# Sim II Goldratt Handout

### Pages to are hidden for

"Sim II Goldratt Handout"

SIMULATION – PART II
Application to Inventory Management

1
A Modification of
Goldratt’s Simulation

This simulation is a modification of a simulation in
Chapter 14 of:
The Goal
by Eliyahu Goldratt
By the way, I highly recommend to you this novel
about a plant manager’s quest to improve operations
at his plant to prevent its closure.

2
Learning Objectives

Introduce the concept of Simulation.

Understand the impact that Variance
has on process flow, and then
understand how to manage this impact.

3
Overview
PRODUCTION LINE
(Amount WS "moves" to WIP on WS's right) = MINIMUM [ (WIP on WS's left) , (WS's capacity) ]

WS 1                   WS 2                     WS 3                   WS 4                   WS 5                   WS 6
Capacity               Capacity                 Capacity               Capacity               Capacity               Capacity

Raw                                                                                                                                        Finished
WIP 1-->2               WIP 2-->3               WIP 3-->4              WIP 4-->5              WIP 5-->6
Material                                                                                                                                      Goods
(unlimited                                                                                                                                   (unlimited
supply)                                                                                                                                     demand)

WS = Work Station            WIP = Work in Progress

4
One Work Station
What if there is just ONE Workstation?

WS 1                                      WS 1
Capacity                                  Capacity
Die                                       H=3
Face                                       T=4
OR
Raw                   Finished            Raw                   Finished
Material                 Goods            Material                 Goods
(unlimited              (unlimited        (unlimited              (unlimited
supply)                demand)            supply)                demand)

What is the Work Station’s capacity (i.e., the
average output of Finished Goods per period)?

5
Line #1 (Base Case)
LINE #1 (Base Case)
WS 1                   WS 2                   WS 3                   WS 4                   WS 5                   WS 6
Capacity               Capacity               Capacity               Capacity               Capacity               Capacity
Die                    Die                    Die                    Die                    Die                    Die
Face                   Face                   Face                   Face                   Face                   Face

Raw                                                                                                                                      Finished
WIP 1-->2              WIP 2-->3              WIP 3-->4              WIP 4-->5              WIP 5-->6
Material                                                                                                                                    Goods
(unlimited                                                                                                                                 (unlimited
supply)                  0                      0                      0                      0                      0                    demand)

What is your prediction of the average output of Finished Goods?

6
Initializing the Simulation

Appoint one member of the team to be the team’s
“Accountant”. The Accountant will enter data on the
Recording Form.

Place the initial inventory into each WIP location.

7
The Steps of One Period
in the Simulation
Step 1
The person working at “WS 1” rolls a die (or flips a coin) to determine the capacity of “WS 1”.
From the unlimited supply of “Raw Materials”, move to “WIP 12” a quantity equal to the
capacity of “WS 1”.
On the Recording Form, enter the quantity moved.

Step 2
The person working at “WS 2” rolls a die (or flips a coin) to determine the capacity of “WS 2”.
From “WIP 12”, move to “WIP 23” a quantity equal to the minimum of the inventory in
“WIP 12” and the capacity of “WS 2”.
On the Recording Form, enter both the quantity moved by “WS 1” and the remaining inventory
in “WIP 12”.

Steps 3, 4, 5, & 6
For “WS 3”, “WS 4”, “WS 5”, & “WS 6”, proceed as in Step 2, until “WS 6” has moved units to
“Finished Goods”. Begin the next period by returning to Step 1.
8
Summary of Your Simulations
of Line #1

Go to Excel Workbook

9
Summary of My Simulations of
Line #1 (Base Case)
Line #1: Output
(average of 10,000 averages of 24-period runs)

4.00
Average Output
3.50

per Period
3.50                3.16
2.94
3.00                                          2.78                              Line #1
2.65        2.53
2.50

2.00
WS 1        WS 2         WS 3     WS 4          WS 5       WS 6
Work Station

Line #1: WIP
(average of 10,000 averages of 24-period runs)

20.00
at End of a Period

14.33
Average WIP

15.00                                                                           Line #1
10.00
5.27
5.00                 3.21         2.39          1.90        1.56
0.00
WIP 1-->2    WIP 2-->3    WIP 3-->4     WIP 4-->5   WIP 5-->6   TOTAL

WIP Location

10
Improvements

How can we increase the Line 1’s average
capacity (i.e., output of Finished Goods)?

