Lean Thinking and Lean

Manufacturing

ISEN 645
FA2016

Integrate Flow Monitor &

Define Design Instantiate
& Control Remediate
FA2016 Week
1: 29/31AUG
Core Topic / Theme
Introduction to Lean
Technical focus
Core principles and definitions

15week 2: 5/7SEP
3: 12/14SEP
Value
Value / Value Stream
SE; IDEF0; Lean PS design principles
IDEF0; VSM; Value and the Value Stream

Schedule 4: 19/21SEP
5: 26/28SEP***
Value Stream / KD - project
VS / Flow
VSM; KD presentation
8-Step design process; IDEF3; JIT; Cells
Class17:
6: 3/5OCT Flow Line balancing; Task engineering – centroid of the PS
The first part of this course has
been focused on the first 4-core 7: 10/12OCT*** Flow Cell design and design activities;
principles of lean value, value
stream, flow, and pull and how 8: 17/19OCT Control Demand leveling, MM sequencing, takt/pitch/pack;
those principles are instrumented
3EQN/4GRAPHS – core factory physics; Buffer engineering (time,
into the LPS design. 9: 24/26OCT*** Control
capacity, inventory);
The next major part of the course 10: 31OCT/2NOV Lean supply chain SC: LSC design, P&P, Integration with the PS; Beer game
deals primarily with the, often
counterintuitive, influence of 11: 7/9NOV*** Perfection: Lean 6σ DMAIC VOC; SIPOC; C/E chaining
variability in the PS – and what
implications there are for the LPS 12: 14/16NOV Perfection: Lean 6σ DMAIC Gauge R&R; SMED; SPC
designer.
13: 21NOV* (MON) Perfection: Gemba Kaizen Implementation planning applied
We can then turn our attention to
variability reduction using 6σ 14: 28/30NOV*** Culture / LPS design - Epilogue Leadership
P&P.
15: 7DEC* (WED) Project briefings Schedule and timing TBD
We finish in the gemba where we
cultivate the future LPS leaders. 16: Final 9DEC 0730-0930a

***KD scheduled review after class at 7p; team leads – quad-chart status briefing (3-5min)
 Lean system engineering is the systematic reduction of “waste” in the production system

Project summary &

Approach
Technical objectives

Project news Deliverables and

Issues being
addressed and
schedule
progress

We are in week 9. In week 15 the teams will brief KD on their projects.

Keys: CONOPS, technical objectives, design concepts to address those technical
objectives, progress towards realizing those design concepts, SOPs, pilot
implementations (if warranted).
This WED scheduled meeting with KD … details to come
Insights and notes from this past weekend
• The “software” is not the focus. It would be nice to put a bow on the
intellectual efforts and provide a strong “link” back to the PS in operation,
but the software is a tool NOT the PS.
• So your team’s focus is on systematizing what is currently not
systematized. Each project “need” is representing a set of issues/problems
that have manifested themselves entirely because there is no systematic
way of _____________. (planning, operating, managing, …)
• To systematize is to design and organize for clear, repeatable, reliable,
successful operation
• The ISEN’s job, as the physician of the PS, is to systematize the PS through
the transformative activities required to define, design, implement,
operate, monitor, sustain, and when necessary – retire the PS itself.
 Texts
Trade journals

You are encouraged to (re)search… Articles

…

• Routing planning and management

• How do others approach route planning?
• What information must be managed?
• What constitutes a route plan?
• What procedure will be used when change occurs?
• Production planning
• This is largely what is covered in ISEN 615
• Understand the demand – profile it  FC, AP, MPS, MRP, … includes the IC plan
• Having the exact data is not as important as developing a procedure(s) for BB to perform the production
planning
• Bottling line operation (Production)
• Production process definition
• Resourcing (equipment, manpower, …)
• Production concept (VSM) flow and control; including scheduling box
• C/O procedures
• Facility layout and design (receiving … shipping)

Then systematize!!!
 Prelude to Class17…

• Variability has a corrupting influence on the highly regimented and deterministic LPS design
– clockwork precision degrades
• Understanding, quantifying, and developing countermeasures to combat said variability are
the job of the ISEN for the entire scope of the LPS
• Factory physics is the science behind the LPS (or any PS for that matter)
• From factory physics we achieve understanding, methods for quantifying the impact of
variability, and proven P&P for mitigating its impact in the PS
• The Thomist principle/warning of education is always in effect:
Quidquid recipitur ad modum recipientis recipitur
• Intuition must be cultivated, Professors Hopp and Spearman preside
PS representations
• Without continually honing our
representations of (proxies for) the PS we
can easily lose context with how impacts
propagate throughout the system
• As time moves forward we will need
frameworks that help us organize those
representations
• SE is the BOK for representation and
frameworks
Setting and maintaining context – we need several
characterizations to bolster our intuition and foster
dialogue
• SE models and methods that frame what we are doing and vector us
to our next best step – what are we doing
• SE models and methods that help us frame the issues within the
context of the system (for us PS) within which they (the issues) reside
(ASIS and TOBE) – on what PS
• SE models and methods to assist us in performing analysis and
synthesis activities on the ASIS to make precise the nature of the
remediation required to bring the PS to a state that reflects that of
the TOBE – what are we doing about it
 News from the Academy…

