Sunwind Ab Case
2) Draw the schematic flow diagram for Sunwind and all Volvo plants. (Draw at abstract level not detailed level). Provides detail of distances and demand (quantity based on 1987 forecast) flow. Ans) Demand of Sunwind is 1250/week = 1250*45 = 56250 units The following table gives us the demand of each plant yearly for the year 1985 Plant| | Torslando | Kalmar| Ghent| Total| Year| 1985| 17050| 4525| 12090| 33665| | %| 50. 65%| 13. 44%| 35. 1%| 100%| Year| 1987| 32919. 947| 8736. 819| 23343. 23| 65000| Depending on the percentage of share of each plant of the total in 1985, the same percentage is used to calculate the demand of each plant in 1987, as we know the total production of Volvo from all the plants put together in 1987. 3) What are the challenges facing Sunwind? Do they need a change in strategy by Sunwind? Why? Ans The challenges faced by SUNWIND are as follows : The main problem is to meet the increase in the demand from Volvo which is around 650 per week in 1985 to 1200 per week in 1986 * There is also a problem of meeting the quality of the finished products supplied by them, some of the machines like gluing machine had proved particularly troublesome and has increased rejects. * Some other bothering issues would be the off-spec plywood blanks received from Finnish supplier. * The rejection of the batches by Volvo as they haven’t met the quality constraints imposed by them. The demand for the finished goods is around 1400 units/week while the ideal capacity of plant excluding wastages is only 1250 units/week; this mismatch is of a greatest concern for the Sunwind in the present scenario. * The trend of the major manufacturers like Toyota who are working on “Less” suppliers’ model to increase the efficiency is of a big threat as Volvo might even persuade it. * The system of JIT which is being implemented recently by the Volvo group, the Belgian manufacturer is turning out to be major competitor to Sunwood on this perspective. The batch size if we see for different operations varies from 2500 to 500, such a huge amount of batch size might lead to having no control over the quality issues i. e. in case of any damage done its hard to find out and the who batch has to be set off which is of a huge loss for the plant. * This large batch size might also increases the MLT hence leads to a lot of inventory which has a lot of adverse effects. For the other part of the question whether they need to change the strategy of the Sunwind or not, yes they have to change indeed to so as to protect themselves from Volvo by meeting their demand needs.
At the same time the technological aspects of Sunwind are at a ground level, they need to compete with the competitors and have to go for new machinery. Right now they are not following the JIT method while Volvo has gone for it, In that case to meet the Volvo demands it might have to put a huge pile of raw materials instead if it makes itself a JIT system it could save itself from one of the competitors. Their batch size as mentioned before is also very large, hence they need to change this strategy too. There is a quality issue also being faced hence they a need a new strategy which can address all these issues in a very efficient way. ) What are the benefits to implement JIT for Sunwind? How Volvo will get benefited if Sunwind goes for JIT production and delivery? Ans) The benefits to implement JIT for Sunwind are 1. The main advantage would be saving on inventory i. e. there is no need to spend a lot of money in storing the inventory for huge number of days until it is used instead JIT takes care of inventory only when needed hence there is no idle inventory. 2. The JIT system will take care of the batch size this will help increasing the frequency and also easy transportation and on time as the batch size is small 3.
In case of any defects the wastage would be in a small scale 4. The quality issue can be addressed, if we have the batch size to be small there is an every chance to make strict quality checks and reject the rest. 5. This helps in cutting the waste by cutting the excess capacity or inventory and removing the non value-added activities. 6. This will develop a close relationship with their suppliers, in a way they will get suppliers as a partner in the venture. 7. This will also encourage the suppliers to get themselves placed in and around the Sunwood plant so as to deliver the raw materials on time. 8.