11
Lines #1, #2, & #3
LINE #1 (Base Case)
WS 1                   WS 2                    WS 3                   WS 4                   WS 5                   WS 6
Capacity               Capacity                Capacity               Capacity               Capacity               Capacity
Die                    Die                      Die                   Die                    Die                    Die
Face                   Face                     Face                  Face                   Face                   Face

Raw                                                                                                                                       Finished
WIP 1-->2              WIP 2-->3               WIP 3-->4              WIP 4-->5              WIP 5-->6
Material                                                                                                                                     Goods
(unlimited                                                                                                                                  (unlimited
supply)                  0                      0                       0                      0                      0                    demand)

LINE #2 (More WIP)
WS 1                   WS 2                    WS 3                   WS 4                   WS 5                   WS 6
Capacity               Capacity                Capacity               Capacity               Capacity               Capacity
Die                    Die                      Die                   Die                    Die                    Die
Face                   Face                     Face                  Face                   Face                   Face

Raw                                                                                                                                       Finished
WIP 1-->2              WIP 2-->3               WIP 3-->4              WIP 4-->5              WIP 5-->6
Material                                                                                                                                     Goods
(unlimited                                                                                                                                  (unlimited
supply)                  3                      3                       3                      3                      3                    demand)

LINE #3 (Lower Variance)
WS 1                   WS 2                    WS 3                   WS 4                   WS 5                   WS 6
Capacity               Capacity                Capacity               Capacity               Capacity               Capacity
H=3                    H=3                     H=3                    H=3                    H=3                    H=3
T=4                    T=4                     T=4                    T=4                    T=4                    T=4

Raw                                                                                                                                       Finished
WIP 1-->2              WIP 2-->3               WIP 3-->4              WIP 4-->5              WIP 5-->6
Material                                                                                                                                     Goods
(unlimited                                                                                                                                  (unlimited
supply)                  0                      0                       0                      0                      0                    demand)

12
Summary of Your Simulations
of Lines #1, #2, & #3

Go to Excel Workbook

13
Summary of My Simulations
of Lines #1, #2, & #3
Average Output per Period                              Average WIP at End of a Period
WS 1 WS 2 WS 3 WS 4 WS 5 WS 6                WIP 1-->2 WIP 2-->3 WIP 3-->4 WIP 4-->5 WIP 5-->6 TOTAL
Line #1 3.50 3.16 2.94 2.78 2.65 2.53                  5.27      3.21      2.39      1.90       1.56    14.33
Line #2 3.51 3.26 3.14 3.08 3.03 3.01                  6.30      4.30      3.69      3.38       3.14    20.81
Line #3 3.50 3.40 3.34 3.30 3.26 3.23                  1.48      0.90      0.65      0.51       0.41    3.94

Comparison of Lines #1, #2, & #3: Output                                             Comparison of Lines #1, #2, & #3: WIP
(average of 10,000 averages of 24-period runs)                                       (average of 10,000 averages of 24-period runs)

4.00
Average Output

25.00

at End of a Period
per Period

3.50                                                                                                                                                           Line #1
Line #1
Average WIP
20.00
3.00                                                                                                                                                           Line #2
Line #2                           15.00
Line #3
Line #3                           10.00
2.50
5.00
2.00
0.00
WS 1 WS 2 WS 3 WS 4 WS 5 WS 6                                                       WIP 1-->2   WIP 2-->3   WIP 3-->4   WIP 4-->5   WIP 5-->6   TOTAL

Work Station                                                                                       WIP Location

14
1000 Work Stations?

For the Base Case, suppose that, instead of only 6
Work Stations, there are 1000 Work Stations.

What do you predict about the process’s capacity?

15
Conclusions
When a process has components whose capacities vary
from period to period, it is a mistake to compute the
process’s capacity using only the averages of the
components’ capacities.

Instead of averaging out, the variations in the
components’ capacities propagate through the process in
a successively negative manner and result in the
process’s capacity being significantly less than the
components’ average capacities.

Although increasing WIP will increase the process’s
capacity, a better alternative is to decrease the
variances in the capacities of the process’s components.
16

DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
 views: 29 posted: 2/18/2012 language: English pages: 16