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MICSS Run With Under Full Drum-Buffer-Rope Methodology

Introduction
The reader should go through this run after going through the previous A-WinningCase-Analysis run. The reader is also advised to read Chapter 2 again with emphasis
on the Drum-Buffer-Rope (DBR) section.
In the full DBR run the capacity constraint (M4 as the reader should already know) is
fully scheduled and the materials that go through the constraint are released based on
its schedule. This significantly smoothes the load on the shop.
Another value is getting prior notification that orders might be late. Based on the
finite-capacity schedule of the constraint it is possible to predict when an order might
be late. As explained in Chapter 2 the DBR schedule tries to provide full shipping
buffer time from the predicted time the last part of the work order finishes processing
by the capacity constraint resource (CCR) until the due date. When the CCR schedule
for a certain order is pushed forward in time so less than half of the shipping buffer is
provided (due to too much contention), the order is noted as bound to be late.
This warning that an order might be late because the CCR is scheduled too late is
included, in the simulation, in the red warning.
The initial policies for this run are certainly impacted by what we have already
learned and the desire is certainly to do even better.

The DBR Simulation


Initial Policies
After you call the simulation and bring the erpbook scenario up, click on the Session
menu, then on Load policies, and double click on erp-dbr.plc.
You should get the following window:

The question refers to the schedule of M4. What should the simulation do when the
sequence cannot be performed by M4 because of lack of materials? Should it wait for
materials or do whatever is possible? Click on OK to confirm the As possible
common sense answer.
Let us walk now to see what policies have been implemented for this run:
In the Marketing View, open the Policies menu and bring up the Product Parameters
entry:

We have moved to the more ambitious response times to the market: 4 weeks to ship
any order for A1 and 3 weeks to ship any C1 order. As product B1 is relatively less
desired, the original lead-time is kept. The Red Line Time is now only 2 days,
because the full DBR provides enough protection on the shipping date and there is no
longer a need for an emergency zone.
Click OK and go to the Production View, Policies. Click on Raw Material Release:

Instead of the material requirements planning (MRP) option, we take here the DBR.
The constraint machine is declared by us to be M4.
The buffers are defined in hours rather than days. The shipping buffer is 40 hours 5
days. The CCR buffer is 8 days. So, the lead-time from material release until
completion is assessed as: 8+5 plus the CCR processing time of the order, which is in
line with the 3-week response time to any order for C1 (the most complex product).
The Work Order Policy is built on full subordination to the market:

Work Order Planning Policy is shown below:

Here the lesson from reducing the batch size too much has been learned and
implemented.
The Red-Line Policy is shown below:

The important additional point is marking the Red Line Level Policy field.
During the run the management policy we are taking is being aggressive in accepting
more market, making sure we do not run out of materials and capacity. The inventory
levels, especially for Z1, are definitely on the high side. The idea is that any shortage
of Z1 is very damaging as it goes to all the three products.
The Planning-for Contracts policy deals with when should the planning plan work
orders for the contracts. The default value of 44 working days (two months) is too
long. Once a work order is created it is part of the planned load represented by the
red bar. We have chosen a new value of 22 days giving enough degrees of freedom
to M4 schedule to consider these work orders. The Planning for Contracts window
should look like that:

In the Purchasing View the policy of Material Parameters are:

That concludes the initial policies.

January 1, 2002
Results Review
This is just the start of the simulation.
Actions
The policies are all set. Run until next month.
On January 10, the contract for 55 units of A1 appears. Take it.

February 1, 2002
Results Review
We already get a substantial $20,930 profit. The load is not too high M4 does not
have enough material on hand. However, we should not worry since this level of load
M4 is still not the constraint.
Actions
Run until next month.

March 1, 2002
Results Review
Everything moves smoothly. The load on M4 starts to build.
Actions
Run until next month.
On 3/20/02 the renewal of the contract for B1 will appear. Reject the renewal by
marking the No field and click Continue.

April 1, 2002
Results Review
The profit is already $77,909. The red warning is lit. Click on it you will get:

The Less Than 50% shipping buffer is the warning that the CCR schedule for one or
more orders is too close to the shipping date. When you click for the full list you get:

Work order 118 is due on 4/11/02, but the CCR schedule is too close so a realistic
date is 4/15. This is not too good, but it also does not mean the original date cannot be
met. It just causes concern because the time for the last part coming out from M4 has
less than 2.5 days (half of the shipping buffer that is 5 days). However, given the redline time policy that order will get priority.
Right now let us do nothing. When this list of Less Than 50%... contains only one
order, the chances for on time delivery are still good enough.
Close the red warning window.
Actions
Run until next month.
On 4/15/02 the other contract for 55 of A1 and 20 of C1 appears. This time we will
accept this contract as our policy is to use the advantage of having full DBR to be
more aggressive in the market.
Accept the contract by clicking on Yes and then OK.

