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Factory Physics for Managers


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Table of Contents

Prologue 1
The Book in Brief 1
Why Is This Book Needed? 2

CHAPTER 1 Science-Use It or Lose 5
Of Theories and Buzzwords 6
Toyota and Science 9
How Toyota Did It 10
Batch and Queue Production 14
A Balanced Approach 15
The Track Record: Lean and Six Sigma 15
A Confused Landscape 16
Boeing's Moving Assembly Line 18
Looking Ahead 22

CHAPTER 2 The Nature of Business-A Secret Hidden in Plain Sight 25
Leading Performance Improvement More Productively 27
Tradeoff Illustrations 31
Leadership and Tradeoffs 34
The Factory Physics Approach 34

CHAPTER 3 Practical Science for Leaders 37
Knowledge and Science 37
Science, Math, Software, and Intuition 40
Practical Theory 45
The Value Stream: Demand, Stocks, and Production 46
Buffers 50
Types of Buffers 51
Conceptual Illustrations: Something or Someone Is Always Waiting 53
A Manager's World: Environment, Tactics, Controls, and Measures 60
Putting Practical Science to Practice 65
Defi nitions 65
Factory Physics Science: As Simple as Possible but No Simpler 69
Advancing the Practical Science of Management 70
The VUT Equation 72
Cycle Time versus Utilization Graph 74
Production and Stocks 80
Little's Law 82
Production-Flow Graph 84
Variance of Replenishment-Time Demand Equation 92
Tradeoff Plot: Inventory versus Fill Rate Graph 98
Effi cient Frontiers 100
Insights from the Tradeoff Plot 104
Visual Management of Stock-Point Performance 106
Stocks and Flows, the Lot-Size Graph 108

CHAPTER 4 Practical Math for Managers 113
Defi ning Terms 114
Modeling Stocks 115
A Perfect World 115
Replenishment Times 116
Demand 118
Forecast Error and Lead Time 120
Inventory Performance Measures 123
Computing Inventory Policies 133
Inventory in an Assembly System 135
Modeling Flows 137
Little's Law 137
Capacity Analysis 138
Overall Equipment Effectiveness 144
Best-Case Performance 146
Effect of Variability 147
Measures of Variability 150
Queuing Effects 151
Total Cycle Time 154
Raw Process Time 155
Move Time 156
Shift-Differential Time 156
Batch Time 157
Pull Systems 160
Combining Stocks and Flows 163
Cash-Flow Optimization 165
Examples of Cash-Flow Optimization 166
Conclusions 167

CHAPTER 5 Profit, Cash Flow, and Factory Physics Science 169
The Value-Added Fantasy 172
Financial Statements and the Science of Operations 176
Financial Performance Driven by the Science of Operations 179
Contribution Margin at the Bottleneck 179
When Lean Manufacturing Adds Cost 185
Inventory Optimization 188
Managing the Portfolio of Buffers 190
Marketing and Operations Strategies Drive Financial Results 195

CHAPTER 6 Operations Strategy and Planning 197
Operations Strategy 197

Strategy 198
Tactics 199
Controls 199
Measures 199
Execution 200
Information Technology Control and Control Limits 200
Factory Physics Sales and Operations Planning 202
S&OP Event Sequence and Participants 203
S&OP Meeting Practices 208
S&OP+ 211
S&OP+ Process 212

CHAPTER 7 Implementing Tactics, Controls, and Measures for Optimal Results 219
Demand Tactics and Controls 221
Describing and Forecasting Demand 221
Lumpy Demand 222
Inventory Tactics 224
Inventory Strategy Considerations 225
Capacity Considerations 225
Current Performance versus Predicted Performance 226
Strategic Options 227
Tactics for Inventory Management 232
Inventory Control 235
Capacity Tactics 240
Utilization 241
WIP Control and CONWIP 245
Virtual Queues and Due-Date Quoting 248
Rework and Scrap 251
Response-Time Stratagems 254
Predictive Control Using MRP/ERP Systems 257
Common Practices 257
MRP for Inventory Control 261
MRP for Production Control 265
Dynamic Risk-Based Scheduling 265
Dynamic Risk-Based Scheduling in
Assemble-to-Order Environments 271
Measures Alignment and Insight 277

CHAPTER 8 Leadership, Measures, and Culture Change 283
An Approach to Sustainable Leadership 285
A High-Level Plan So That Strategies Can Be Shared and Understood 288
Vision and Mission 289
Critical Strategies 290
Monthly or Quarterly Plans to Establish Prioritized Initiatives 291
Inventory Optimization 292
Utilization Targets 293
Weekly Scheduling Meetings to Plan the Work 295
WIP Caps 296
Due-Date Quoting 297
Weekly Operations Meetings to Check Progress 298
Daily Mechanisms for Feedback 301
Personal Plans So That Individuals Understand Their Roles 303

CHAPTER 9 Examples from Industry 307
Learning to See-Farther 307
Beyond ABC-Optimal Inventory Policies 316
Reducing Cycle Times in a Traditional Pharmaceutical Plant 320
Restoring Customer Service in a Fabrication and Assembly Plant 325
Increasing Throughput in a Biopharmaceutical Facility 330
Dynamic Risk-Based Scheduling in the Textile Industry 331

CHAPTER 10 Final Word on Factory Physics Science (for Now) 339
Quick Wins 342
Operations Strategy Alignment with Business Strategy 343
Absolute Benchmarking 343
High-Level Assessment of Utilization 344
Bottleneck Analysis 344
Potential for WIP Cap Deployment 346
High-Level Analysis of Lead Times 346
ERP/MRP Mechanics 347
More Complex Implementations 347
A Large Company Implementation 349
Alternative Histories 351
The Future 353

Notes 355
Acknowledgments 358
Index 359

About the Author

Edward S. Pound is Chief Operations Officer at Factory Physics Inc.
Jeffrey H. Bell is a managing partner of Arc Precision, a supplier of precision-engineered components to the medical device industry, and he serves on the advisory board of Factory Physics Inc.
Mark L. Spearman, Ph.D., is the founder, president, and CEO of Factory Physics Inc. and coauthor of Factory Physics.

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