Economics In Action


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The manager of Quality Parts Company has been contemplating installing an automated ordering system to help control inventories and to "keep the skids filled." (She feels that two days of work in front of a workstation motivates the worker to produce at top speed.) She is also planning to add three inspectors to clean up the quality problem. Further, she is thinking about setting up a rework line to speed repairs. Although she is pleased with the high utilization of most of her equipment and labor, she is concerned about the idle time of the milling machine. Finally, she has asked the industrial engineering department to look into high-rise shelving to store parts coming off machine 4.

OPERATION NUMBER AND NAME OPERATION TIME (MIN) SETUP TIME (MIN)

Milling for Model Z 20 60
1. Lathe 50 30
2. Mod. 14 drill 15 5
3. Mod 14 drill 40 5
4. Assembly step 1
Assembly step 2
Assembly step 3 50
45
50
5 Inspection 30
6. Paint 30 20
7. Oven 50
8. Packing 5

Table 1. QPC Operations and Set-up time
The Manager of QPC was looking to solve several problems within the work flow of the company. One such improvement contemplated was the hiring of three inspectors to clean up a quality problem.
In the JIT ((Just-in-time) Integrated activities designed to achieve high volume production using minimal inventories of raw materials, work-in-process, and finished goods.) model, one of the elements for reducing waste is "Quality at the Source." Quality at the Source means do it right the first time and, when something goes wrong, stop the process or assembly line immediately. Factory workers become their own inspectors, personally responsible for the quality of their output. Workers concentrate on one part of the job at a time so quality problems are uncovered. If the pace is too fast, if the worker finds a quality problem, or if a safety issue is discovered, the worker is obligated to push a button to stop the line and turn on a visual signal.

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People from other areas respond to the alarm and the problem. Workers are empowered to do their own maintenance and housekeeping until the problem is fixed. Using this methodology, the need to hire three inspectors would be eliminated.
Establishment of quality circles can also aid in reducing quality problems. In quality circles, employees meet regularly to discuss their jobs and problems and attempt to devise solutions.
The JIT model leaves no room for surplus or safety stock. No safety stocks are allowed because if you cannot use it now, you do not need to make it now; that would be waste. Hidden inventory in storage areas, transit systems, carousels, and conveyors is a key target for inventory reduction.
The other six elements that address elimination of waste are:
1. Focused factory networks.
2. Group technology.
4. JIT production.
5. Uniform plant loading. (Chase, Jacobs &, Aquilano, 2004, Chapter 11)
6. Kanban production control system.
7. Minimized setup times.

Physical workflows in the plant could also be improved. By swapping the placement of machines 1 and 3, a cleaner workflow could be established. Also by adding a door between the assembly line and paint shop near the offices, the distance gizmos had to travel between skids 7 and 8 could be reduce by approximately 75%, thus increasing efficiency.
Another problem was the excess product produced by machine four. The manager had contemplated purchasing high-rise shelving for the surplus, but, with a five minute set-up at machine 4, a kanban system (Kanban and the kanban pull system are inventory or production control systems that use a signaling device to regulate flows) could be set up between machine four and the assembly department step 9, (see figure 1) eliminating the need for high-rise shelving for storage of parts coming from machine 4. This system could act as a signal for machine 4 operations signaling them when they have reached an upper production limit and to cease production. It could also signal the operator when they need to restart production to replenish needed supply.
Under-utilization and over-utilization of capacity are controversial features of JIT. Conventional approaches use safety stocks and early deliveries as a hedge against


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