SE, the 2400y old precedent…

SE methods and techniques for moving up and out of
the cave… (Socrates, Plato, and Aristotle presiding)

• One very important role that

SE, as a BOK, provides is a
glimpse into “forms” for the
idealized system
• It is worth the time and effort
to build a library of models
(~forms) that reflect the key
dimensions (function,
information, process…) of
production systems for
different types of production
systems – manufacturing,
diagnostic, planning, …
A synopsis of the synopsis of the ….
• Go Lean
• Value to the customer is first and foremost; clean house
• Takt and the Value Stream
• [identify and control demand]
• Flow
• [Necessary and Sufficient set of transformative processes and stocks
to realize the product for the demand; EPE-?]
• Pull Control via kanban and CONWIP
• [adhere to Takt, sequence, work at the pitch, and minimize WIP
without sacrificing Fill rate all within the context of variability,
shared, and scarce resources]
• Sustain … 6σ for the life of the PS
Lean PS design is a framework of deterministic thinking put in place to
visually control an inherently stochastic production system
• At this point we have defined and applied 4 of the 5 core principles of Lean
• We have identified with a design procedure that drives towards single piece flow and mixed model production at takt
• The reality is that due to shared resources with their costly change-over requirements and various forms of system
variability we resort to small batch runs made as often as permissible … EPE
• But how do we instrument the production system to ensure flow despite system variability? - after all we can only
drive out variability to the extent possible then we have to earn revenue to keep the enterprise in business
• Factory Physics is the prescription for the ills of variability
• The next several lecture modules describe the essence of factory physics. Primers on queueing, queueing networks,
and simulation are added to serve as tools for the lean engineer to use in design analysis and verification activities.
• Regardless of the care taken to engineer the transformative processes within the LPS – variations and change in
demand impact the operation of the LPS and decisions must be made regarding WIP in order to achieve takt (TH-1)
while maintaining the designed LT (lead time)
• Little’s Law makes clear the tradeoff: WIP = LT / takt … since TH (takt-1) and LT are design parameters, then WIP is
specified. But note what else it says – if we maintain a CONstant Work In Process and adhere to takt then LT is
specified, meaning we can make promise dates.
• How do ensure that we adhere to takt? Buffer engineering – the levers of throughput.
• But variation can bring the best of designs to its knees – buffer engineering via the levers of inventory, time, and
capacity; beyond the 3E&4G we arm ourselves with queueing results and simulation technology is assist in the design
analysis and specification
When the production system speaks we must interpret
Stochastic process, sample path, ensembles, and time series assumptions…
Thus we model

Models of stochastic
processes
Sample paths
For our purposes there are
time series models, queueing
models, and simulation
models
Ensembles
For practical purposes we
leverage a little from each

The lectures this week focus

on the essence of the
stochastic nature of
production processes through
{Xt} is the stochastic process of interest here the lens of factory physics

Our mission…
• The definition of Lean
• The core principles of Lean
• The application of those
principles to production
system (manufacturing
and service) design and
operation, and
• The methods, tools, and
techniques for
implementing lean
throughout the life-cycle
of the production system.
ISEN 645 is lean production system design
Lean
Principles
and
Practices
Design Lean
Production System Lean Production System
Production System
Recall our scope for
“production system” is an
Lean intentional, purposeful
Methods, system of transformative
Tools processes that produce
products and/or services of
and
value to the customer
Techniques
Production systems are
ubiquitous
Back to production system
It’s a planned transformation

Controls

Transformation or
Inputs ‘Production’ Outputs

Resources
 It’s also a planned transformation
SoS: System • Key elements:
– Process
of Systems Controls
– Facility
– Resources***
– Information
Transformation – Policies
Inputs or ‘Production’ Outputs
– Movement
– Safety
– Human factors

Resources

One of the best examples of a SoS that is also a production system is a “supply chain”
we can gain great insight from examining one… [we will return to this again later in the semester]
 Design is largely a process of communication.

It either is or we are not going to realize that

design.

We must state unambiguously What the

design is and How it is to operate
WHAT

HOW
• A PS design has an intention
• To achieve that intention there are rules, that is the design
requires the system to behave in a particular manner.
• The behavior is a Lean behavior – that is the rules are setup to
prevent inventory build up and the production flow operates
in strict accordance with an “integrated” control paradigm EXECUTE
 Phase of Design Tools/Techniques Role in the Lean Production System Design

Understand the [ASIS] IDEF0&VSM Establish needs and Lean opportunities

Establish vision
VSM: leveraging Lean Establish takt and lead time targets
Define and design the
Principles and the 8- Identify cells, supermarkets, and the pacemaker [along with a cut at the production batch size and pitch]
[TOBE]
key Qs directly Establish integrated production control [pull]
Establish high level inventory requirements and supermarkets

Establish specifications for how the requirements will be achieved in the physical production operation – esp. the integrated
Process Design IDEF0 and IDEF3 production control process / procedure. Job descriptions. Many small scenarios are best – reuse is the norm as the same scenario
occurs in many places throughout the design. The VA transformative processes are the focus here.