This system gets an in-plant representative who will be onsite in Sunwind on behalf of the suppliers whose main purpose is to plan and schedule the replenishment of the materials from the supplier hence even the forecasting is also taken care by him. 9. He also helps in designing ideas to help reducing cost and improve manufacturing processes and managing production schedules for suppliers, materials contractors and other subcontractors. 10. It also provides the best organizational structure needed to improve the supplier coordination by integrating the logistics, production and purchasing processes together.
The advantages of the Volvo if Sunwind go for JIT is same as the ones enjoyed by Sunwind on behalf of their supplies * This will develop a close relationship with Sunwind. * This system gets an in-plant representative who will be onsite in Volvo on behalf of the Sunwind whose main purpose is to plan and schedule the replenishment of the materials from the supplier hence even the forecasting is also taken care by him. * He also helps in designing ideas to help reducing cost and improve manufacturing processes and managing production schedules for suppliers, materials contractors and other subcontractors. It also provides the best organizational structure needed to improve the supplier coordination by integrating the logistics, production and purchasing processes together. 6) How many varieties of products does the Sunwind manufacture for Volvo? How does this information help to design production and delivery? Ans) Sunwind was the only supplier for the floorlid for the 5-door 700 series station wagon. These were offered in several carpet/ colour combinations. The lid comprised of 4 separate items – front panel, rear panel, left panel and the right panel.
The carpeting could be any of four different colour choices – beige, blue, black and burgundy. The carpeting could be either needle felt or tufted. Thus 32 part numbers were needed to specify a particular part/ colour/ carpet combination 4 parts x 4 colours x 2 carpets = 32 This data of the variety of products being manufacture will give us an advantage of designing the production through JIT. One of the process considerations in lean systems “Uniform workstation loads “ comes into the picture. This in turn would decrease the big lots there by decreasing the average inventory level.
We can follow the production model of “heijunka” which is the levelling of production load by both volume and product mix. Using this what we can do is to form batches in a way so that each batch gives us 32 varieties of different materials instead of having the same variety in a batch. This would help workers to get acquaintance of all the products and also though there is any wastage in a batch the other batch can cover up for it, if a batch has all the products of same kind it would be a problem if there is any defect or quality issues.
Thus this data of the variety of products gives us the division of batches in an efficient way which reduces the extra non value added costs. 8) Provides details of some critical characteristics of one of the Volvo operations (Customer interface point) between Volvo and Sunwind. How does may this information be helpful to get advance intimation to prepare the next JIT delivery? Ans) Sunwind’s interface with Volvo parts at the order placement. Every 4 weeks Volvo send an order form indication the requirement over a 60 week planning horizon.
This was broken into seven 4 week periods and one 32 week period. The next interface was at the loading stage of the shipping process. Volvo mandated that it suppliers use Volvo’s wholly owned transport company, use standard containers and ship one part per container. Sunwind ordered transportation and empty containers as required. Post shipping, the next interface would be at the inspection upon receipt of parts by Volvo. If the randomly chosen container did not pass the stringent quality control criteria, the entire shipment would be rejected and the supplier would be called.
Sunwind could then either replace the entire shipment ot come to Torslanda to check the rejected shipments and replace the defective parts. Rejected parts were either scrapped or sent back to the supplier at the supplier’s expense. The fault would be officially notified and the next shipment would be subjected to 100% inspection. The interface points are at various stages in the part procurement process. Continuous communication between supplier and vendor enables updation of records on both ends and real time flow of information.
The 4 week periodical order placement can help Sunwind plan its production such that they complete production just in time for shipment and the shipment occurs just in time for assembly at Volvo. Shipping is done through Volvo’s own transport system. Knowledge of the production schedules of Volvo in advance will enable Sunwind to request transport and containers in advance so that they arrive just in time for loading. This makes for efficient operations as the production can then be planned to meet the shipment schedule.
Inspection procedure is well defined and knowledge of this can help Sunwind optimize its production to avoidrejection upon shipment. Rejection of shipments can be costly and they run the risk of not being able to meet the just in time production schedule. 9) How KANBAN, facilitator of JIT inventory Design be used for Sunwind operations? Show few sample calculations. Ans) In order to avoid the stock outs or overproduction Kanban can be used as a facilitator of JIT system. According to Kanban system, there is a card which contains the requirement or the supply of units written on it.
