Crete an introduction, questions and conclusions, less than 1500 words in word format, it is possible to add more support documents. Questions:
C2Q1 - Create a present-state Vale Stream Map (VSM).
C2Q2 – Perform an assessment of the present-state VSM. Identify, discuss, and if applicable, quantify any problems or areas for improvement.
C2Q3 – Create a future-state VSM. Discuss how the future-state VSM corrects deficiencies found in the present-state VSM. Quantify any impacts on lead time or profitability.
Value Stream Mapping at an Indianapolis, IN Flange Manufacturer Value Stream Mapping at an Indianapolis, IN Flange Manufacturer Author: Craig Seidelson Pub. Date: 2022 Product: SAGE Business Cases DOI: https://dx.doi.org/10.4135/9781529796889 Keywords: manufacturing, inventory, maps, assemblies, distribution, raw materials, drilling, factories, carrying costs, operations management Disciplines: Business & Management, Operations Management, Operations Management (general), Production Management & Planning, Supply Chain Management Access Date: February 20, 2023 Publishing Company: SAGE Publications: SAGE Business Cases Originals City: London Online ISBN: 9781529796889 © 2022 SAGE Publications: SAGE Business Cases Originals All Rights Reserved. https://dx.doi.org/10.4135/9781529796889 Abstract This case is an opportunity to apply the concepts of value stream mapping based on details about a flange manufacturing facility. Value stream mapping is a fundamental lean tool in which flowcharts are used to show all steps involved, from making a product from incoming raw ma- terials to the delivery of finished goods. In this learning activity, use the details provided in this case to construct a present-state value stream map. From this map, identify issues and create a future-state value stream map to address them. Operations management principles, such as takt time, cycle time, Kanban, standard costing, and inventory control will guide this learning ac- tivity. Case Learning Outcomes By the end of this case study, students should be able to: • create a present- and future-state value stream map (VSM) for a manufacturing facility; • assess and correct problems with value streams; • determine manufacturing lead time; • establish optimum inventory levels; and • calculate manufacturing cost. Introduction to the Facility The 200,000 sq. ft. facility shown in Figure 1 has been manufacturing flanges in Indianapolis, IN for the past 50 years. SAGE © Craig Seidelson 2022 SAGE Business Cases Page 2 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer Figure 1. Flange Factory Source: Free to use under Upsplash license Flanges are bolted, steel plates used to connect pipes with one another. Manufacturing of flanges consists of five operations: (1) hot forging; (2) batch normalizing; (3) turning; (4) drilling; and (5) assembly. As is typical of a facility of this age, all production assets are fully depreciated. To address some issues within the facility, senior management has asked for a present-state VSM covering all aspects of flange manufacturing, from incoming raw materials to outgoing finished products. Management has likewise asked for a future-state VSM to address any issues uncovered. Outgoing Logistics Flanges made in the factory are shipped to the company’s distribution center in Muncie, IN (Figure 2). SAGE © Craig Seidelson 2022 SAGE Business Cases Page 3 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer Figure 2. Distribution Center Source: Free to use under Upsplash license The distribution center’s standing 12,000-piece weekly production order is issued to the factory through SAP (enterprise resource planning software). The logistics department arranges for pick-up from the factory’s fin- ished product warehouse every Friday at the end of the production shift for evening delivery to Muncie. Re- cently, the logistics department at the distribution center has been complaining about excessively long manu- facturing lead times as compared to the industry standard of two weeks. Incoming Logistics The factory manufactures flanges from steel bars (Figure 3). Each bar weighs 94 kg and costs USD 88 (ex- cluding delivery fee). The steel bar supplier is located in Gary, IN. The bar vendor is capable of delivering every week, every two weeks, every three weeks, and so forth. The purchasing department issues a pur- chase order (PO) through SAP for 1,000 steel bars to be delivered every four weeks. The transportation cost is USD 300 per truckload. A single truck can carry 20,000 kgs of bar. SAGE © Craig Seidelson 2022 SAGE Business Cases Page 4 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer Figure 3. Steel Bars Made at Supplier Source: Free to use under Upsplash license Every week, the purchasing department at the flange manufacturer sends a USD 700 PO for a single pallet of 25,000 screws. Of that amount, USD 500 is for screws (i.e., USD 0.02/screw). The courier charges USD 200 per pallet delivered. Pallets can hold up to 25,000 screws. The distributor, which is located in Evansville, IN, is only able to offer weekly pallet shipments to Indianapolis out of its warehouse (Figure 4). SAGE © Craig Seidelson 2022 SAGE Business Cases Page 5 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer Figure 4. Screw Vendor’s Warehouse Source: Free to use under Upsplash license Presently, there are 1,000 steel bars and 100,000 screws in the raw materials warehouse at the factory. The carrying cost of steel bar inventory is 3% of the total amount spent on bars in inventory (excluding transporta- tion cost). The annual carrying cost of screws is, likewise, 3% of the total amount spent on screws inventory (excluding transportation cost). Delivery of bars from the vendor in Gary has been an issue. On average, shipments are one day late. Screws, however, are always delivered on time. SAGE © Craig Seidelson 2022 SAGE Business Cases Page 6 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer Manufacturing Operations The flange-making factory is open 50 weeks per year, five days per week, eight hours per shift, and three shifts per day. The production office does not plan for processes to be running for all eight hours in a shift. Actual production time available is assumed to be at 85% overall equipment efficiency (OEE). Hot Forging In the hot forging department, one flange is made from 2 kg of bar stock (not including scrap). Forging involves three steps: (1) induction heating bar to 300 °C (see Figure 5); (2) shearing bar into segments of appropriate length; and then (3) closed die shaping segments. The factory’s two bar forging lines were purchased for USD 500,000 each. Each line is run by a single operator and runs a 90-second cycle time. Uptime in the forging department averages 94%. Scrap is 3%. SAGE © Craig Seidelson 