit causes delay due to a short screw length, Product design hinders assembly of switch & selector PCBA, Manual tightening is time consuming

Manual Work

for parts due to low on-time delivery of plastic parts, damaged or inferior components, high changeover times

Waiting

Testing process - high testing cycle time, serial placement of testing machines

Motion

Process Time/Units

Current Takt Time 87 sec

Production Lead time 2.95 days

Low value added Ratio 0.6%

Production Per month 15000 units

Star model 5000 Units

Other Products 10000 Units

Process Workers Inventory CT

SMT 3 50 0.33

THT 1 20 0.3

Slide line & Wave 6 20 0.27

Lead Cutting & Touch Up 3 42 0.39

ICT 2 12 0.41

Build Line & Testing 10 36 1.22

Boxing 1 5 0.36

Supplier

Central Warehouse

Factory Warehouse

Manufacturing Facility

Distribution Centers

Consequences of the spike in demand

• Overall demand in July = 37000 units of STAR + 10000 units of other products = 47000 units

• New Takt time = 45 sec (435 min per shift *3 shifts * 60sec * 27days / 47000 units demand)

• Cycle time (max.) is more than the Takt time for ‘Build Line & Testing’ process (1.22 min = 73 sec)

• Supplier: Current supplier capacity may not be sufficient to meet the demand spike of UNF plant

• Warehousing: Central warehouse space may not accommodate the rise in parts quantity

• Testing machine is at capacity and cannot meet the requirements of the new Takt time

Flow of Material in the system

• Distribution Centre: Insufficient space available atdistribution center

• If assurance of similar demand for STAR fails in latermonths, additional investment may lead to excesscapacity

• Cannot buy any number of machines to increasecapacity due to limited funds

• Workers may not easily accept to work for this increasein demand

• May need to hire more workers for the 3rd shift• May need to employ more trucks for raw material and

finished goods transportation

Value Stream Mapping

0.018 days

2.87 days

2.89 days

0.62%

26*3 = 78

Value Added Time

Non-Value Added Time

Production Lead Time

Value Added Ratio

Manpower

Future State - 3 Shifts

LT : 3.4

PT : 1.3

CTMAX : 0.33

CO : 5

#Persons : 3

Supplier : A1 ChinaCapacity : 5000 units

Distribution Centre-Req/Month = 47000 units-Req/Shift = 581 units (27 working days, 3 shift) out of which 460 are of STAR-Task Time = 45 sec

50

ERP

Factory Warehouse

SMT THT

Daily

Weekly/Monthly

PO Weekly

Central Warehouse

Monthly

Daily

Size = 1400 units/day

600

20

LT : 0.9

PT : 0.4

CTMAX : 0.3

CO : 5

#Persons : 1

Slide Lineand Wave

20

LT : 2.1

PT : 1.6

CTMAX : 0.3

CO : 5

#Persons : 6

42

LT : 3.2

PT : 1.8

CTMAX : 0.39

CO : 0

#Persons : 3

ICT

12

LT : 2.5

PT : 0.8

CTMAX : 0.41

FPY : 94.2%

#Persons : 2

Lead Cutting, Touch-Up

36

LT : 9.3

PT : 6.3

CTMAX : 0.73

MDR : 12000

#Persons : 10

Building & Testing

5

LT : 2.6

PT : 1.8

CTMAX : 0.36

CO : 0

#Persons : 1

Boxing

150

Reduce changeover time to 5 min using SMED

Reduce defect rate using root cause analysis

Reduce CT to 44 sec (0.73 min) by procuring 2 more testing machines

MaterialTransfer = 460 units/shift

Once/Twice per shift

Order Management

Factory Planner

Weekly/MonthlyCall off Daily/ Weekly/ Bi-Weekly

Daily

Timeline 1.3 + 0.1 days3.4 min

0.04 days

0.9 min0.04 days

2.1 min 3.2 min 2.5 min 9.3 min 2.6 min0.09 days 0.02 days 0.06 days 0 0.32 days

Proposed VSM – Future State with 3 shifts

Old Bottleneck

•Build line and Testing Process is the bottleneck which limits UNF to achieve the STAR demand spike

•Testing processing time = 220 seconds (3.67 minutes)

•Cycle time mentioned in VSM = 1.22 minutes (73 seconds)

•Therefore, 3 testing machines in series are present (3.67 minutes / 3 = 1.22 minutes)

•Total number of testing machines to achieve Takt time = 220/45 = 4.89 ~ 5 machines

•Hence, to satisfy the Takt time of 45 seconds, TWO more testing machines need to be procured (Exhibit 7.12)

REMOVE BOTTLENECK AT TESTING PROCESS

Quality

- First Pass Yield at ICT is 94.2%

- Defect Rate found after Testing is 6.5% which leads to lot of rework

- These need to be addressed so as to ensure sufficient time is available for the production of other products

Changeover Time

- Changeover time for SMT, THT AND, Slideline & Wave processes is too high

- It should be reduced to single digit minute in order to increase overall time available for production

Pull Production

- Pull production can be ensured using Kanban technique after the reliability of machines is increased