Once if the card reaches the supplier depending on the requirements the desired date the supplier manufactures or prepare the goods and then they will be put in the same box with the card in place. The same process is done when the units reach the ordered company it will crosscheck the number of units in the box with the required in the card, once it matches it will then proceed to the operations. The best use of this comes when the manufacturing process has lots of operations involved in it with different batch sizes and cycle time and lead time.
For example if we take Sunwind it has 8 operations with different batch sizes hence by using this it can send the Kanban cards at will according to the lead time to the respective suppliers and they can receive the desired goods right on time and can verify it also accordingly. The basic formulae to calculate the number of Kanban cards is Kanban quantity = Daily Demand x Lead time (in days) x Safety factor Container quantity Here the daily demand can be calculated as we know that the demand per week is 1250 and there are 5 working days per week thus the daily demand is 250 units
The lead time here as it is not mentioned clearly anywhere in the case we have taken the sentence” the production is planned two weeks before”. Using that we can get the lead time as 2 weeks i. e. 14 days (including working and non-working days) Safety factor: we are taking a standard 10%(assumption) hence the whole quantity is multiplied by 1. 1 Container quantity is given in the case as 20 units Hence Kanban quantity = 250*14*1. 1 = 192. 5 20 Thus using this estimate this will give us a forecast of how many Kanban cards are in place for the JIT beforehand and would make the process efficient enough. 1) Repeat Q10 for Volvo’s Kalmar and Ghent plants. Write only short discussion and detailed calculation and diagram is not expected as in Q10. Ans) The distance plays a major role when it comes to Kalmar and Ghent plants as for us to make a JIT delivery of 4 times a day, the transportation including all logistics plays the deciding factor. Similarly if we look into this case the distances are shown below Save to Kalmar —– 179. 82 Miles or 289. 39 KM (Source : http://www. mapcrow. info) Save to Ghent —– 1284 KM (source : Google Maps)
For both the plants if we see there is no feasibility to do the JIT supply 4 times a day as the distance is so large that the transportation becomes a problem and even though if pains are taken and the things are meeting the deadline, the efficiency decreases as this will in no way an add on for the current existing process in terms of the ROI ( Return on Investment ). Q 5 ) Draw the process flow diagram of Sunwind operations. Perform capacity analysis Sunwind’s operations. Is the capacity at plant sufficient to meet the requirement (Demand and any other) of all VOLVO plants?
How would you interpret the capacity calculations? (Consider a batch size and process time information in Exhibit 8). What is the Manufacturing Lead time? Do you think it is right or a long MLT in line with JIT requirement? If it is short or long, what is cause of such short/Long MLT? Ans. Operation 2- Painting Cycle time: 1. 15 min Operation 3&4-batterns, riveting inserting studs Cycle time: 6. 85 min mins Operation 1-Shaping plywood panel Cycle time-2. 8 min Raw material (plywood) Operation 7- Attaching metal and carpet fixtures
Cycle Time: 2. 2 min Operation 6-Gluing Carpet Cycle Time: 4. 25 min Operation 5-Mounting hinges Cycle Time: 0. 95 min Operation 8-Assembly of left and right units Operation 3 is the bottleneck with maximum cycle time of 6. 85 mins. So it becomes the cycle time for the entire process. The working time for a personnel/week = 40. 7 hours. So, effective working hours/day= 8. 14 hours. Therefore, total no. of units produced/ day=8. 14*60/6. 85= 71 units. ( considering 100 % capacity utilisation) So at 100 % utilization,output/week= 71*5= 355 units/ week
Monthly production= 1420 units. Starting from January 1985 Volvo’s maximum demand per month till July was 1115 units. So Sunwind was able to meet the demand . In August 1985 when demand of Volvo’s three plants surmounted to 4000 units / month Sunwind was unable to supply the required quantity. In 1986 when the forecasted demand of Volve stands 1387 units/ week present capacity of Sunwind ( 355 units/ week) is not sufficient to meet the demand . Direct labor content ( parts fabrication + operations 1-9 ) =18. 8+25. 2+5. 15= 49. 15 mins/ shirt (excluding set up time)
