Mikron Project Proposal

03/14/12

Written By: Nicolas Arif, Aaron Bumgarner, Trevor Dawson, Tara Horne, Michelle Lay, and Ribka Liong

Abstract
This paper details our teams work to date and project plans for Spring Quarter. We will describe how and why our groups focus shifted from project to project. We are confident that we developed through the systems analysis procedure most productively and efficiently. Our primary contact in the beginning was Josh Hayes, Mikrons Inventory Manager, and then more than halfway through the quarter, Shawn Fiest became our new, main contact. This change had a positive impact on our teams growth and helped us reach our final proposal. We have confirmed our future plans with Mikron, and intend to solve two projects and hold one project alternative to serve as backup in case problems arise.

Table of Contents

Goal Development Summary Defining Goals Establish Criteria for Ranking

Iteration #1 Iteration #2 Iteration #3 Scrap Management Project Cost Analysis of Warehouse Visual Management of Raw Materials Future Work

Goal Development Summary

In the initial weeks of this project, we used the Systems Analysis method to determine our goals for the project. Goals were established through the following seven critical steps: generalize the question, develop a descriptive scenario, develop a normative scenario, develop the axiological component, prepare, and objectives tree, validate, and iterate. In generalizing the question, we created a well-defined generalizable problem: Mikrons production is chaotic and lacks simplicity, visual cues, and prioritization. Josh Hayes is the Inventory Manager, and was our primary contact in the beginning stages of our work. He helped us recognize problems with both excess and shortages in raw materials and finished goods. Because of this, we focused our attention on Mikrons supply chain. Specifically, we were interested in the forecasting models. We then moved to the next stage, develop a descriptive scenario. The descriptive scenario is a bottom up analysis that describes the operations as they exist today. Mikron produces finished goods using a combination of make-to-stock and make-to-order. They work to maintain large amounts of finished goods, and they having problems with their raw material levels. They either have too much and it clusters their plant in an unorganized fashion, or they have too little and cant produce. These problems stems from both the short lead time and the unpredictable demand. Demand forecasting is built by analyzing data from previous years and with some customer collaboration. Visual management seemed to be lacking across all parts of the facility. After the development of the descriptive scenario, we moved onto the development of the normative scenario. The normative scenario describes ideal operations. In ideal operations, Mikron would have a precise forecasting system, whether this be a simulation or be building better relationships with customers. More precise forecasting would enable ideal inventory management. Non-consigned raw material levels would be low, and all raw materials would never be in short supply. There would be ideal communication, both internally and externally. The plant would become a visual factory, containing clear visual feedback systems and the use of an organizational methodology. The development of our normative scenario led to the development of our axiological component. The axiological component relates to human values and beliefs and identifies the stakeholders involved in the project. We identified the following stakeholders: operators, management, Quanex, customers, suppliers and our team. Finally, based on the gathered information, we formed an objective tree, which is a graphic display of the determined goals. In words, we determined that the goal of our project is to increase Mikrons profit by decreasing the amount of chaos. Specifically, we seek improvements in supply chain management and its product throughput. We can improve the supply chain integration by focusing on improvements in forecasting and communications between departments in the company. To maximize throughput, we think that it is necessary for Mikron to improve workers productivity, utilize machines as efficient as possible, and maximize the space usage in the plant as best as possible. Developing these initial goals required extensive validation and iteration.

Defining Goals
Moving from old goals to new goals ...are you going to talk about how our goals shifted here? - i think this part would be helpful to understand our process. Mikron is chaotic and we are seeking to reduce the chaos???

Establish Criteria for Ranking maybe move to back of paper???

We looked at five specific IPs, and they are as follows: economic impact, social impact, time frame,

data accessibility, and management support. These IPs will be briefly defined below and later discussed in our ranking of our final alternatives. Economic impact quantitatively evaluates the financial impact, including potential profits and the implementation costs, of each project. With a scarce nine weeks to gather data and make recommendations, available time maps out the expected timeline of each project in order to access its time frame feasibility. Data accessibility is applied in conjunction with available time. Accessibility is determined by three sequential questions. Does the required data exist? If not, do we have a means to obtain the data? If so, what is the time frame for achieving this? Social impact is not quantitatively defined, but to consider the implementation of certain projects, it must be identified. Mainly, this identifies how the culture within Mikron is going to be impacted, identifying areas such as work scope and work load. The final IP is management support, which is a rank given to each project by our client. This identifies the projects which they see most applicable and beneficial.

