A COMPREHENSIVE STUDY ON THE RELATION BETWEEN WORK IN PROCESS AND THROUGHPUT TIME

SUBMITTED TO : Ms. Girja Jha SUBMITTED BY : Vineet Kaushik COURSE : M.FTECH

WORK IN PROGRESS
What is WIP?
WIP is actually an inventory account that represents the value of

materials, labor, and overhead that has been issued to manufacturing but has not yet produced a stockable item. Raw materials are stored at the manufacturing site where later they become finished goods and are then sold, but there is a void between raw materials and finished goods; this is WIP. Work in process consists of products that are in the process of being manufactured or fabricated but are not yet complete. Work in process consists of the costs of direct materials, direct labor, direct purchased services, and indirect costs, including general and administrative costs, used in producing an end item Work-In-Process (WIP) consists of the unfinished products in production processes that are either being fabricated or waiting in a queue or storage.

Application of WIP in industries

Each employee is a capital asset; when an employee engages in

their services they are creating WIP and should be billing for this time accordingly. At the end of the project the services complete the final good which is usually delivered to the client in a professional opinion. Then the bill goes out. Next comes your favorite question, Why is my bill so high? Maintaining WIP costs money, takes up space, limits other investment opportunity, and, even worse, it can represent an unfinished good of an already obsolete product. Now, add in the dynamic of supply and demand and your WIP could represent raw materials bought at a higher price than current market value.

Tracking Work-In-Process

 Tracking WIP is an essential part of garment manufacturing industries

these days Electronic Product Code (EPC)/Radio Frequency Identification (RFID) technology is enabling companies to reduce costs and overhead by creating visibility into inefficient work-in-process flows. In a Work-in-Process tracking solution, EPC data is collected as items move through production stages and provides an accurate and complete record of components and assemblies as they come together into a finished product. This helps manufacturers accelerate materials management within a plant floor and better manage assembly automation, track plant floor assets, and manage inventory. EPC data collected as items move through the production stages is linked with data from testing and quality control systems to provide a detailed, auditable history of manufacturing activity. This information provides visibility into work-in-process, which would otherwise remain largely hidden from view. With accurate WIP tracking, labor costs associated with tracking materials and equipment during the assembly process are significantly reduced. In addition, WIP tracking strengthens the audit trail, and enables warranty tracking for raw materials and components, as well as making it easier to comply with regulations and mandates

Benefits of WIP Tracking Solution

Bar Codes provides highly reliable identification and tracking.

RFID is also reliable and provides enhanced efficiency, can allow for multiple reads at one time, and work in extreme environments such as high heat, vibration, moisture and chemical exposure. Reduce Human Errors and improve accuracy Identify and record in real-time components, assemblies and other work-in-process. ROI is attainable and measurable providing lower labor requirements and errors will reduce costs. RFID tags are rewritable and do more than just identify they can have pertinent information updated throughout the production process (i.e. configuration information, operator and inspector IDs, quality control test results, data from sensors, time stamps, lot numbers, and much more.)

THROUGHPUT TIME

TPT is the time taken for a product to come out from the particular production facility, once it is entered there. For an example if we feed the raw materials today to the lines, if we can get the finished products in two days out of the production facility, we call the TPT as two days. an order routing line to the last production step including all running, transport, control and all waiting time. Manufacturing throughput time is defined as the length oftimebetween the release of an order to the factory floor and its receipt into finished goods inventory or its shipment to the customer. The amount of time required to turn raw materials into completed product is called throughput time, or Manufacturing cycle time.

The throughput time is the period of time between the first step of

Application of TPT in industries

Reductions in manufacturing throughput time can generate numerous benefits, including lower work-in-process and finished goods inventory levels, improved quality, lower costs, and less forecasting error More importantly, reductions in manufacturing throughput time increase flexibility and reduce the time required to respond to customerorders , this can be vital to the survival and profitabilityof numerous firms, especially those experiencingincreased market pressures for shorter delivery lead times of customized product.

Calculation of Throughput Time

Throughput time or manufacturing cycle time is an important measure of internal business process performance.

Throughput (Manufacturing Cycle) Time

The throughput time or manufacturing cycle time is made up of process time, inspection time, move time, and queue time. Process time is the amount of time work is actually done on the product. Inspection time is he amount of time spent ensuring that the product is not defective. Move time is the time required to move materials or partially completed products from workstation to workstation. Queue time is the amount of time a product spends waiting to be worked on, to be moved, to be inspected or to be shipped. Formula: Throughput time = Process time + Inspection time + move time + Queue time Example Novex Company keeps careful track of the time relating to orders and their production. During the most recent quarter, the following average times were recorded for each unit or order:

Wait time Inspection time Process time Move time Queue time

17.0 0.4 2.0 0.6 5.0

Goods are shipped as soon as production is completed. Required: Calculate the throughput time or manufacturing cycle time. Solution: *Throughput time = Process time + Inspection time + move time + Queue time 2.0 days + 0.4 days + 0.6 days + 5.0 days = 8.0 days