If we consider batch sizes of 500 (operation 6 has the minimum batch size of 500) the changed cycle time for each operation are as follows: Operation 4 with zero set up time still remains the bottle neck time and hence the cycle time. So the batch size does not influence the process cycle time. To meet the average forecasted demand of 1400 units/week in 1986 the cycle time of the entire process should be 1. 4 min assuming the plant operates at 80 % efficiency level. Since different operations have different WIPs( according to batches as shown below):
Manufacturing lead time is given by MLT= WIP * Cycle time At current plant capacity, considering lids are produced in batches of 500 MLT= (2500+1500+1000+1500+500+500)* 6. 85 = 51375 mins =856. 25 hrs= 21 weeks (considering working hours of 40. 7 /week as bottleneck operation is run in 1 shift only) The lead time is very high and the primary cause for this is large lot size used for production. A high MLT cannot go hand in hand with JIT production. The JIT philosophy is timely delivery of customer order . To meet the delivery deadline for a JIT e need to start the production as soon as the order is booked. For this we need to maintain a minimum Manufacturing Lead Time as products are produced in batches. Q 7) Should Lars Olav were to design a JIT programme at Sunwind, what should be its elements? Give details about the current status and future requirement of few essential ingredients of JIT/Lean elements requiring improvement/change in Sunwind. Please suggest/show your improved/changed version of the Sunwind operations process to meet the requirement (Demand and any other) to all Volvo plants.
Hint: You may like to meet the new demand (1987 forecast) by balancing the capacity of Sunwind operations. Ans. The elements of a JIT programme would be as follows: 1) Make to order strategy and not make to stock. This will reduce over production which not only creates excessive lead times and inventory but also makes it difficult to detect defects. 2) Reduction of inventory level so as to identify quality issues more promptly and effectively thereby correcting at source instead of creating rejections at end. ) Setting a plant layout such that the distance between adjacent workstation is minimum. This will reduce material handling cost and time. Excessive movement of products can at times cause damage and deterioration of product quality. 4) Manufacturing lead time to be minimum so as to reduce waiting time for starting production when an order is booked. 5) Close ties with supplier making sure they are located in close geographic proximity in order to promote strong partnerships and better synchronise product flows.
Current status and requirements for adopting JIT in Sunwind: 1) High raw material and WIP inventory level. High batch sizes don’t allow problems to surface immediately. This hinders quality check at source. Few of the quality control procedures were followed in practice. Processes were not monitored formally. Defects were inspected by customers after delivery instead of identification in-house. Defective materials were rejected by eliminating the problem but no summary statements were available in Sunwind concerning the rejects.
Sun Wind needs to reduce its inventory level and present MLT so as to identify defects at source thereby reducing cost as rejection rate comes down. 2) Presently in Sun wind due to extended delivery lead time of some items (eg. Carpeting) the purchasing department uses a 3-6 months planning horizon. On the contrary the production planning department focuses on first four weeks of delivery schedule which unnecessarily increases the inventory level. As a result raw material inventory unnecessarily goes up.
Sun Wind should ask it supplier to reduce this lead time as it is planning to go for JIT. The benefits of a successful JIT can only be realized if your inventory levels are low. Considering suppliers as partners in venture can build long term profitable relationship wherein there is a win-win situation for everyone. 3) Sun Wind is presently operating in moderate batches which is giving a very high Manufacturing lead time which is not acceptable for a JIT . To meet the increased demand for Volvo Sunwind needs to improve its cycle time as well as reduce its MLT by reducing batch size.
