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Schneider Case Study Challenge

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Detailing a solution for the demand spike problem faced by Schneider Electric.

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Schneider Case Study Challenge

  1. 1. Demand Spike at Schneider UNF NIKHIL KEJRIWAL – NIKHILKEJRIWAL.PGP2013@IIMKASHIPUR.AC.IN - 8191898099 PRASHANT GAUR - PRASHANT.PGP2013@IIMKASHIPUR.AC.IN – 8191898040 Team - LeanMeanMen
  2. 2. Schneider Electricals, a global specialist in energy management Schneider plans to launch STAR, a smart UPS in a month time 12 Central hubs across the country asked for 100% stock Current plant capacity is 15000/month, working for 2 shifts/day and 6 days a week 37000 Units required within a month which is 700% of current production capacity Production capacity to be revamped in order to meet new capacity Budgetary constraints , limits investment in any additional machinery and other resources Optimizing other processes to fulfill the spike in demand, reduce wastage and fix other problem areas Executive Summary Production Management More testing machines, layout changes 3rd shift production, Lean optimization Defect prevention and rework minimization Vendor Management Co-invest with suppliers Use simple pull contracts Form Join Ventures Strategic Outlook Schneider Best Practices •A self-help methodology conceptualized and practiced at shop floor. This system provides a scope for seeking help from operators from across the lines to rebalance the workload and also maximize the output from each line through mutual help Mutual Aid Signaling •This denotes the level of expertise of the shop floor workers and also creates a healthy competition among them. This also raises their self-motivation to rise quickly to the level of “expert”, who also act as mentors Color-coded Collars
  3. 3. Current Value Stream – Problem Area Identification • Build line & Testing process is the bottleneck process as its cycle time is greater than the Takt time • Push type production: each process produces and pushes the material as per the schedule received from factory planner instead of the actual needs of the downstream customer process Inventory is being observed at all the workstations . Overproduction More storage space is needed, hence more people are needed to handle this inventory Storage Due to improper online programming of microcontroller at ICT tester, defects can only be identified after the assembly Rework Closing the top cover of the unit causes delay due to a short screw length, Product design hinders assembly of switch & selector PCBA, Manual tightening is time consuming Manual Work for parts due to low on-time delivery of plastic parts, damaged or inferior components, high changeover times Waiting Testing process - high testing cycle time, serial placement of testing machines Motion Process Time/Units Current Takt Time 87 sec Production Lead time 2.95 days Low value added Ratio 0.6% Production Per month 15000 units Star model 5000 Units Other Products 10000 Units Process Workers Inventory CT SMT 3 50 0.33 THT 1 20 0.3 Slide line & Wave 6 20 0.27 Lead Cutting & Touch Up 3 42 0.39 ICT 2 12 0.41 Build Line & Testing 10 36 1.22 Boxing 1 5 0.36
  4. 4. Supplier Central Warehouse Factory Warehouse Manufacturing Facility Distribution Centers Consequences of the spike in demand • Overall demand in July = 37000 units of STAR + 10000 units of other products = 47000 units • New Takt time = 45 sec (435 min per shift *3 shifts * 60sec * 27days / 47000 units demand) • Cycle time (max.) is more than the Takt time for ‘Build Line & Testing’ process (1.22 min = 73 sec) • Supplier: Current supplier capacity may not be sufficient to meet the demand spike of UNF plant • Warehousing: Central warehouse space may not accommodate the rise in parts quantity • Testing machine is at capacity and cannot meet the requirements of the new Takt time Flow of Material in the system • Distribution Centre: Insufficient space available at distribution center • If assurance of similar demand for STAR fails in later months, additional investment may lead to excess capacity • Cannot buy any number of machines to increase capacity due to limited funds • Workers may not easily accept to work for this increase in demand • May need to hire more workers for the 3rd shift • May need to employ more trucks for raw material and finished goods transportation