Task Engineering Work M&M Establish standardized work to drive the PS. If the “atomic” level work is engineered then we are safe from building a house of cards.

GT, WM&M, LB, LL, The heart of single-piece flow is the cell – we need to arrange the tasks into workstations, balance those WS, and do our best to get
Cell Design
SMED, Right-sizing the cell operating at or near the takt. Staffing done in a variety of ways including loops, rabbit chase, bucket brigade, and Little’s Law.

Level Loading, EOQ,

We have 3 major levers: time, capacity, inventory. We don’t make everything. ABC analysis is used along with MRP-logic to establish
Buffer Engineering EPQ, IC models,
what to order. Safety stock, usage rates, and acquisition lead time are used to determine how much to order and when.
Kanban, CONWIP

System performance is the ultimate test of our design. Factory physics and key indicators attune us to places to fine tune our design
Performance analysis 3-Equations, 4-Graphs
and order release from PC to the pacemaker.

Queueing networks, The best way to test the design and integrated control architecture is in context with various sources of variability. Simulation allows
Simulate and refine
Simulation us to play arm chair designer prior to putting our design on stage.

Lean 6σ along with a core set of other Lean tools are made manifest throughout the Lean PS in order to help us prognosticate issues
Sustain 6σ
rather than rely on diagnostics to continuously lean and improve the system
Little’s Law is the F = ma of Production!!! Production physics is the backbone of Lean PS specification

Can we use LL to assist in determining the number of operators to use in a Rabbit chase to staff a Other common LL
12 station assembly cell? If the desired takt rate for the cell is 45s and the operator lead time for representations:
the 12 stations is 195s, then just as for the TWI assembly process the WIP = # operators
operating in parallel = 195/45 = 4.333 ~ 5 operators in a rabbit chase might work WIP = TH * CT
WIP = TH * LT
WIP = LT / takt
Little’s Law [for Lean]
WIP = (Production Rate) * (Lead Time)
• Lead time = WIP * Takt [restating LL for our Lean needs]
• Note that CT is often used in place of LT … depends on the application – we should engineer the CT
• Caution!!! Lead time may be loaded; it is the sojourn time; it may contain “waste” – but the scope
for lead time is in the hands of the engineer and it MUST be understood before LL can be of value

The long-run average number of customers in a stable system L is equal to the long-run average
effective arrival rate, λ, multiplied by the average time a customer spends in the system, W; or
expressed algebraically: L = λW.

Notice that also were using LL when we calculated the theoretical minimum number of WS for line balancing
WIP = [sum of task times] / takt = # of Workstation required to cycle the cell at takt
“Plans are only good intentions unless they immediately
degenerate into hard work.” -Peter Drucker

24OCT Lecture Plan

0: Review and preview – the Goal, TOC, Variability

1: Factory Physics – overview

2: The Penny FAB
3: Buffer engineering – taming variability
We now begin a journey into the corrupting influence of variability
in our PS and what we can do about it – that is, how we can plan to
minimize its impact.

First we need to understand how variability is propagated in the PS

– the impact of this propagation, traditionally, has been an area
that is not well understood by management – but must be
understood by the LPS designer.

Goldratt made a very compelling argument – which we now

summarize and demonstrate (via the matchstick game/simulation)
to bolster our own intuition.

M0:
TOC (Theory of Constraints) – The Goal; prelude to Factory Physics – the science
of production
 The Goal
Jonah – “Impossible to perfectly balance capacity to demand, there
even exists a mathematical proof showing if you did, inventories go
through the roof?”
Alex – “How’s this possible”
Jonah – “Due to two phenomenon:
1. Dependent events – a series of events must take place before
another begins.
2. Statistical Fluctuations – the length of events and outcomes are not
completely deterministic.
The combination of these phenomenon are the issue.”
The Goal
Dependent events – Statistical Fluctuations

Q. - Where does Alex first come to grips with this (i.e. sees this first hand)?

A. – During the boy scout hike.

The Goal
Analyzing the boy scout hike

Observations:
• The walking speed of individuals fluctuate
• All may have the same average walking speed, but gaps continue to
lengthen, why?
• There is no limit to how much an individual can slow down, but your top
speed is dependent on the person in front.
• Fluctuations are accumulating over time, and the slow fluctuations tend
to accumulate faster because they are not limited like the fast ones.
The Goal Boy scout hike –> Manufacturing Plant
Observations:
• Each boy is an operation
• The product is “walk the trail”
• Each boy/operation is dependent on the one in front.
• A “sale” is when the last operation/boy walks the trail.
• Throughput is the rate at which the last person walks the trail.
• Operating expense is the energy output of each boy.
• Inventory (material inside the plant) is the distance between the first and last boy.
• Fluctuations in operating speed is causing inventory to increase [accumulate] and
causing throughput to decrease. Attempting to reduce gaps is increasing
operating expense.
The Goal

Play the matches game? (via spreadsheet sim)

• Setup: 5 players, 5 bowls, matches, 1 die
• Dump all matches in bowl #1
• Roll one die (starting with player #1) and pass that many matches from your bowl to the next
person down the line
• Pass die to next player who rolls die and moves that number of matches from their bowl to
next player, rule: cannot pass more matches than what is in your bowl (impact?).
• Continue for each player, with last player handing die back to player #1.

