THROUGHPUT TIME REDUCTION: TAKING ONE'S MEDICINE

Managing throughput time and its relation to work-in-process (wip) inventory and customer service is the focus of this paper. This research combines theory, simulation results, and the analysis of corporate data in an effort to address the issues associated with how one company (Eli Lilly) managed a reduction in their throughput times and an improvement in their delivery reliability. The results for this company suggest that production control decisions—expediting and de-expediting—can lead to a vicious circle of decisions, which in turn can lead to increased levels of WIP inventory and higher and more unpredictable throughput times.     

A COMPARISON OF RULES FOR ALLOCATING SETUP-REDUCTION INVESTMENTS IN A CAPACITATED ENVIRONMENT

This paper builds on a recent empirical study of the setup-reduction process that suggests setup-reduction proceeds through three major stages and that each stage is dominated by a particular type of investment function. Specifically, it examines the question of how to best prioritize investments during the stage that emphasizes standardizing setups across a work center. We compare different investment-allocation rules in a multi-item, capacity-constrained, dynamic demand environment under a variety of cost, demand, and investment assumptions. This analysis shows that significant differences in benefits can be achieved depending on the way setup-reduction investments are prioritized.     

SETUP REDUCTION AND MACHINE AVAILABILITY

This paper is an extension of Billington, who used the framework of the economic production quantity (EPQ) to model setup cost reduction. In the present paper, we use the EPQ model as a starting point to investigate the nature of setup costs and the effect of setup time reduction on the increase in available capacity. Reducing setup is vital to a company's success because a lengthy changeover of machinery is expensive: it demands long production runs to justify its cost, and these, in turn, lead to excessive inventory and to a slow response to customer needs. As in Billington, setup reduction is modeled as a function of an annual amortized investment. The paper examines the behavior of the setup time, the inventory cost, the lot size, and the freeing up of machine time in the face of a capacity constraint. A solution algorithm is provided to find setup times that minimize the sum of setup and holding cost, subject to a constraint on machine availability. The analysis sheds light on the true nature of setup cost and on the opportunity cost of not reducing setups. In the constrained optimization, the Lagrangian multiplier gives an estimate of the marginal value of adding one time unit of machine capacity, or, alternatively, of reducing one unit of setup time.     

MODELS FOR OPTIMAL LEAD TIME REDUCTION

Most inventory and production planning models in the academic literature treat lead times either as constants or random variables with known distributions outside of management control. However, a number of recent articles in the popular press have argued that reducing lead times is a dominant issue in manufacturing strategy. The benefits of reducing customer lead times that are frequently cited include increased customer demand, improved quality, reduced unit cost, lower carrying cost, shorter forecast horizon, less safety stock inventory, and better market position. Although the costs of reducing lead times in the long term may be relatively insignificant compared with the benefits, in the short term these costs can have a significant impact on the profitability of a firm. This article develops a conceptual framework within which the costs and benefits of lead time reduction can be compared. Mathematical models for optimal lead time reduction are developed within this framework. The solutions to these models provide methods for calculating optimal lead times, which can be applied in practice. Sensitivity analysis of the optimal solutions provides insight into the structure of these solutions.     

Making Employee Involvement Work: Cooperative Goals and Controversy to Reduce Costs

Organizations are involving employees to helpreduce costs to succeed in the intensely competitivemarketplace. However, many researchers have beenskeptical of the value of participation. This study uses Deutsch's theory of cooperation and competitionto examine the critical mediating variable of theinteraction as employees discuss how to reduce costs.Results of structural equation analyses on datacollected from interviews when employees participated inreducing costs indicate that cooperative goalscontributed to constructive discussion among employeesthat resulted in productive work and strongerrelationships, which in turn led employees to be committed toreducing costs. Competitive goals were negativelycorrelated with dynamics and outcomes. These resultssuggest that researchers and managers can agree that employee involvement has potential butemployees need cooperative goals and skills to discussissues open-mindedly and constructively to realize thesebenefits.     

REDUCING FLOW TIME IN AIRCRAFT MANUFACTURING

The assembly of aircraft is a labor-intensive process that exhibits a significant learning-curve effect and that requires long flow times and costly work-in-process inventories. This paper describes the production context, the cost of flow time in this context, and some of the causes for the long flow times. We then develop an argument for a firm to use improvements in labor productivity to reduce flow times. Boeing has implemented the recommendations from this research and has obtained significant benefits from reducing flow times.