Please help with this one!!

Mini-Case 1 TWI Industries 4 Adapted from Learning to See Version 1.3, by Mike Rother and John Shook, Lean Enterprise Institute, Inc. (Cambridge, MA) June, 2003. Used with permission. (revised 11/3/2015) Steering Arm Value Stream: Future State In the current state, the Steering Arm Value Stream shop floor was swamped with orders due to the long lead times. Because of the long lead times, the order quantities were changed after they were issued. The result was a lot of juggling of the production schedule to expedite urgent customer requests. Over a six month period, the Steering Arm Value Stream made changes and improvements, arriving at the future state. TWI decided to release production orders in 30- minute production increments (pitch) to a newly configured Weld & Deflash cell and have production proceed on a FIFO basis from that point. The Weld & Deflash cell draws materials from rods and forgings parts supermarkets restocked by the cutting and machining cells using a kanban system to avoid overproduction. By limiting overproduction and variability, the lead time from the weld schedule point has been reduced to three days and the overall lead time is ten days. Because the lead times were shorter, customers could order much closer to the time they actually needed the steering arms, eliminating the need for quantity adjustments. In addition to combining the weld and deflash processes into a single cell, changeover times had to be reduced and machine uptime improved to achieve the desired future state performance. Customers continue to order 24,000 steering arms per month. Each customer order is for 25 200 steering arms, with an average of 50 steering arms per order. Each customers configuration requirements (part numbers and quantities) vary greatly from order to order. The orders are packed in corrugated boxes with each box containing up to 5 steering arms. TWI now quotes a lead-time of 14 days. Despite the much shorter lead time quoted, TWIs on-time shipment rate has improved to 93%. The accounts receivable balance is now $3,122,000. The ending book value of inventory is now $737,600. Compared with their (22,000 square foot) use of floor space in the current state, the Steering Arm Value Stream saved 200 square feet of floor space for every days worth of inventory they eliminated (Inventory at the outside painting process does not occupy space). Combining the weld and deflash processes into a single Weld & Deflash cell saved them an additional 500 square feet of space. The occupancy cost TWI charged to the Steering Arm Value Stream has been reduced by $3.00 for every square foot of space saved. Work time remains 20 days per month, 8 hours per day, with two shifts in all production departments and overtime, if necessary. Workers have two 15-minute breaks per shift, and 30 minutes (unpaid) for lunch. Machines are not run during the unpaid lunch breaks, but the machines can operate through the 15-minute morning and afternoon breaks. Manual processes stop during breaks. Operators and assemblers continue spend the first fifteen minutes of each shift at a production meeting, and the last 10 minutes of each shift engaged in cleaning and 5S activity. Machines are not running during the production meetings or the 5S and cleanup activity. The average time operators and assemblers spend gathering and reporting data and filling out reports has been cut to 10 minutes per day. Machinery can be running while operators are gathering and reporting data. When machinery is down, operators are occupied with troubleshooting and bringing the machinery back on line. Production control: Two people. Customer orders are received 14 calendar days before ship date and are entered in the MRP system. Shop orders with 30 minutes of work (about eighty steering arms) are released in 30-minute increments. Cutting: A manual machine process with one operator per shift. Cycle time: 15 seconds for both operator and machine. Changeover time has been reduced to 5 minutes per changeover. Batch size is now 40. The defect rate remains 0%. Unscheduled downtime has been cut from 8% to 4%. Mini-Case 1 TWI Industries 5 Adapted from Learning to See Version 1.3, by Mike Rother and John Shook, Lean Enterprise Institute, Inc. (Cambridge, MA) June, 2003. Used with permission. (revised 11/3/2015) Machining: An automatic machine process with one operator per shift. Machine and operator cycle time: 15 seconds per forged fitting. Changeover time has been reduced from 2 hours to 30 minutes. Batch size is now 400. The defect rate has been reduced to 1% (all defective fittings are reworked). Unscheduled downtime has been reduced to 1%. Welding & Deflash: The two automatic welders and the deflashing machine are combined in a single cell run by one operator per shift who loads and unloads the machines in sequence as they run automatically. Cycle time: 30 seconds for the operator, and 30 seconds for each machine, a total machine cycle time of 90 seconds for each steering arm. Changeover time has been reduced to 2 minutes per machine per changeover (6 minutes per changeover for the operator). Batch size is now 40. The defect rate for the weld & deflash cell is 1% (all defective units are scrapped). Unscheduled downtime has been eliminated. Painting: Outside process with 2-day lead time. There is a single daily pick-up of unpainted arms and drop-off of painted arms. Defect rate: 0%. Assembly: A manual labor process with five assemblers per shift working in sequence (a reduction from the six assembly workers per shift in the current state). The total labor cycle time per unit is 195 seconds. Changeover time has been eliminated and the defect rate has been reduced from 5% in the current state to 1%. All defective units are reworked with the same 195- second cycle time as in the original process. The manual assembly process has no unscheduled downtime. Shipping: Two people on one shift. They remove parts from the finished goods warehouse, pack them, and stage them for truck shipment to the customer. Purchasing (and material costs): One person. Contracts are negotiated with suppliers of production materials and many other materials and supplies. Materials for rods average $22.00 per rod. Forged fittings average $16.00 per fitting. TWI had to purchase sufficient rods and forged fittings to meet monthly demand while allowing for defective production in processes with less than 100% yield. In the future state, an added $5,280 worth of rods and $11,520 worth of fittings are purchased to replace production scrapped due to defects in the weld & deflash cell. Conversion Costs: The Steering Arm Value Stream conversion costs are unchanged from the current state except for the following: 1. Two of the four current state welding #1 & #2 workers and the deflash workers have been redeployed to other value streams. The workers and their costs are no longer assigned to the Steering Arm Value Stream. (The other costs associated with welding #1 & #2 and deflash in the current state are costs of combined Weld & Deflash cell in the future state.) 2. Assembly workers not needed in the future state have been redeployed to other value streams. The workers and their costs are no longer assigned to the Steering Arm Value Stream. (The other costs associated with the assembly cell remain unchanged from the current state. 3. The need for overtime has been eliminated. 4. The occupancy cost for the Steering arm value stream is reduced by $3 per square foot for the space saved due to the reduction in inventory storage and the space saved in consolidating weld #1, weld#2 and deflash into a single Weld & Deflash cell. Mini-Case 1 TWI Industries 6 Adapted from Learning to See Version 1.3, by Mike Rother and John Shook, Lean Enterprise Institute, Inc. (Cambridge, MA) June, 2003. Used with permission. (revised 11/3/2015) Required Future State: 1. Add a second column to your value stream box score showing the future state. a. Include Sales per person, On-time shipments, Dock-to-dock days, First time through, Average product cost, AR days, and Floor space occupied as your operational measures. b. Create a new worksheet for the future state capacity analysis. The capacity analysis should cover Cutting, Machining, Weld & Deflash, and Assembly. TWI excludes the two 15 minute paid breaks and the unpaid lunch hour from total scheduled time for labor. The machines dont get paid breaks, but they are not scheduled to operate during the lunch breaks. So for capacity analysis, people have 7.5 hours of total scheduled time per day and machines have 8 hours of total scheduled time per shift. c. Use net income plus depreciation to approximate cash flow on an ongoing basis from future current state conditions (that is, assuming inventory accounts receivable, and accounts payable levels are stable at the future state level).