  5. 5. Value Stream Mapping 0.018 days 2.87 days 2.89 days 0.62% 26*3 = 78 Value Added Time Non-Value Added Time Production Lead Time Value Added Ratio Manpower FutureState - 3 Shifts LT : 3.4 PT : 1.3 CTMAX : 0.33 CO : 5 #Persons :3 Supplier : A1 China Capacity : 5000 units DistributionCentre -Req/Month= 47000 units -Req/Shift=581 units(27 workingdays, 3 shift) out of which460 are of STAR -TaskTime = 45 sec 50 ERP Factory Warehouse SMT THT Daily Weekly/Monthly PO Weekly Central Warehouse Monthly Daily Size = 1400 units/day 600 20 LT : 0.9 PT : 0.4 CTMAX : 0.3 CO : 5 #Persons :1 Slide Line and Wave 20 LT : 2.1 PT : 1.6 CTMAX : 0.3 CO : 5 #Persons :6 42 LT : 3.2 PT : 1.8 CTMAX : 0.39 CO : 0 #Persons :3 ICT 12 LT : 2.5 PT : 0.8 CTMAX : 0.41 FPY : 94.2% #Persons :2 Lead Cutting, Touch-Up 36 LT : 9.3 PT : 6.3 CTMAX : 0.73 MDR : 12000 #Persons :10 Building & Testing 5 LT : 2.6 PT : 1.8 CTMAX : 0.36 CO : 0 #Persons :1 Boxing 15 0 Reduce changeovertime to 5 minusingSMED Reduce defectrate using root cause analysis Reduce CT to 44 sec (0.73 min) by procuring2 more testingmachines Material Transfer = 460 units/shift Once/Twice pershift Order Management Factory Planner Weekly/Monthly Call off Daily/ Weekly/Bi-Weekly Daily Timeline 1.3 + 0.1 days 3.4 min 0.04 days 0.9 min 0.04 days 2.1 min 3.2 min 2.5 min 9.3 min 2.6 min 0.09 days 0.02 days 0.06 days 0 0.32 days Proposed VSM – Future State with 3 shifts Old Bottleneck
  6. 6. •Build line and Testing Process is the bottleneck which limits UNF to achieve the STAR demand spike •Testing processing time = 220 seconds (3.67 minutes) •Cycle time mentioned in VSM = 1.22 minutes (73 seconds) •Therefore, 3 testing machines in series are present (3.67 minutes / 3 = 1.22 minutes) •Total number of testing machines to achieve Takt time = 220/45 = 4.89 ~ 5 machines •Hence, to satisfy the Takt time of 45 seconds, TWO more testing machines need to be procured (Exhibit 7.12) REMOVE BOTTLENECK AT TESTING PROCESS Quality - First Pass Yield at ICT is 94.2% - Defect Rate found after Testing is 6.5% which leads to lot of rework - These need to be addressed so as to ensure sufficient time is available for the production of other products Changeover Time - Changeover time for SMT, THT AND, Slideline & Wave processes is too high - It should be reduced to single digit minute in order to increase overall time available for production Pull Production - Pull production can be ensured using Kanban technique after the reliability of machines is increased It is intended to keep the raw material for one day in factory, hence 1400 units can be transferred from factory warehouse to the manufacturing plant 460 units of Finished Goods per shift are to be transferred from the plant to the distribution center VALUESTREAMMAPPINGRESULTS Production lead time = 2.89 days Low value added ratio = 0.62 % Type of production : Pull Proposed VSM – Benefits and Improvements
  7. 7. Addition of third shift- Consequences & Measures • One more shift is to be added to the existing two shifts • The challenge of deciding between hiring new workers for 3rd shift and making the current employs to work overtime arises • Though expensive, going ahead with current employs working overtime is a better option, as training the new workers would take time, which is the major constraint • Measures should be taken in order to prevent the employs feeling exhausted due to overtime • They should me motivated through non- monetary incentives etc. • Extra breaks, while keeping production running (rotational) Production Strategy Architecture Change – Linear to Cellular M1 M2 M3 Present Layout – “I” Shape From Build Line To Boxing M1 M2 M3M4 M5 Testing Proposed Layout - Cellular From Build Line To Boxing Testing Structural decisions - Hard • Purchase two new testing machines to reduce the cycle time Sub-structural decisions - Soft • Managing labor- introduction of 3rd shift by hiring new workers, contract laborers, better overtime wages • Supplier management - add or allot capacity to fulfill our increased demand of raw materials • Production plan for three shifts like inventory planning, quality assurance • Quality can be improved by implementing better testing mechanisms after every stage of the process and better programming • Change the layout to Cellular manufacturing to reduce defects, deploy less man power, easy change over and setups, etc. Strategic Decisions