Only operation 6 has a significant set up time which has to be reduced for going to JIT by enacting machine controls or preparing for changeovers while a job currently in production is still being processed. 4) In Sunwind the workstation load at different operations is not uniform. The cycle time at different processes vary considerably. As a result there is inventory pile up at workstations with high cycle time. Capacity planning and line balancing are to be used to meet the changed requirement of Volvo plant in 1987. In 1987, Volvo needs 65000 units of 700 series 5-door station wagons.
To meet this demand Sunwind needs to produce =65000/52= 1250 units/week. At current capacity Sunwind can only produce 350 units/week. To meet the demand Sunwind needs to produce=1250/5=250 units/day. We propose change in number of workers and number of shifts to meet the required demand(considering Save plant of Sunwind alone will be producing for all Volvo plants) as shown below. Present Situation Proposed Capacity Planning and line balancing to meet new requirement In this changed line balancing the bottleneck operation is Operation 6 with a cycle time of 2. 83 mins.
Since operation 6 has got maximum set up time and Sunwind is producing 32 combinations of part/color/carpet, we assume Japanese concept of heijunka for a JIT, a batch of 32 each wherein all the varieties will be there per batch. Assuming a reduced set up time of 15 mins /batch for JIT achieved by machine control , we get a cycle time of 2. 83+0. 47= 3. 3 mins. Since this operation is run for two shifts the daily production will be = 2*8*60/3. 3= 290 units/day. Operation 7 which has a lower cycle time becomes the bottle neck as the process is run for 1 shift only. No of units produced /day = 8*60/1. 3=262 units. Hence we can say the actual bottleneck is operation 7 with a cycle time of 1. 83 mins which run for single shift. Hence this becomes the cycle time for the entire batch process. To meet this requirement 3 additional workers at Sun wind’s Save factory are needed as per changed capacity planning. In this scenario of JIT an operational efficiency of above 95 % will be needed to meet the demand requirement of 250 units/day or 1250 units/week (assuming 5 days week) If each batch of JIT is 32 units, in that case per day no of batches produced will be =250/32=7. Hence a JIT will shorten the Manufacturing lead time thereby reducing the inventory level and lumpy requirements on different workstations. This will help identify defects immediately and strengthen quality control measures and help achieve higher efficiency. MLT for JIT= WIP* Cycle time = 32*6*1. 83=351. 4 mins=5. 86 hours. Q 10 Assuming that Sunwind is now ready for JIT delivery (hope so, based on your Q1 to 9 analysis and suggested improvement), how to synchronize the delivery of product 4 times a day to Volvo’s Torslanda Plant? For this you may require the one day demand of Torsdland plant) Ans. The actual demand of 5 door model 700 for Volvo’s Torslanda Plant is 1985 is 17050. The total demand for Volvo isn 1985 is 33665. So Torslanda plant produced around 51 % of total Volvo’s production. Considering the same percentage production of total Volvo’s requirement, by using the overall forecasted demand of Volvo plant in 1986, Torslanda plant will require to produce =51% of 62400= 31824 units annually.
Hence per week demand is calculated to be=31824/52= 612 units. Since Sunwind runs 5 days a week, daily production requirement will be=612/5= 122 units. Considering new Capacity planning and line balancing for Sunwind as in Q7, our cycle time is 1. 83 mins ( bottleneck process 7 running for single shift). As the bottleneck operation is for single shift, in order to synchronise the delivery of products 4 times a day to Volvo’s Torslanda plant we need to have an MLT which will be atleast= 8*60/4= 120 mins.
Considering the previously arrived cycle time of 1. 83 mins in Q7 There will be WIP of equal size at 6 different work stations (Operation 1 to 7) where processing will be done in batches. Hence maximum batch size that can be allowed so as to make a just in time delivery of new order booked 4 times a day =120/(6*1. 83)=11 Lot sizes of 11 units if produced in JIT system can enable us to deliver products 4 times a day, if the product criteria and combination is known beforehand.