• What is the average number rolled on a die?

• After 20 rounds, how many matches should the last player “produce”?
Let’s create a spreadsheet to run this experiment
 http://pubsonline.informs.org/doi/pdf/10.1287/ited.3.1.20
A basic approach…
• Step1 is the first process
operation so the utilized
capacity = available capacity
• The queue (inventory) in
between the steps is what
we had in queue (inventory)
previously minus what the
next step used (withdrew)
previously plus what we
just received as production
• Available capacity is
determined by rolling the
die
• Utilized capacity is the
minimum of what was
available to us [in the
queue] or the available
capacity
 Our journey into Factory Physics
will make this PS impact due to the

And the point is? “propagation of variability” clear 

• Bottlenecks float, but their impact is profound

• Performance does not match our intuition
• The more complex the system – the less intuition
we have
• “Balance” in a stochastic system is not possible
• The “system” never makes up for (w/o
intervention) the lost capacity due to the
“bottleneck” … thus the need for buffering the
bottleneck
• WE need to get intuition into the impact caused
by fluctuation and dependency, otherwise we
will overcorrect, add too much inventory, and
waste capital
In particular, for the matchstick game, the
variation that was at the root of the reduced
average production output was due to the
fact that once we starved (via a reduced
capacity at an upstream operation) a
downstream process we could not make up
for it since the impact was propagated
throughout the remaining operations.
The lost production capacity was lost to the
entire PS.
TOC principles
1. Balance flow not capacity
2. Non-bottleneck resources are controlled by another constraints in the PS
3. Utilization and activation are not synonymous
4. An hour lost at the bottleneck is an hour lost for the PS
5. An hour saved at a non-bottleneck is a mirage
6. Bottlenecks govern TH and WIP
7. Process batch sizes do not necessarily equal the move batch size
8. Process batch sizes should be variable
9. Lead times are the result of a schedule and cannot be predetermined
10. Schedules should be assembled by looking at all constraints
simultaneously
TOC method…
1. Identify the constraints
2. Exploit the constraint
3. Subordinate all other resources to the constraint
4. Elevate the constraint
5. Once the constraint has been broken, move to step 1
M0: Takeaways
• TOC is not cheap
• More than anything – it is a mode of thought
• Takt is king, but the PS may have a say in whether it can be achieved
• No rocket science – we simply cannot move any faster or further than
the weakest link
• Synchronization is appreciated by all participants – this is not a
guessing game this is a PS and we want it to be viable
 Factory
Physics

M1:
Overview of Factory Physics
 We have a need – manifested through the VSM [ASIS]
We have a vision – manifested through the VSM [TOBE]
We have a more refined specification – IDEF3 + principles in action [EPE, Kanban, Cycle, Buffer, Safety stock]

We need an understanding of the physics of production and the IMPLICATIONS for us as Lean PS designers

The old line was:

“Better, Faster, Cheaper”
– pick any two…

Overview of Factory Physics

and Why we need it
Why?
• Manufacturing operations are governed by a series of laws.
• Hopp and Spearman, developed and mathematically proved a series of fundamental
relationships in manufacturing.
• These were captured in Factory Physics.
• The "laws" of Factory Physics describe the underlying logistical behavior of manufacturing
systems, including the fundamental relationships between basic performance measures
such as throughput, Work-In-Process, manufacturing cycle time, and process variability.
• By understanding these relationships managers can diagnose their manufacturing systems
and make major improvements in throughput, cycle time, customer service, and quality.

• In particular, these laws of manufacturing give managers a way to identify the largest
sources of waste and variability and to compute the effect of alternative improvements
before implementing them.
 More on these as we roll along…
A few key FP Principles…
Little's Law: WIP = TH * CT  This is the basis of Factory Physics. So if the throughput is 100 units per week
and the CT is 2 weeks, then the WIP is 200 units.
Law of Capacity: In steady state, all plants will release work at an average rate that is strictly less than the
average capacity.
Law of Inventory: In an unconstrained system, inventory builds relentlessly.
Law of Bottleneck: Accumulation of inventory is not necessarily an indication of a bottleneck (or a constraint).
Law of Variability: Increasing variability always degrades the performance of production system. Corollary: In a
line where order releases are independent of completions, variability early in a routing increases cycle time more
than equivalent variability later in the routing.
Law of Variability Buffering: Variability in a production system will be buffered by some combination of
inventory, capacity, or time. Corollary: flexibility reduces the amount of variability buffering required.
Law of Utilization: If a workstation increases utilization without making any other changes, average WIP and
lead time will increase in a highly non-linear fashion.
Law of Conservation of Material: In a stable system, over the long run, the rate out of a system will equal the
rate in, less any yield loss plus any parts production within the system.
 A common tale…
• A manager wants TH = 3000 u/wk; no OT

