Recall that the initial run of this production system yielded a capacity utilization for WS-4 of 119.05%. The system as currently designed will not be able to fulfill a demand of 10 airplanes per week.
Therefore, a reduction of utilization of at least 19.06% is required to make the system run. However, following the discussion on queue time above, a utilization near 100% will create long cycle times for the Airplane Assembly Company. Clearly, a utilization away from 100% is much better for performance. But how far away? This will be explored later, but first, the company must decide how it will increase capacity for this work center.
Capacity Levers
The AAC has two levers it can pull to increase capacity for WS-4. The first lever is to increase the time available for a particular process center. This can be done by adding another work center, adding another shift, or increasing the length of a shift. All three of these require financial investment in labor and/or equipment.
Another way to increase capacity is to decrease the time used by the process center. This can be done in a few ways:
- Process improvement effort to reduce process and setup times and improve scrap rates
- Redistribute workload to another workstation
- Outsource some of the demand
Option 1 requires time and team effort to analyze and improve a process. Option 2 is quick and easy as long as the work being moved can be executed on equipment located at other workstations. Option 3 works well when it is cheaper or faster to purchase the products than to make them.
For this discussion, capacity utilization for WS-4 will be decreased by redistributing workload across workstations 1, 2, 3 and 4. To meet demand, capacity utilization for WS-4 needs to drop below 100%. To accomplish this, 3.217 hours of work needs to be redistributed to other workstations. In this new process, process time for Install Fuselage has increased to 8.417 hours, Install Wings has been increased to 16 hours, Install Seats has been increased to 16 hours and Install Engines has been decreased to 16.7828 hours. The new capacity utilization is as follows.
Now, the utilization of WS-4 is at 99.9% and the system should, on average, be able to meet the demand of 10 airplanes per week.
Will this be an optimal system for the AAC? Based on the AAC’s objectives, the answer is no.
Even though utilization has been brought down below 100%, the system is still subject to very long cycle times and variability. Recall from the description above that capacity utilization drives queue time. As utilization approaches 100% queue time becomes very large and therefore cycle times become very large. In fact, with a utilization of 99.9%, cycle times for an airplane increase to over 1,700 days! In reality, as CT grows, management adds capacity to lower utilization. Utilization would never begin to approach this point, or if it did, customers would stop buying from this provider because of the cycle times.
Recall that capacity utilization measured here are averages, meaning that sometimes they will be larger and sometimes smaller. Any variability and utilization can easily tip over 100%. Capacity utilization must come down further.
In this new process, process time for Install Fuselage has increased to 12.917 hours, Install Wings has been decreased to 14 hours, Install Seats has been decreased to 14.5 hours and Install Engines has been decreased to 14.7828 hours. The new capacity utilization is as follows.
Now, cycle time for an airplane has been reduced to 43 days. This enables the AAC to meet their lead time target of 60 days, with a nice buffer in the event of any additional variability.