RELATIONSHIP B/W WIP THROUGHPUT TIME

The relation between WIP and TPT is known as Littles Law. Littles Law states that The average number of customers in a system (over some interval) is equal to their average arrival rate, multiplied by their average time in the system. WIP =TPT*CT Where: TPT= Throughput (arrival rate). This is the velocity or speed of production. It is calculated by determining how many items are produced and dividing this by the length of time it took to produce them, but it can of course, be computed from Littles Law; TPT = WIP/CT

CT = Cycle Time (average time in the system). This is the time it takes to complete the production cycle or the average time it takes to produce one unit. Generally, cycle time requires either direct measurement to determine (technically very difficult) or can be computed from Littles Law (one of the powerful things about this Law as we shall see); CT = WIP/TPT WIP = Work in Process (average number of units/customers in a system). This is the number of items currently in production or being serviced in some way. Again, this figure must be measured (counted) directly or can be computed from Littles Law.

A Production Example
Lets assume we are running a process where throughput (TPT), the number of units we produce, is equal to 25 units per day. Our work in process (WIP), the number of units in various stages of production, remains

relatively constant at 100 units. Given these conditions, our cycle time, the average time it takes to complete one unit, would be 4 days (CT = WIP/TPT, CT = 100/25, CT = 4). This means we can accommodate new orders of 25 units each day and the system remains in balance. But suppose one day, we receive orders for 60 units 35 more than the standard order of 25. WIP would increase from 100 units to 135 and with TH remaining constant at 25 units per day, CT would immediately increase from 4 days per unit to 5.4 days per unit. The increase in orders (normally considered a good thing), immediately causes a decrease in production efficiency (a bad thing). This is one of the strange but accurate implications of Littles Law, significant levels of new orders cause production efficiency to decrease. Adding to the confusion is that delivery promises made to customers at the time the orders are taken are typically based on historical cycle times in this case 4 days. But the very act of taking these orders has increased the cycle time by 35%, making it impossible to meet the delivery times promised. Beyond the obvious results of missed delivery dates and cancelled orders, the impact of this may include an increase in inter-departmental squabbling. Marketing blames slow Operations for the missed deliveries and Operations blames Marketing for over-promising on delivery dates to make sales. Both are victims of Littles Law. If your organization is confronted with sources of friction such as this, you may want to conduct a little operations research to evaluate the extent to which Littles Law is at work in your organization. Chances are youll find it is with a vengeance.

SUPERB CASE STUDY ON RELATION BETWEEN WIP AND TPT

The C17 Globemaster.In the early years, production of the C-17 was fraught with problems. There were quality issues, significant cost overruns and aircraft were constantly delivered late to the customer, in this case, the U.S. Air Force. Exhibit 1 details delivery times relative to schedule for every C-17 delivered to the Air Force for the years 1992 to 2000. Negative numbers indicate delivery was behind schedule, positive numbers indicate delivery was ahead of schedule. Notice the negative numbers in 1992 and 1993, indicating late deliveries (slow cycle times). The improvements in 1993 and early 1994 gave program managers at Boeing some hope they felt they were making progress and deliveries would soon be on schedule. But when it became apparent that plane number 12 was going to be significantly behind schedule, Don Kozlowski, General Manager of the C-17 program, came to the realization that to have any hope of meeting the delivery schedule to the Air Force, things were going to have to be done differently. What he did was revolutionary; temporarily take airplanes out of the workflow (reducing WIP) so that cycle times improved. In other words, Don reduced the time it took to assemble a C-17 by stopping work on selected C-17s in production. At the time, aircraft moved through various stations on the assembly line with a specific set of tasks conducted at each station. Keeping the aircraft moving through the stations was paramount. Even if all the tasks at one station were not completed, aircraft were moved to the next station where personnel played catch-up in assembly. Boeing believed it had to keep the planes moving to meet the schedule. What Don Kozlawski did was make quality king, dethroning the schedule as the critical driver of production. He decided no plane would move forward in the production cycle until all tasks associated with that station were completed and completed well. This meant there would be stations where assembly teams would have nothing to do while they waited for the station ahead of them to complete their tasks. These planes in waiting were essentially taken out of the workflow (temporarily reducing WIP) while work progressed on the plane holding up production. Once the plane holding up production was capable of moving ahead to the next station, all planes in the workflow would move forward and work on them would proceed. In this way reduction in WIP leads to increment of CT and thus customer starts getting the products without any delay

 The material inside the inventory is not kept for long time and thus the cost of keeping the material safe is reduced Overall increase in production and helps in building confidence of customers The money starts coming earlier than expected time and thus can be invested to earn more IN THIS WAY APPYING THROUGHPUT TIME AND WORK IN PROCESS SMARTLY CAN GIVE EXTREMELY GOOD RESULTS IN PRODUCTION INDUSTRIES (especially in apparel industries)