May 1, 2002
Results Review
We have to make some critical decisions now. If you look at the Production View,
Information, and Rough Cut Capacity, you see that the future load goes up
considerably. The current load on M4 is also now significant.
There are two actions to take. One is to reduce the demand for B1 by raising the
selling price by 10%. Accepting the contract for A1 and C1 should be at the expense
of selling B1. If there is more demand for B1 it will at least bring more throughput to
the bottom line.
The other action is to add fair amount of second shifts. Ideally we should run day by
day and check the need. Instead, we will need a fair amount of consecutive second
shifts at the start of the month, so we could run for a whole month every time.
Note also that the red warning shows now a much longer list of orders that do not
have 50% of the shipping buffer as protection. That clearly means we should go to
second shifts and by that move the schedule of M4 earlier in time.

Actions
Change the selling price for B1. In the Marketing View select Policies, Product
Parameters, and change from 1000 to 1100.

Let us add four second shifts to make sure all the orders will be shipped on time.
In the Production View select Actions and then Add Extra Shift. Change the To date
to 05/04/02.
Click OK.
Run until next month.

June 3, 2002
Results Review
The load continues to build up. Two orders are red and the Less Than 50% list is
longer. We are now in the start of the peak and need more capacity: more second
shifts.
Actions
We would add seven second shifts. As second shifts are not done over the weekend,
wed have to do second shift every day from June 3 until June 11 (including June 11).

Run until next month.

July 1, 2002
Results Review
There is no red warning and there is a relatively low load on M4. Are we already
beyond the peak or is it just an incident? In regular case it is suggested to continue
with caution. Here we take a chance and run the whole month without any additional
capacity.
Actions
Run until next month.

August 1, 2002
Results Review

It seems the relatively low load of last month was only a statistical fluctuation. The
load has been building throughout July. While there is only one red order, the Less
Than 50% list is quite long. We need to add significant number of second shifts so the
CCR (M4) will work on those order early enough to ensure time delivery
Actions
Add eight additional shifts. The To date in Add Extra Shift should be 08/10/02.
Remember that during weekends there are no shifts at all, and that it is possible to add
only one shift per day. Confirm by clicking on OK.
Run until next month.

September 2, 2002
Results Review
The load on M4 went down a little, but the whole shop is still loaded. This is how the
red warning looks:

One order is in the red (note that the order is not necessarily late, but it just penetrated
into the Red Line Time [2 days]). The Z1 material is below the red level; two more
orders seem to be almost late to M4 schedule (M4 needs the parts in less than 16
hours from now).
If we double click on the Less Than 50% list we get a long one. Even though orders
appear more than once in the list (depending on the number of M4 operations that are
too close to the due date) when you scroll and count you will find 12 orders on the M4
schedule where timely delivery is not guaranteed.
Actions
We start with purchasing Z1 units. In the Purchasing View we see 144 Z1 units are on
hand. Since we should be careful with material availability especially when we draw
every bit of capacity from the constraint, let us buy 200 units from the Fast supplier.
In the Purchasing View select Order, Z1, 200, Fast, and then Order. Confirm and
close the window.
Go back to the Production View. Let us add eight additional shifts. The To date on the
Add Extra Shift should be 9/11/02.
Run until next month.

October 1, 2002
Results Review

The load went down. The profit is now $319,089 after taxes. Right now M4 has no
materials in front of it, but we do not get a warning that an order is late to the
constraint. This is because the constraint is not heavily loaded, so nothing is
scheduled for the next 16 hours.
Now that the peak demand is over, should we reduce the quality lead-time (QLT) to
the market? As M4 is not too loaded, we could now accept more B1. We are not
going to reduce the price on B1; we rather get the higher price, but offer 5 weeks of
delivery rather than 6.
Actions
In the Marketing View select Policies and then Product Parameters. The QLT of B1
should be changed to 25 (working days):

Click on OK to accept the change.


Run until next month.

November 1, 2002
Results Review
The load is just right, even though one order is late to M4. There is no reason to add
capacity. On the contrary, let us reduce the QLT of A1 to 18 days. It seems we can do
it.
Actions
In the Marketing View select Policies and then Product Parameters. The QLT of A1
should be changed to 18 (working days):

Run until next month.

December 2, 2002
Results Review
We must be careful. There is one order in the Less Than 50% list and three orders that
are late to the constraint. Let us add two shifts.
Actions
Go to the Production View and select Add Extra Shift. Change the To date to
12/03/02.

Run until next month.


On the 12/11/02 the renewal of the contract for 55 units of A1 will pop up. Accept by
marking the Yes field and click on Continue.

Run of 2002 completed


Results Review
First review the profit and loss statement:

You will notice that it is substantially more than the previous one. This run means
managing the company close to its edge.
The extra planning control of DBR, smoothing the load on the shop according to the
load on the weakest link is one big advantage. The early warning that some orders
might be late led to better capacity management.
The buffer management part, which is seen via the red line control mechanism, is of
the utmost important. The Enterprise Resource Planning (ERP) packages that do have
full DBR and buffer management capabilities should be used to manage the sales in a
more aggressive manner. Regular ERP packages can be still manipulated to give very
good results. The management should first have a good grip on the ideas and rationale
demonstrated by the running simulator.
The user is invited to try and achieve more. It is definitely possible. Just see that your
rationale before the run is reasonable. The uncertainty plays a big part in the
simulations, so you must run carefully using the control mechanism information all
the time.
Readers and users are invited to email Eli Schragenheim (elyakim@netvision.net.il)
with questions, suggestions, or maybe just a report on what can be learned by running
the MICSS simulator.

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