  8. 8. Vendor Management + Waste Management Supplier Willingness to add capacity High Complexityofaddingcapacity High Low • Co-invest with suppliers • Assure high margins • Use Quantity flexibility or backup agreements • Form Join Ventures • Acquire equity stakes • Agree on marginal price increase • Use joint productivity improvements • Reallocate capacity • Edge in backward integration • Sign contracts • Wait for self- resolution • Use simple pull contracts • Reallocate capacity • Engage in joint productivity improvements • Modularize • To ensure production of 1350 units/day - continuous raw material supply is important • Alternate suppliers should be developed for the 110 critical parts (42 Import + 68 Local) • Collaborating with local suppliers to produce the parts that are presently imported • Use of multimodal logistics to avoid any delay in the production • Proper monitoring of the suppliers so as to communicate them without any delay when they are falling behind schedule • As per the current status company needs to reallocate the extra capacity as most of the suppliers will take time to develop extra capacity • Capital expenditure involved in reallocating capacity will be low • However in the long-run suppliers will be able to develop extra capacity and the company can return to single source vendor policy
  9. 9. Recommendations Need to procure 2 more testing machines Testing Third shift has to be introduced, labor management Shifts Current “I” shape layout needs to be changed to “Cellular” Layout Layout Re-allocation, re-negotiation and inclusive growth Supplier Additional Measures The new heat sink line, that is multi-functional, can be deployed to produce the required UPS A 5S-Lean approach towards production The SPS methodology has some prominent tools and has been implemented in various Schneider plants across the globe, we could ask for experts from other plants for its quick implementation Moreover, it will only reinforce the Schneider mantra of “Mutual Aid” signaling, only extending the mantra from a facility-strategy to a corporate way Pull production Design correction Changeover Time reductionLabor Use in-house workforce Already trained, low defect rate only more overtime cost Vendor Alternate supplier for 110 critical parts Real time monitoring to check supply gaps Announce special rewards: To ensure motivation announce direct rewards to match daily targets, zero defects and other profit sharing programs Be specific: Set numbered targets for shifts, days and monitor Follow up: Plan in advance and see to implementation. Not every action will result in improvement, but that is OK. The goal is to create a habit of actively seeking out small wins that add up over time.
  10. 10. Description Data Production 300 units/shift Current Platform (Buildline, Slide-line, SMT) Build Line Number of Working Days 6 days per week Number of working hours per shift 7.25 hour = 435 min Bottle necks final testing Test cycle time 220 sec Current testing capacity (for 2 shifts) 950 units/day Defect rate 6.50% Current capacity (machine) utilization (%) 95% Number of existing testing machines 3 Number of testing machines we can procure 2 Areas /machines which can be expanded 2 sq. m. No of workers/station 2-3/station Time required in each step of process 56 seconds Current layout type I-line (straight line) Number of current workers on this product 26 per shift * 2 shifts Time taken to produce one unit (total lead time) 24 min Vendor Current Supplier capacity as per regular monthly demand of 5000 units Vendor management Single source for major commodity Total count of bottleneck parts identified 110 (Import 42 + Local 68) Exhibit 1
  11. 11. Exhibit 2

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