It is intended to keep the raw material for one day in factory,

hence 1400 units can be transferred from

factory warehouse to the manufacturing

plant

460 units of Finished Goods per shift are to be transferred from

the plant to the distribution center

VA

LUE

STR

EAM

MA

PP

ING

RES

ULT

S

Production lead time = 2.89 days

Low value added ratio = 0.62 %

Type of production : Pull

Proposed VSM – Benefits and Improvements

Addition of third shift- Consequences & Measures

• One more shift is to be added to the existing two shifts

• The challenge of deciding between hiring new workers for 3rd shift and making the current employs to work overtime arises

• Though expensive, going ahead with current employs working overtime is a better option, as training the new workers would take time, which is the major constraint

• Measures should be taken in order to prevent the employs feeling exhausted due to overtime

• They should me motivated through non- monetary incentives etc.

• Extra breaks, while keeping production running (rotational)

Production StrategyArchitecture Change – Linear to Cellular

M1 M2 M3

Present Layout – “I” Shape

From Build Line

To Boxing

M1

M2

M3M4

M5

Testing

Proposed Layout - Cellular

From Build Line

To Boxing

Testing

Structural decisions - Hard• Purchase two new testing machines to

reduce the cycle timeSub-structural decisions - Soft• Managing labor- introduction of 3rd shift

by hiring new workers, contract laborers, better overtime wages

• Supplier management - add or allotcapacity to fulfill our increased demandof raw materials

• Production plan for three shifts likeinventory planning, quality assurance

• Quality can be improved byimplementing better testingmechanisms after every stage of theprocess and better programming

• Change the layout to Cellularmanufacturing to reduce defects,deploy less man power, easy changeover and setups, etc.

Strategic Decisions

Vendor Management + Waste Management

Supplier Willingness to add capacity High

Co

mp

lexi

ty o

f ad

din

g ca

pac

ity

High

Low

• Co-invest with suppliers• Assure high margins• Use Quantity flexibility

or backup agreements

• Form Join Ventures• Acquire equity stakes

• Agree on marginal price increase

• Use joint productivity improvements

• Reallocate capacity• Edge in backward

integration• Sign contracts

• Wait for self-resolution

• Use simple pull contracts

• Reallocate capacity • Engage in joint

productivity improvements

• Modularize

• To ensure production of 1350 units/day - continuous raw material supply is important• Alternate suppliers should be developed for the 110 critical parts (42 Import + 68 Local)• Collaborating with local suppliers to produce the parts that are presently imported• Use of multimodal logistics to avoid any delay in the production• Proper monitoring of the suppliers so as to communicate them without any delay whenthey are falling behind schedule

• As per the current status company needs to reallocate the extra capacity as most of thesuppliers will take time to develop extra capacity• Capital expenditure involved in reallocating capacity will be low• However in the long-run suppliers will be able to develop extra capacity and thecompany can return to single source vendor policy

Recommendations

Need to procure 2 more testing machinesTesting

Third shift has to be introduced, labor managementShifts

Current “I” shape layout needs to be changed to “Cellular” Layout

Layout

Re-allocation, re-negotiation and inclusive growthSupplier

Ad

dit

ion

al

Mea

sure

s

The new heat sink line, that is multi-functional, can be deployed to produce the required UPS

A 5S-Lean approach towards production

The SPS methodology has some prominent tools and has been implemented in various Schneider plants across the globe, we could ask for experts from other plants for its quick implementation

Moreover, it will only reinforce the Schneider mantra of “Mutual Aid” signaling, only extending the mantra from a facility-strategy to a corporate way

Pull production Design correctionChangeover Time

reductionLabor

Use in-house workforce

Already trained, low defect rate

only more overtime cost

Vendor

Alternate supplier for 110 critical

parts

Real time monitoring to

check supply gaps

Announce special rewards: To ensure motivation announce direct rewards to match daily targets, zero defects and other profit sharing programsBe specific: Set numbered targets for shifts, days and monitorFollow up: Plan in advance and see to implementation. Not every action will result in improvement, but that is OK. The goal is to create a habit of actively seeking out small wins that add up over time.

Description Data

Production 300 units/shift

Current Platform (Buildline, Slide-line, SMT) Build Line

Number of Working Days 6 days per week

Number of working hours per shift 7.25 hour = 435 min

Bottle necks final testing

Test cycle time 220 sec

Current testing capacity (for 2 shifts) 950 units/dayDefect rate 6.50%

Current capacity (machine) utilization (%) 95%

Number of existing testing machines 3Number of testing machines we can procure 2

Areas /machines which can be expanded 2 sq. m.No of workers/station 2-3/station

Time required in each step of process 56 seconds

Current layout type I-line (straight line)

Number of current workers on this product 26 per shift * 2 shifts

Time taken to produce one unit (total lead time) 24 min

Vendor

Current Supplier capacity as per regular monthly demand of 5000 unitsVendor management Single source for major commodity

Total count of bottleneck parts identified 110 (Import 42 + Local 68)

Exhibit 1

Exhibit 2