Feasibility in Implementation The purpose of a feasibility assessment is to determine whether the project can proceed into the design phase. This is based on two criteria: the project needs to be based on an achievable idea, and it needs to be within cost constraints. It is of utmost importance to have an engineer with experience and good judgment to be involved in this portion of the feasibility study, for they know whether the engineer's project is possible or not time frame The time constraint refers to the amount of time available to complete a project. The cost constraint refers to the budgeted amount available for the project. The scope constraint refers to what must be done to produce the project's end result. These three constraints are often competing constraints: increased scope typically means increased time and increased cost, a tight time constraint could mean increased costs and reduced scope, and a tight budget could mean increased time and reduced scope. available data Management Backing economical impact social impact

Our paper will continue by detailing our project alternatives. Only our final alternatives will be formally ranked with the above IPs. We did however roughly use these criteria to throw out or keep project alternatives as they developed.

Iteration #1
The first iteration was the list of our possible projects after our second meeting with Mikron. During this time, we hadnt really communicated that much with the client and we mostly thought of these projects by brainstorming and developing our objective tree. After a plant tour and discussion about our class, we decided to choose four possible projects that would seem to be suitable for us to do next quarter. The four projects are: Supercoat Paint Facility, Visual Management on the production line, Machine Dies, and a Forecasting Model. Supercoat Paint Background

The Supercoat Painting Area is a small confined space inside the production plant. After analysis we determined this project feasible. Problem The paint area poses many problems: Poor area layout No standardized work Wasted paint (expensive) Incorrect use of kanban cards for paint ordering Poor process flow Goal Improve the paint facility economically, socially, and environmentally. We would save money and improve worker satisfaction by standardizing the layout of the area and the flow of processes. Reduce wasted paint and costs by simplifying the paint ordering process by utilizing kanban cards. Reasoning it Infeasible Although this project seemed to be feasible as our capstone project, after another discussion we learned that Mikrons parent plant in Kentucky is currently improving their Supercoat area. The Kent site plans to adopt the methodology of Kentucky, which means that any recommendations or implementations we make would be inevitably discarded. Because of this, we discarded the project. Machine Dies Background The machines that Mikron uses to produce various extruded products employ a wide array of separate parts called dies. For a machine to properly extrude it requires 3 dies. Problem The dies are very heavy and are not located near each other. It takes a lot of time finding, reaching, and collecting all three together. Goal The goal is to rearrange the sorting of the dies to reduce risk of injuries and time required to collect them. Reasoning it Infeasible Mikron has over than a thousand dies in the whole plant, and each die can be used several times to produce a product. That means that we would have to locate die and document each possible combination of the dies. This would require extensive work with operators and theyre time is precious. After collaborating with Josh, we determined that this project had low economical impact, minimal management support, and was therefore not worth the effort for either Mikron or us. Forecasting Model Background In our first meeting, our client wanted us to focus our expertise on improving their supply chain. Mikrons customer demand is highly variable and fluctuates with the demand of the construction market. Currently, accountants work with the inventory manager to predict demand and drive the ordering schedule. No software, simulation, or in depth analysis is used. Problem

Mikrons inability to forecast accurately causes lots of chaos further upstream. Their current forecast model has led them to run out of raw materials too often. When they cant produce, they meet demand, and when they cant meet customers demands, they lose profit and credibility from their buyers. Goal Our goal was to increase Mikrons forecasting system to better predict customer demand. This would help reduce a significant amount of chaotic production at Mikron and have a large economical impact. Reasoning it Infeasible Despite how profitable this project is, we deemed it infeasible for us to do in three months. Indubitably, we would want to tackle this problem because it would benefit Mikron very much by giving them better prediction about the fluctuation in the market. The problem, however, we do not really have a background in supply chain or financial statistical analysis. Also, the project would require us to constantly communicate between vendors and buyers to be able to predict future demands, which is out of our scope. Visual Management Mikrons production floor is very loud and every person inside must where earplugs, yet nearly no visual management exists in the facility. Work is communicated on a need to know basis and work progress is difficult to track throughout the day. We quickly recognized the need for visual signals and tracking to improve Mikrons success. The plant lacked any indicators of work in real time, kanban cards/boards, andon lights, and floor tapes. The presence of these signals will definitely help the workers in indicating problems and increase production. Our client agreed that it would be a feasible project to do in the following quarter. Further development of this project will be discussed in Iterations 2 and 3.