2022 SAGE Business Cases Page 7 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer Figure 5. Flange Forging Line Source: Free to use under Upsplash license Batch Normalizing After forging, steel grains making up the flange are too distorted for machining. Parts must be cooled for a SAGE © Craig Seidelson 2022 SAGE Business Cases Page 8 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer day and then transferred into steel tubs for a batch heat-treating process called normalizing. Approximately 200 parts fit into a tub. The normalizing furnace (as shown in Figure 6) was purchased for USD 1,000,000. Depreciation was done on a straight-line basis over 10 years, as is standard at the facility. One person op- erates the furnace and is capable of processing 250 kg per hour. Uptime is 100%. After normalizing, parts must be placed in a holding area for at least one day to allow them to reach room temperature for subsequent machining. Figure 6. Normalizing Furnace Source: Courtesy Pixabay; used with permission Turning Turning is done on the opposite side of the factory from normalizing and drilling. This is because only the side of the factory where turning is located is plumbed for turning coolant. The turning department has three SAGE © Craig Seidelson 2022 SAGE Business Cases Page 9 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer machining centers (Figure 7), each operated by a single machinist. One turning center costs USD 250,000. Cycle time per machine is 80 seconds. Average uptime in the turning area is 99%. Scrap is 2%. Figure 7. Flange Turning Machine Source: Free to use under Pixabay license Drilling After machining, flange holes are drilled (Figure 8). The factory has six computerized numerical controlled (CNC) drills. Each was purchased for USD 100,000. It takes 160 seconds to drill (and tap) four screw holes. Drilling is highly automated and located adjacent to assembly. One operator runs all six drills. Average uptime in the turning area is 99%. Scrap is 0.5%. SAGE © Craig Seidelson 2022 SAGE Business Cases Page 10 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer Figure 8. Flange Drilling Machine Source: Free to use under Pixabay license Assembly The assembly process consists of placing one screw through each of the four drilled holes in a flange. This process is slow and requires very little skill. One worker can assemble a flange in 120 seconds, and six peo- ple (Figure 9) work in assembly each shift. Assembly workers earn USD 10 per hour. Workers in all other departments earn USD 15 per hour. Average assembly scrap is 1%. SAGE © Craig Seidelson 2022 SAGE Business Cases Page 11 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer Figure 9. Flange Assembly Line Source: Free to use under Pikwizard license Flow Each of the five manufacturing departments is managed by a different cell leader who is in charge of oversee- ing the efforts of production teams. Daily, the production control analyst manually sends a production sched- ule to each cell leader. Some cell leaders have been complaining about lack of product flow. To ensure there is always enough information and work in progress (WIP) inventory flowing in the system, production planners have explained that they should not be responsible for determining the start and stop time of every production job in every department. Lean manufacturing principles require that subsequent (i.e., downstream) operations SAGE © Craig Seidelson 2022 SAGE Business Cases Page 12 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer should determine when prior (i.e., upstream) operations start and stop in real time. Cell leaders agree. Inventory In addition to a lack of downstream pull, cell leaders blame long lead times on low WIP availability. In re- sponse, planners have now placed 45,000 forgings in front of normalizing. In front of turning, there are now 39,000 parts. In front of drilling, there are now 37,000 turned flanges. There are 25,000 parts presently await- ing assembly. To mitigate the risk that production issues could interfere with delivery, management does not want to be mak- ing parts during the present week for that week’s delivery. In response, planners have placed 50,000 flanges in the finished product warehouse. Although management is satisfied that inventory is being used to reduce delivery risk, they are worried about the negative impact inventory is having on profitability. After taking into account floor space, labor, and insurance, the cost of carrying WIP is 2% of inventory value at each point in the process. Value is determined by total material (excluding delivery) and labor cost required to make a finished flange discounted by percentage work completed at each step. Table 1 breaks down percentage of work completed making flanges at each step in the manufacturing process. Finished flange inventory carrying cost is 4% of the finished flange inventory value in the warehouse. Value is determined by the total material (excluding delivery) and labor cost required to make a finished flange. A Table 1. WIP Valuation WIP % completed Post forging 50 Post normalizing 60 Post turning 80 Post drilling 95 SAGE © Craig Seidelson 2022 SAGE Business Cases Page 13 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer 1. 2. 3. 4. finished flange is sold to the distributor for USD 4.50. Next Steps for VSM Production planners at the factory are working diligently with cell leaders to understand why lead times are so long and weekly deliveries to the distribution center are coming up short. As requested by management, they will create a present-state VSM and a future-state VSM to identify problems and then find a resolution. Although funds are limited because of lower-than-expected profits last year, management recognizes that overcoming issues will likely cost money. Current and future-state VSMs should, therefore, include profitabili- ty calculations. Discussion Questions Create a present-state VSM. What are six problems with the present-state VSM? Create a future-state VSM. The future-state map should address each of the six problems identified in Question 2. What is the future-state map impact on lead time and profitability? Further Reading Rother, M. & Shook, J. (2003). Learning to see: Value stream mapping to add value and eliminate MUDA ( 1st ed .). Lean Enterprise Institute. Verma, E. (2021). Understanding TAKT time and cycle time vs. lead time. SimpliLearn. https://www.sim- plilearn.com/time-confusion-cycle-time-takt-time-lead-time-part-1-article https://dx.doi.org/10.4135/9781529796889 SAGE © Craig Seidelson 2022 SAGE Business Cases Page 14 of 14 Value Stream Mapping at an Indianapolis, IN Flange Manufacturer https://www.simplilearn.com/time-confusion-cycle-time-takt-time-lead-time-part-1-article https://www.simplilearn