Hub Manufacturing Cell: Jet Engine Hubs

Submitted in partial fulfillment of the requirement of the course

Manufacturing Operations Management

Instructor: Prof. Prahalad

Submitted on March 7th, 2016 by

Study Group B5
Karandeep Singh
Kumar Abhijeet
Namrata Yadav
Sajal Jain
Vaibhav Garg

Background
The aviation industry is currently in the midst of a severe downturn. A majority of
the companies are seeing red in their bottomlines as they struggle to maximize
profit. In such a situation, the supply chain in the aviation industry is facing severe
cost cutting measures and decreasing traffic. As the aircraft manufacturers try to
gain an edge over their competitors in this market, they need to offer on-time
delivery and high fill rates. Parts distributors are the bedrock of this supply chain.
Avionics firms produce a forecast of what parts are needed and whichever
manufacturer is capable of delivering that order within the forecast period are
accepted by the company in order to drive the risk closer to zero.
Jet Engine Hubs has been facing inefficiencies in the system which has compelled
them to change from a product line manufacturing system to a cellular
manufacturing system. The inefficiencies largely exist because of large lead times.
The initial implementation of the proposal had lead times that were still very high hovering in between 30 to 40 days. The targeted delivery time is 3 days.
The problems associated with large lead time are as follows:
1) The need of large net working capital to maintain the huge work in process
inventory because of the large lead times. Cost cutting measures in the industry
mean that manufacturers who use lesser working capital would remain competitive.
2) Higher inventory holding costs
3) High inefficiencies in the manufacturing process since the current capacity is not
being utilised properly.

Analysis Approach
Objective: Reduce the lead time of the four hubs to the optimal 3 days.
We use the MPX simulation software based on Rapid Modelling. The advantage of
using this software is that the analysis process is highly intuitive. It provides a single
point of control software for the entire system. It also provides numerous tools and
configurations to easily meet the dynamic needs and environments for the factory
in consideration. The basic idea behind the software for the current problem is that
every analytical performance results can be achieved by thinking of the entire
system being made up of different queues and the relationship between these
queues and its operators will generate optimal results. The model incorporates
process variability and can generate lead times, WIP and throughput
instantaneously and also provide an intuitive view of when and where to utilize the
resources in the best way.

Recommendations

Base Case:
Labor
Time
Inspect
or
Machin
st
Prep

No working
Simultaneou
sly
3

Overti
me %
0

% time
Unavaila
ble
5

Repair

10

Action Step: As the Utilization for Lathe and Mill is >95% largely because of Wait
for Labor. On back tracking the type of labor required for mill and lathe work, we
find that Machinst are required for both. Also it can be clearly seen that the
utilization for rework is considerably low. Hence, a labor is cross trained and
transferred from rework to Machinst. This case is considered to be the base case
from this point onwards.
New Base Case
Labor
Time
Inspect
or
Machin
st
Prep
Repair

No working
Simultaneou
sly
3

Overti
me %
0

% time
Unavaila
ble
5

3
2

0
0

5
10

Optimizing the Labor:

Labor
Time
Inspect
or
Machin
st
Prep
Repair

No working
Simultaneou
sly
4

Overti
me %
0

% time
Unavaila
ble
5

4
3

0
0

5
10

By cross training the labor from rework to Machinst, though we have been able to
bring utilization below 95%, to further bring the utilization down, we need to
eliminate the component of wait for Labor as labor is cheaply available. Therefore,
we have added one labor to inspector, Machinst and Prep to obtain the following
utilization.

Altering the Lot Size:

From the Product manufacturing Critical-path Time graph, we notice that Wait for
rest of lot is a major component in the lead time. To reduce this, we alter the lot
size so as to reach an optimum point for Equipment Setup and Wait for Lot.
Hence, altering the lot size as shown in the table below

Hub
Hub
Hub
Hub

1
2
3
4

Initial Lot
Size
40
30
44
30

New lot Size

7
10
10
10

Adding Lathe Machine:

As the Equipment Utilization % for Lathe Machine is above 95%, we plan to buy a
lathe machine. This step is required as the last lead was well up 20 days and hence
buying a lathe machine is required.

Adding Mill:
Mill and Lathe are the equipment that have high dependence on each other. After
buying a Lathe machine, the WIP in mill would drastically increase which is visible
form the high utilization of the Mill equipment. Therefore, we recommend buying of
the Mill equipment at this step.

Machine Overtime:
Even after adding a Lathe machine, the utilization of Lathe Machine is still well
above the permissible limit. Even if we add labor, the utilization would still be above
95%. Hence, at this stage we recommend that machines should be worked
overtime. Following is the list of overtime recommended for each machine.
Machine
Bench
Deburr
Drill
Inspect
Mill
Rework
Lathe

Old
Overtime
0
0
0
0
0
0
0

New
Overtime
10
10
10
20
20
20
20

Labor Overtime:
Adding overtime for Equipment has drastically brought the utilization of Lathe
machine. However, still utilization is above 95%. A significant component of this
equipment is because of waiting for labor. As we are making machines do 10%
overtime, we recommend that we should take 10% overtime from labor as well.
Cost to reduce coefficient of variation and mean time to failureWe plan to improve the performance of machines by implementing timely
inspections. Doing so will reduce the coefficient of variation from 1 to 0.8 and would
enable a smoother output. Also, recommend bring down the mean time of failure.

The above recommendations finally bring the Lead time down to 4.8 days. Though
this is above the required 3 days lead time, the above mentioned recommendations
are easy to implement and very quantitative approach of reducing the lead time.