Iteration #2
At this time, we have crossed off three of four alternative projects from our original list. We also gained a new contact at Mikron, Shawn Fiest. Shawn is shadowing Josh for a few weeks and will eventually take Joshs job and Josh will be promoted. Shawn has an experienced background in Industrial Engineering and is enthusiastic to solve problems at Mikron. One meeting, we collaborated with Josh and Shawn and mapped out a tree of all problems at Mikron using sticky notes. We categorized them and flushed each problem down to a potential solution. This helped us develop two new project alternatives: the Quality Control Inspection and the Warehouse Cost Analysis. We also further explored the idea of incorporating visual management tools on the plant floor. Quality Control Department Improvement Aaron Warehouse Cost Analysis - Ribka discuss briefly here Visual Management Background As indicated in Iteration # 1, we have decided to further develop a project that incorporates visual management to reduce the chaos at Mikron. We have collaborated with Josh and now Shawn as well and narrowed the scope of this potential project. We will focus this project on the receiving department for raw materials.

Problem Mikron uses primarily uses six different raw materials in their production. However, each material has different lead times and contracts that range anywhere from 3 to 90 days. Currently, the ordering manager is not often completely certain how much material they have on site. Goal Our goal is to simplify the order scheduling by making the current levels of these six raw materials visual from inside the factory floor. We have determined this project feasible and will further develop it in the next iteration.

Iteration #3
At this point, Josh has been promoted and Shawn has become our teams main leader at Mikron. His background and enthusiasm helped our team reason through our most current list of project alternatives as well as develop a new one. As a group we have decided to throw out the Quality Control Project but further explore the Warehouse Cost Analysis and Raw Material Visual Management Project. Shawns new proposed project is improved Scrap Management. This is our third and final iteration. Our exploration of Mikrons problems has been thorough and these remaining projects are the most feasible and help us reach our goal most effectively. Each projects contains multiple components and offers flexibility in its completion. We will detail each of our final project alternatives below. Scrap Management Project Background Currently, Mikron recycles some of their scrap in-house and outsources the rest of it to a local company called National Polymers Inc. (NPI) to recycle it for them. Mikron buys the recycled scrap back for a net cost of $.20-$.30/lb. Mikron believes they are wrongly outsourcing some scrap that they could manage in-house, thereby incurring unnecessary costs. The primary driver for this project is an economical incentive, but there is also a social as well as environmental aspect that is described in Obstacles & Issues. How Scrap is Produced The extrusion machines have long start up and shut down times. Therefore, Mikron runs as few machines as necessary at a time and runs each one for multiple days at a time (typically three days). Scrap is produced in one major way. To best understand scrap production, assume the machine is currently running, and if scrap is contaminated it may NOT be recycled and must be thrown away. Contamination occurs three ways: 1. Warm scrap fuses with other warm scrap of different color 2. Warm scrap collects or mixes with dust, dirt, or garbage 3. Hot off the machine scrap is waded up and it cooks itself from the inside out causing discoloration and a change in crystalline structure When the operator completes a batch, scrap forms while he works to halt material flow. Next, new material to match the new batch order is obtained. If the operator does not recycle the old scrap on the ground before running new material he risks contaminating the scrap. Then, the operator must obtain dies (extruding tools that mold the material into the correct shape) and calibrate them correctly to the new batch of material. Variation in the materials formula makes calibrating the dies difficult and timeintensive. This step is where majority of scrap is created. As the operator works to calibrate and secure the dies, warm material falls onto the floor as scrap. Here is where the biggest problem lies. While the material is warm, it is easy and tempting to wad it up into ball. Wadding makes it more manageable for

the operator to carry to either the scrap recycle bin or the garbage. If the scrap wads up while it is too hot it will contaminate itself. Problem with Scrap Recycling Three major problems exist: 1. Scrap is not managed well and is contaminated and wasted 2. Recyclable scrap is too large to be recycled at Mikron and must be outsourced to NPI 3. Some of the scrap sold to NPI was in error and could have been recycled in-house Mikrons recycle grinder is only able to process scrap within dimensions of 1 ft tall x 4 ft wide (any length is acceptable). Currently, the operators discretion determines the scraps recyclability. If he believes it has not been contaminated then he must decide if it may be recycled in-house or not. If he believes the piece of scrap will fit in the grinder he sorts it into the recycle bin, otherwise it goes into the outsource bin. There are no set standards to manage the scrap sorting. Scrap to be outsourced is sold to NPI at $.05/lb then the scrap is ground up at NPI, and Mikron buys it back for $.25-$.35/lb. Goal After analyzing the current situation and developing an outline for this project, we determined it feasible. The primary goal of the Scrap Management Project is to improve Mikrons scrap management by reducing the amount of scrap outsourced in error. Secondary goals are to reduce the amount of contaminated scrap and outsource-required scrap created by redesigning the recycle process and creating recycling standards.
Table 1. Display of Scrap Management decision matrix. We will reduce the Type II Error highlighted in yellow.
RecycleDecision InHouse Capable Outsource Required InHouse Correct Accept Incorrect Accept OutSource Incorrect Reject Correct Reject