As an operation’s utilization
• The Production tradeoff curve tells the rate climbs the CT climbs
story rapidly and non-linearly
• Note the sharp rise in the CT curve
associated with zero OT as the TH is
increased
• Even a small amount of extra capacity
helps significantly

WIP = TH * CT
We can trip over accumulated WIP if we’re
not careful, but what about accumulated
unused capacity?
• Unused capacity goes off into the ether  we cannot store it up to offset
the WIP that builds when the “system” is busy
• Queues build and the system may never recover
• Once the system is operating at near “capacity” – arrival variation greater
than the average has a dramatic impact on WIP and CT (leadtime);
variation is the enemy when the system utilization is high
• When the system is not near capacity, variation has little impact
• The WIP v Utilization or CT v Utilization graph tells the story
• This Pearl of Wisdom (PoW) is one of the most counterintuitive,
misunderstood, costly, but important concepts in Factory Physics:
Law of Utilization: If a workstation increases utilization without making any other
changes, average WIP and lead time will increase in a highly non-linear fashion.
 Factory Physics for Managers (Pound, Bell, Spearman)
The Lean Toolbox (Bicheno and Holweg)

The power 5 behind the lean science

• VUT (Kingman’s Equation)
• Little’s Law
• WIP and the Lean Zone
• Buffer Engineering
• Inventory Tradeoff
Kingman’s equation aka the VUT equation
• Often referred to as the Equation of Lean
• Relates queue time and lead time to
sources of variation that are measurable
from the production process
• V is for variation and this variable is a
composition of both arrival rate and
process rate variation
• U is the process utilization
• T is the average process time
A quixotic quest?
Queueing is delay – a delay to the customer, a delay in finding
and resolving problems, a delay in sales realized … we may
purposely engineer queues into the production system as
buffers but we are on a never ending quest to eliminate them
The Science is clear…
• Variability is an effect due to many root causes
• Queueing (Waiting, delay, lead time inflation) is the system’s mechanism for
dealing with the LAW that the system cannot produce any faster than the
bottleneck (limiting) rate
• So queueing is in response to variability which itself is a response to specific
issues occurring in our PS
• VUT
• For the designer it tells us how to instrument (via buffers) the PS for lean production
• For the analysts it tells us the location and magnitude of queueing and variability
• For the engineer it tells us what buffer levers to pull for greatest impact on PS
behavior
𝒄𝟐𝒂 + 𝒄𝟐𝒆 𝒖 V: variation of input and process
𝑪𝑻𝒒 = ∙ ∙ 𝒕𝒆 U: utilization is load/capacity
𝟐 𝟏−𝒖 T: processing time (engineered)
 The list of specific levers is varied and large, but there are clear categories of what
can be done. Buffers are Time, Inventory, Capacity. Buffers can be applied to the
Buffer Levers… input, the processes, the logistics, the resources, the information, the customer,
regulations, … many ways to impact the operation of PS and drive it to a LPS. Recall a
production system is LEAN if it is operating with minimum buffering costs.

• Time
• Instrument extra time delays (locally) into the PS to Inflate the lead time in order to keep the
entire system synchronized (globally)
• Inventory
• Prevent blocking and starving of the transformative processes via “decouplers” such as
supermarkets
• Capacity (more and better resources)
• Add more Capability (training, outsourcing, tools, machines, …)
• Add more Availability (overtime, shifts, task engineering standards…)

The job of the Lean Engineer is decide what lever, in what quantity, where to apply in the PS, and when to apply it

This necessitates [a] having a LPS design, [b] being capable of measuring the health of the LPS as operated from that
as designed, and [c] taking actions (using the levers) to bring the LPS back into a state of compliance with the LPS as
designed.
M2:
The infamous Penny Fab – the metrics of the PS are born
Hopp and Spearman speak:

from Factory Physics

The basics – the Penny FAB
A few key results that frame our discussion
Definitions [from FP]
• Throughput (TH): for a line, throughput is the average quantity of good (non-defective) parts
produced per unit time.
• Work in Process (WIP): inventory between the start and endpoints of a product routing.
• Raw Material Inventory (RMI): material stocked at beginning of routing.
• Crib and Finished Goods Inventory (FGI): crib inventory is material held in a stockpoint at the
end of a routing; FGI is material held in inventory prior to shipping to the customer.
• Cycle Time (CT): time between release of the job at the beginning of the routing until it reaches
an inventory point at the end of the routing.