On retrospection of the above case, we analyzed on how the lead time could be
further brought down. Following are the additional recommendations that we
suggest.
1. During our interactions with people who have worked in factories, we came to
know that overtime in blue collar jobs are usually done for half the shift.
Hence, instead of having 10% overtime for all labors, we recommend
overtime by Machinst by 50%.
2. For smooth flow of WIP, we recommend 50% overtime by Mill and Lathe
Machine.
3. Furthermore, since setup time for RFTURN and FNTURN for Hub1 and Hub2
has high setup costs, we recommend that these times should be brought
down.

Cost implications
Investments
Investment in machinery- We plan to invest in purchasing one milling and one
lathe machine. The estimated cost of buying these machines is 4 lakhs and
3.5 lakhs respectively. Assuming the service life of the equipment to be 5
years with zero salvage value, the annual depreciation of both the equipments
is 1.4 lakh.

Investment in Labor- We plan to invest capital to employ two machinists, one

person for preparation and one for repair. This will amount to additional
monthly labor cost of Rs 40000.
Cost of overtimeMachine: We plan to increase the machine overtime expenditure by
approximately Rs 20,000 per month. This will take into consideration the
machine repair and maintenance cost because of additional machine
operation time.
Labor: The increased overtime cost will amount to approximately Rs 38,000,
taking into assumption that we have used the entire workforce for overtime.
Cost to reduce coefficient of variation and mean time to failureWe plan to improve the inspection of machines by implementing timely
inspections. This system will lead to additional monthly expenditures of Rs
10,000.
Reduction of batch size
The reduction of batch size will result into increase in setup costs.
Training costWe plan to develop the cross functional skills in our organization which will
help us in meeting the increased labor requirement in lathe and milling
departments by using captive labor. This will help us in dealing with
contingencies where labor demand in lathe and milling operations can be met
from other departments.
Benefit from the above mentioned cost implicationsBy implementing the aforementioned recommendations we will be able to
reduce manufacturing critical path time by five times from 30 days to 5.9
days.
Through improved recommendations as mentioned above we will manage to
bring this figure down to three days. This will translate into cost benefits as we
will be able to fulfill many more customer orders. The increased customer
service level will help compensating the increased capital expenditures. This
shows that targeting low lead times is not really a trade off as far as costs is
concerned as it will lead to financial benefits.
Assuming that the industry profit margin is 3-4%, we envisage that through
this reduction in the lead time, we would be able to charge a premium of 3%
to our customers. Also, such a low lead time would give us a competitive
advantage to us over our competitors. Through this addition orders, we would
be able to reduce our expenses because of economies of scales.

Assuming a yearly turnover of 10 crore of company

Increase in Orders due to reduction in lead time 10%

Estimated Revenue for the next financial year = 11 crore

Premium for low lead time = 33 lakhs
Total Cost of all the Recommendations: 15 lakhs
Additional Profit = 18 lakhs.

Appendices for recommendations: Optimization

Flowchart

Yes

No

No

Yes

Recommendations Appendix:
The 5 Action points optimization points as suggested part of a dynamic process as
shown in above flowchart. As it is a trend in the aircraft manufacturing industry to
levy huge penalties for firing the timeline, therefore our prime objective is to reduce
the MCT of operations by undertaking these 5 action points. Our action points are
dynamic because we have to optimize both machine and labor utilization
simultaneously. Addition of additional capacity will reduce the utilization of
machines but will increase the utilization of labor sometimes to more than 100%
which will result in accumulation of WIP at various locations due to labor shortage.
In contrast, just increasing the labor will only

Action Point 1: Labor optimization

We plan to undertake by implementing this by providing cross-training of personnel
at Repair on machining processes as a short term action plan. The Training mode
suggested is primarily OJT (On job training) at the shop floor by a trained Machining
Personnel. Also, addition to the existing workforce at shop floor is required.
Long term action Plan prescribed id a separate training schedule for all the workers
prior to join actual production. Also, Skill matrix of all the labors should be

constantly updated with new trainings and periodic evaluation of skills is to be

performed. Training and evaluation of labor on additional processes should be linked
to Managers and Labors performance to create a checking mechanism in the
system for proper implementation.
Action Point 2: Batch Size Altering
Our suggestion is to implement time base performance measure for batch size
altering as our labor and machine time is primarily constrained. By analysis of
historical records of procurement, batch sizes and MRP, an alteration on all these
needs to be implemented considering the time based approach heuristics. Also, we
need to map the current and future MCT maps for evaluation of heuristic. Also,
periodic audits should be planned to ensure proper implementation and
performance evaluation.
Action Point3: Purchase of Additional Machines
Addition of additional Lathe and Milling machines will decrease the utilization of
machines. However, it will add to additional Capex. Also, the machine time
optimization needs to be done to sync labor and machine utilization.
Action Point 4: Labor Time
The short term action is to initiate work overtime at shop floor to meet the existing
demand.
The long term action plan is to increase the shift of production per day. So this can
be implemented only after addition of sufficient workforce.

Action Point 5: Machine Overtime

As the current utilization is capped at 95%, the other way to increase machine
overtime is by doing kaizen. The procedure should be initiated by a cross-function
team championed by the floor supervisor with members from all the cells as its
members.

Additional Recommendation: Implementation of POLCA

Require merger of lathe and Milling operations into a single cell.

Forming product families requiring similar jobs and initiating POLCA
cards for daily manufacturing scheduling.