ScrapType

Obstacles & Issues This project has several components and therefore varying obstacles and issues we must consider. Social We will require input from operators to improve our understanding of the process, but getting time to talk to operators has proved difficult so far. Also, whatever changes we make will affect the operators daily procedures. This impact of the operators day-to-day activities must be taken seriously. We need their full buy-in regarding whatever we propose/implement. Since management supports this project, we are confident this wont be a large obstacle. We are also going to redesign the process in which the operator recycles the material and also the recycle bins to increase the probability that the scrap is good, clean, and recyclable. Therefore we must consider worker ergonomics and workload. Environmental We are improving the recycle process and therefor there will be a positive environmental impact because of our project. Risks Our biggest risk is that we fail in implementation because of the 24hr shift. The nonstop action at Mikron will make it difficult to test any potential solutions as well as train employees on the new

procedures. We will rely on upper management to provide the support necessary to avoid these problems. Future Action To go forward with this project there are many steps we must complete. 1. Define standards for scrap that is acceptable to be recycled and also to be recycled in-house 2. Conduct experiment to determine how much scrap is currently outsourced in error according to standards 3. Research competitors of NPI in local area a. Better understand the selling-buying process between the two parties 4. Better understand scrap production 5. Determine recycle process and bin design to optimize probability that scrap is recyclable 6. Measure success of our implementations We expect our project to significantly reduce the amount of scrap Mikron outsources in error as well as the amount of outsource-required scrap they produce. Our project implementations will be secure and withstanding after we leave and will help Mikron manage their scrap in a simple and visual manner.

Cost Analysis of Warehouse

Background Four years ago Mikron downsized from five facilities to one and now space utilization is very important. Unpredictable customer demand has led Mikron to maintain a staggering 15 days worth of finished goods, which occupies a significant amount of the facilitys realty. In fact, they currently use the parking lot to meet the required area to contain all the final products. This situation is inconvenient for the operators and made the inventory management chaotic. We talked with Mikron about reducing the amount of finished goods they stored, but because of variable demand and their poor forecasting ability inventory reduction is not favorable. To solve this problem, they are considering purchasing a new, sufficient warehouse to hold finished goods. Problem Mikron fails to meet customer demand because they are not holding the specific product demanded. Also, the abundance and poor organization of inventory creates a chaotic work environment at Mikron. Goal We will determine if purchasing a new warehouse is an optimal decision for Mikron in their current state as well as their predicted future state. We will develop a formula to conduct the analysis and leave with Mikron in case future analysis is required. We will not take action to purchase a new warehouse but we will make recommendations regarding next steps Mikron should take. Planning When developing the overall plan for an efficient, economical move; we considered the following elements: merchandise, building, services, equipment and handling methods, layout, organization, people, and security. We should estimate the amount of space required in the new warehouse by analyzing their history of sales as well as how many finished goods they currently hold in stock. We also must take the material handling operations accommodation into our consideration. Since the final products not only must be stored, but must be handled in and out easily. Therefore the physical size of the new warehouse must support it. Some of the characteristics that we should we consider include: Loading docks, ceiling height, aisle space, doorway height and width, outside dock doors size, interior doors should be large enough for lift trucks and carts, ramps, stairwells, and OSHA standards for fire code and safety.