We need to be careful when reading the FP literature and other sources – CT can take on different definitions
Note that here CT = Sojourn Time = Lead time
Parameters
Descriptors of a Line:

1) Bottleneck Rate (rb): Rate (parts/unit time or jobs/unit time) of the process center having the highest
long-term utilization.

2) Raw Process Time (T0): Sum of the long-term average process times of each station in the line.

3) Congestion Coefficient (): A unitless measure of congestion.

• Zero variability case,  = 0.
• “Practical worst case,”  = 1.
Note: we won’t use  quantitatively,
• “Worst possible case,”  = W0.
but point it out to recognize that lines
with same rb and T0 can behave very differently.
Parameters (cont.)
Relationship:

Critical WIP (W0): WIP level in which a line having no congestion would achieve
maximum throughput (i.e., rb) with minimum cycle time (i.e., T0).

W0 = rb T0

Once more we have Little’s Law:

rb is the bottleneck rate and therefore governs throughput
T0 is the leadtime for the [production] line
The Penny Fab [from Factory Physics]
a classic example from Hopp and Spearman
• Characteristics:
• Four identical tools in series.
• Each takes 2 hours per work piece (penny).
• No variability.
• CONWIP, that is “FIFO”, job releases.

• Parameters:
rb = 0.5 pennies/hour
T0 = 8 hours
W0 = 0.5  8 = 4 pennies
 = 0 (no variability, best case conditions)
The Penny Fab
The Penny Fab (WIP=1)

Time = 0 hours
The Penny Fab (WIP=1)

Time = 2 hours
The Penny Fab (WIP=1)

Time = 4 hours
The Penny Fab (WIP=1)

Time = 6 hours
The Penny Fab (WIP=1)

Time = 8 hours
The Penny Fab (WIP=1)

Time = 10 hours
The Penny Fab (WIP=1)

Time = 12 hours
The Penny Fab (WIP=1)

Time = 14 hours
The Penny Fab (WIP=1)

Time = 16 hours
Penny Fab Performance

WIP TH CT THCT
1 0.125 8 1
2
3
4
5
6
The Penny Fab (WIP=2)

Time = 0 hours
The Penny Fab (WIP=2)

Time = 2 hours
The Penny Fab (WIP=2)

Time = 4 hours
The Penny Fab (WIP=2)

Time = 6 hours
The Penny Fab (WIP=2)

Time = 8 hours
The Penny Fab (WIP=2)

Time = 10 hours
The Penny Fab (WIP=2)

Time = 12 hours
The Penny Fab (WIP=2)

Time = 14 hours
The Penny Fab (WIP=2)

Time = 16 hours
The Penny Fab (WIP=2)

Time = 18 hours
Penny Fab Performance

WIP TH CT THCT
1 0.125 8 1
2 0.250 8 2
3
4
5
6
The Penny Fab (WIP=4)

Time = 0 hours
The Penny Fab (WIP=4)

Time = 2 hours
The Penny Fab (WIP=4)

Time = 4 hours
The Penny Fab (WIP=4)

Time = 6 hours
The Penny Fab (WIP=4)

Time = 8 hours
The Penny Fab (WIP=4)

Time = 10 hours
The Penny Fab (WIP=4)

Time = 12 hours
The Penny Fab (WIP=4)

Time = 14 hours
Penny Fab Performance

WIP TH CT THCT
1 0.125 8 1
2 0.250 8 2
3 0.375 8 3
4 0.500 8 4
5
6
The Penny Fab (WIP=5)

Time = 0 hours
The Penny Fab (WIP=5)

Time = 2 hours
The Penny Fab (WIP=5)

Time = 4 hours
The Penny Fab (WIP=5)

Time = 6 hours
The Penny Fab (WIP=5)

Time = 8 hours
The Penny Fab (WIP=5)

Time = 10 hours
The Penny Fab (WIP=5)

Time = 12 hours
Penny Fab Performance
WIP TH CT THCT
1 0.125 8 1
2 0.250 8 2
3 0.375 8 3
4 0.500 8 4
5 0.500 10 5
6 0.500 12 6
TH vs. WIP: Best Case

0.6
rb 0.5
0.4
TH
0.3
1/T0
0.2
0.1
0
0 1 2 3 4 5 6 7 8 9 10 11 12
W0
WIP
CT vs. WIP: Best Case

26
24
22
20
18
CT 16 1/rb
14
12
10
T0 8
6
4
2
0
0 1 2 3 4 5 6 7 8 9 10 11 12
W0 WIP
Best Case Performance
• Best Case Law: The minimum cycle time (CTbest) for a given WIP level, w, is given by

T0 , if w  W0
CTbest 
w / rb , otherwise.

The maximum throughput (THbest) for a given WIP level, w is given by,

w / T0 , if w  W0
TH best 
 rb , otherwise.
Best Case Performance (cont.)
• Example: For Penny Fab, rb = 0.5 and T0 = 8, so W0 = 0.5  8 = 4,
8, if w  4
CTbest  
2w, otherwise.

w / 8, if w  4
THbest  
0.5, otherwise.

which are exactly the curves we plotted.