The next step is to consider the handling methods. We must define how final product is to be put away and picked. The speed and volume of inventory turnover will determine, in large part, the type of operation and the kind of equipment needed to perform these functions. In order to move to a new warehouse, we must know how to layout the new warehouse; for example the appropriate aisle width for the material handling and all the bins, shelves, racks, conveyors and bulk areas must be laid out to make certain the inventory fits. Cost Analysis After we complete the planning and found the appropriate new warehouse that fulfills Mikrons entire requirement; we will do the cost analysis. The cost analysis will justify whether the decision is economically appropriate and suitable with Mikrons Budget. These are the categories of the warehouse cost analysis: 1. Handling the handling cost includes moving the final product in or out the warehouse and the labor used to handle the product that moves through the warehouse. It includes receiving, put-away, order selection, and loading. It also may include labor to re-warehouse, repackage, or refurbish-damaged product. Handling also includes all costs associated with the equipment used to handle product in the warehouse, such as the depreciation of equipment cost, and the cost of fuel, or electricity to power the equipment. Other handling expenses are the detention of truck or rail cars, operating supplies, and trash disposal. In effect, handling includes all those costs that are associated with moving the products. 2. Storage. Storage expenses are related to all unmoving products. These costs would be incurred whether or not any product ever moved. Storage expenses are related to the cost of occupying a facility. Storage is expressed as a monthly cost. 3. Administrative Operations. These expenses are incurred to support the operation of the distribution center. These expenses include costs for line supervision, clerical effort, information technology, supplies, insurance, and taxes. This also embodies management, staff, and general office expenses. Allocation of such expenses will require knowledge of payroll.

A detailed breakdown of each category is described in Figure 2 below.

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Figure 2. Cost breakdown of Warehouse Cost Analysis Project [source]

Obstacles & Issues The most difficult aspect of this project will be obtaining accurate costs for our analysis. We will analyze historical data, input from management, and outside research to create our formula and to solve it.

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Since some costs are variable we will conduct a sensitivity analysis that will help make the analysis more flexible. This project is primarily driven by an economical incentive. But if purchasing a new warehouse proves to be economically feasible, then we believe it will have a positive social consequence also. This is because the new warehouse will free up a lot of congested space on Mikrons floor, which will reduce chaos and increase employee satisfaction in their work environment. Risks No foreseeable risks will limit our ability to conduct this analysis. We are confident we are trained and experienced enough to complete the analysis accurately and timely. The only potential risk is that the construction market rises significantly and Mikron has a more urgent need to expand their business to stay competitive. If this was the case, Mikron may decide to purchase a warehouse or new facility without waiting for our analysis. Future Work As described above, we first need to map out a formula that contains all elements involved in the cost analysis. Then we must integrate flexibility into the formula to account for variable costs. Then we need to collect data, analyze, research, and collaborate to obtain costs for each element in the formula. We will then make a recommendation to purchase a new warehouse to store finished goods or not.

Visual Management of Resin

Background Making work at Mikron more visual has been on our mind since our arrival. Through our iterations we have narrowed the scope of our visual management project to the raw materials ordering area. Resin is Mikrons most widely used raw material. Currently, Mikron stores resin on rail cars out back. It is on consignment, which means they do not pay for it until they use it. Mikron also has ample space out back to store up to a months inventory of resin. In theory, Mikron should never run out of resin. But, occasionally they do, and when it happens it is a very big problem. Problem Mikron sometimes runs dry of their main ingredient, resin. They have ample space to store the resin on consignment, but do not fully utilize the space. Often times, assumptions are made about the amount of resin on hand without any kind of validation. The problem arises when consecutive incorrect assumptions are made about the resin levels. When Mikron runs out of resin, production completely stops and every minute wastes $1000s while management frantically orders more material at an expedited and costly rate. Goal Our goal is to stop Mikron from running out of resin unknowingly. We will accomplish this by making the amount of resin out back visually accessible from inside the plant. The visualizer will be simple to understand and updated in real time to ensure accuracy. Obstacles & Issues We expect to have obstacles from the current team in charge of Mikrons raw material ordering schedule. They have always worked in a specific way and our implementation will likely change that. We need to be sure that our implementation does not cause the employees to work more, but to work smarter. We are confident that this will not be a large problem because of the strong management support for this project. We hope that our visual display of resin levels will improve worker satisfaction because it will provide important information publicly and in a simple manner.

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Risks No major risks exist for this project. As long as we continue to have managements support, this project is feasible. Future Work As shown in the IP Ranking Chart below, this project is our lowest priority. But this project is simple enough that if we experience roadblocks with another project partway through the quarter, we can switch our focus to this project. At this time, we are tabling this project until we get a better understanding of the workload required by the previously two mentioned projects. If time permits, we will attack this project and at the very least make recommendations for how and where Mikron should integrate visual signals. Insert revised ranking chart with correct metrics and numbers for only FINAL PROJECTS here

Conclusion

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