A Manufacturing Law
• Little's Law: The fundamental relation between WIP, CT, and
TH over the long-term is:

WIP  TH  CT

parts
parts   hr
hr
• Insights:
• Fundamental relationship
• Simple units transformation
• Definition of cycle time (CT = WIP/TH)
Worst Case
• Observation: The Best Case yields the minimum cycle time and maximum throughput
for each WIP level.

• Question: What conditions would cause the maximum cycle time and minimum
throughput?

• Experiment:
• set average process times same as Best Case (so rb and T0 unchanged)
• follow a marked job through system
• imagine marked job experiences maximum queueing
Worst Case Penny Fab

Time = 0 hours
Worst Case Penny Fab

Time = 8 hours
Worst Case Penny Fab

Time = 16 hours
Worst Case Penny Fab

Time = 24 hours
Worst Case Penny Fab

Time = 32 hours Note:

CT = 32 hours
= 4 8 = wT0
TH = 4/32 = 1/8 = 1/T0
TH vs. WIP: Worst Case

0.6 Best Case

rb 0.5
0.4
TH
0.3
0.2 Worst Case
1/T0
0.1
0
0 1 2 3 4 5 6 7 8 9 10 11 12
W0
WIP
CT vs. WIP: Worst Case
Worst Case
32
28
24
CT 20
16 Best Case
12
T0 8
4
0
0 1 2 3 4 5 6 7 8 9 10 11 12
W0
WIP
Worst Case Performance
• Worst Case Law: The worst case cycle time for a given WIP level, w, is given by,

• CTworst = w T0

The worst case throughput for a given WIP level, w, is given by,

• THworst = 1 / T0

• Randomness?
None - perfectly predictable, but bad!
Practical Worst Case
• Observation: There is a BIG GAP between the Best Case and Worst Case
performance.

• Question: Can we find an intermediate case that:

• divides “good” and “bad” lines, and
• is computable?

• Experiment: consider a line with a given rb and T0 and:

• single machine stations
• balanced lines
• variability such that all WIP configurations (states) are equally likely
PWC Example – 3 jobs, 4 stations
clumped
up states
State Vector State Vector
1 (3,0,0,0) 11 (1,0,2,0)
2 (0,3,0,0) 12 (0,1,2,0)
3 (0,0,3,0) 13 (0,0,2,1)
4 (0,0,0,3) 14 (1,0,0,2)
5 (2,1,0,0) 15 (0,1,0,2)
6 (2,0,1,0) 16 (0,0,1,2)
7 (2,0,0,1) 17 (1,1,1,0)
8 (1,2,0,0) 18 (1,1,0,1)
9 (0,2,1,0) 19 (1,0,1,1)
10 (0,2,0,1) 20 (0,1,1,1) spread
out states
Note: average WIP at any station is 15/20 = 0.75,
so jobs are spread evenly between stations.
Practical Worst Case
Let w = jobs in system, N = no. stations in line, and t = process time at
all stations:

CT(single) = (1 + (w-1)/N) t

CT(line) = N [1 + (w-1)/N] t
= Nt + (w-1)t
= T0 + (w-1)/rb
From Little’s Law
TH = WIP/CT
= [w/(w+W0-1)]rb
Practical Worst Case Performance
• Practical Worst Case Definition: The practical worst case (PWC) cycle time for a
given WIP level, w, is given by,

w 1
CTPWC  T0 
rb
The PWC throughput for a given WIP level, w, is given by,

w
TH PWC  rb ,
W0  w  1
where W0 is the critical WIP.
THvs.WIP:Practical Worst Case

0.6 Best Case

rb 0.5
0.4 PWC
Good (lean)
TH
0.3
0.2 Bad (fat) Worst Case
1/T0
0.1
0
0 1 2 3 4 5 6 7 8 9 10 11 12
W0
WIP
CTvs.WIP:Practical Worst Case

Worst Case
32 PWC
28
24
20 Bad (fat)
CT Best Case
16
Good
12 (lean)
T0 8
4
0
0 1 2 3 4 5 6 7 8 9 10 11 12
W0
WIP
M2 in Summary
• Penny fab helps understand the key performance measures and set
bounds
• Our operating range lies in between
• We now have a visualization for Little’s Law

• What else is there in the Factory Physics arsenal to bolster intuition?

M3:
Buffer engineering – variability is tamed. An overview.
 Buffers – the Science and the Psychology
• 3-types: Inventory, Time, Capacity
• Inventory – we discussed these as cycle, “buffer”, safety for FGI + WIP-stock + Raw materials
• Time – this is an interesting class of buffer – basically amounting any delay that we can place
between demand and satisfaction by the transformative processes
• Capacity – stored potential; overtime; extra equipment; outsourcing
• But let’s revisit the Time-buffer for a moment…
• This is the buffer type that appears to have one foot in the “dog ate my homework” world
• An interesting pair of articles was written first by David H. Maister [1985] then Richard Larson
[1987] – dealing with the psychology of waiting
• This work, from a design standpoint was tightened up into some principles of system design
for the queueing aficionado by Donald Norman [whose work on Design is worth having more
than a fleeting familiarity with]
Three Equations and Four Graphs [to visualize them with]
Equation Visual Representation

VUT – “Kingman equation” (The Equation of Lean) CT v Utilization Graph

describes the relationship between waiting time, Variability, Utilization, and clearly depicts the nature of the business as the utilization
processing Time for a single work center increases towards 100%

Little’s Law: WIP = CT x TH Production-Flow Graph

Provides our first cut at value stream cycle times; note that WIP is a leading
a combination of TH v WIP and CT v WIP graphs; this is a
indicator of CT; Spearman: “WIP is visible CT”
visual of LL

Variance of Replenishment-Time Demand equation Tradeoff Plot: Avg. Inventory v Fill Rate Graph
A visible representation of stock-point behavior; inventory
This equation provides insights into how to manage stocks; behavior of stocks
investment v fill rate
[inventory buffer] and stock points [logical constructs used to create
classifications for planning and control of physical items]
A special type of “efficient frontiers” graph

CT v Lot Size Graph

Brings together desired customer service level, shortest
possible CT, highest utilization, lowest inventory investment
 Recall, we met variability…
Many new terms to unravel… Now we plan for its capture and to
bring it to justice
• VUT Once we have a PS design – we must

• Lead-time demand engineer the buffer levels

Time and Capacity buffers are levers

• Fill rate that management can use to tune the
system with, but inventory buffers
• Efficient frontiers must be engineered by us as part of
the design
• Stock point
• Lot size
• Customer service level
VUT [Variability, Utilization, Time] Very interesting, but VUT does it mean?

• 𝐶𝑇 = 𝑡𝑒 + 𝐶𝑇𝑞
• cycle time at a workstation is equal to the effective processing time
[includes any downtime] plus any time spent waiting
• 𝐶𝑇𝑞 = VUT
Now the implication of increasing
utilization is clear;
𝑐𝑎2 + 𝑐𝑒2 𝑢
𝐶𝑇𝑞 = ∙ ∙ 𝑡𝑒 If we have a PS with many products and:
2 1−𝑢 The utilization, u, moves from u = 0.70
[U = 2.3] to u = 0.95 [U = 19] then the CT
𝑐𝑎2 +𝑐𝑒2 𝑢
• 𝑉= and 𝑈 = and 𝑇 = 𝑡𝑒 will increase rapidly and non-linearly
2 1−𝑢

• 𝑐𝑎2 is the squared coefficient of variation of the interarrival times

On to
• 𝑐𝑒2 is the squared coefficient of variation of the effective process times Cincinnati

• 𝑡𝑒 is the effective process time

The CT v Utilization Graph
• The VUT, now in visual form, shows how a movement towards higher
utilization in a stochastic system will meet with swift and unquestioning
imprisonment [Kafka’s The Trial style] by the stable system police as CT
climbs through the roof and the wait time grows beyond even the high
water mark for waiting as experienced during rush hour in Beijing 

It’s even more profound

for PS that exhibit highly
variable demand and
process times
 M3: Takeaways
• We have some ground to cover – but the good news is that we now know our
task and that is Buffer Engineering
• We attack this by becoming familiar with how buffer impacts the PS
• We have 3-equations and 4-graphs to become familiar with
• We have a lean design [VSM] but we need to make it operate effectively for
the enterprise using factory physics

• Next module we continue our orientation on factory physics and move out
smartly towards the efficient frontier for the PS and the enterprise
Next time…

• ***WED 26OCT – Mark Spearman guest lecture on

fundamental concepts in factory physics and
analytical modeling options

• HW9 – to be assigned Monday 31OCT

• www.lean.org
• www.idef.com Assigned Sources leveraged
• Factory Physics [Hopp and Spearman] 3rd edition 2008
• Factory Physics for Managers [Pound, Bell, Spearman] 2014
• Lean Engineering [Black and Phillips] 2013
• Manufacturing Systems Modeling and Analysis [Curry and Feldman] 2nd edition 2011
• Lean Manufacturing [Lonnie Wilson] 2nd edition 2015
• Lean Thinking [Womack and Jones] 2003 edition
• Learning to See [Rother and Shook] v1.2 1999
• The Lean Toolbox [Bicheno and Holweg] 5th edition 2016
• Improving Production with Lean Thinking [Santos/Wysk/Torres] 2006
• Methods, Standards, and Work Design [Niebel] 12th edition 2007
• Applied Probability and Stochastic Processes [Feldman and Valdez-Flores] 2nd edition 2010
• Operations Research Models and Methods [Paul A. Jensen, Jonathan F. Bard] 2002 edition
• Principles of Operations Management [Heizer/Render] 7th edition
• Gemba Kaizen [Imai] 2nd Edition 2012