P&Q Factory

April 20, 2020

This is the Process used as a sample when a process is needed in this project.

The P&Q Factory gives no room for apology and demonstrates how the “Theory of Constraints” (ToC) can help managers with their decision-making logic. The fictional factory portfolio has products P & Q.

P&Q Factory

Using TPM to describe the P&Q Factory, there are very few reasons to blame poor corporate results:

• ati = 1 Equipment runs nonstop for the working time, available time index is 1.
• oti = 1 There is no break in the operation, operating time index is 1.
• opi = 1 There is no speed loss, operational performance index is 1.
• zti = 1 There are no defective products, then zero defect index is 1.
• gpi = 1 Multiply above indexes to get the P&Q global performance index of 1.

Using the week as a unit, the factory’s working time is 2,400 minutes per week. Due to unitary gpi, this time is all used in the process to manufacture P and Q at the highest quality and speed possible. More details about the P&Q Factory that make life easier to investors and managers:

• Sales: There is no difficulty in moving the P&Q products because the market has potential to buy up to 100 pieces of P and 50 pieces of Q per week.
• Prices: The unit prices are preset at $90 for P and $100 for Q. If production exceeds market volume limits, the products become stranded.
• Operating Expenses: There are no surprises for fixed costs, since Operating Expenses are immutable $6,000 per week, including Workforce and Overhead.
• Raw Materials: The raw materials used in the process are P-Part, RM1, RM2, and RM3, at costs respectively of $5, $20, $20 and $20, with no surprises.
• Workforce: The P&Q Factory has four people with different skills: A, B, C, and D. They are absolutely perfect during all the working time. No delays, no errors.

P&Q Process

The engineering of the P&Q Factory presents its manufacturing process in the following diagram, showing the production flows that result in P and Q. These flows could also be applied to other environments where resources are used for tasks that require skills, to achieve a goal.

graph LR PP[P-Part $5/u] --> D1[D 15min/u] --> P[P $90/u 100u/wk] RM1[RM1 $20/u] --> A1[A 15min/u] --> C1[C 10min/u] --> D1 RM2[RM2 $20/u] --> B2[B 15min/u] --> C2[C 5min/u] --> D1 C2 --> D2[D] RM3[RM3 $20/u] --> A3[A 10min/u] --> B3[B 15min/u] --> D2[D 5min/u] --> Q[Q $100/U 50u/wk]

As seen at the top of the diagram, RM1 is processed by A for 15 minutes, then C processes it for 10 minutes. It is finished by D that assembles product P using the purchased P-Part.

The middle flow starts with RM2 being processed by B for 15 minutes, continue to C workstation for 5 minutes and may reach both assembly tasks done by D. This central flow is used in both P and Q fabrication. To manufacture one of each, it is necessary to process RM2 twice by B and C.

Lastly, RM3 spends 10 minutes being processed by A, then is processed for 15 minutes by B and goes to Q assembly workstation. D assembles P and Q in respectively 15 and 5 minutes.

How much does the P&Q Factory make?

What is the maximum net profit that P&Q Factory can make per week? Think about the time each stage has for producing P&Q and apply the ToC decision process.

TOC DECISION PROCESS

1. Identify the system constraint(s);
2. Decide how to exploit system constraint(s);
3. Bribe everything else to the previous decision;
4. Evolve the system constraint(s);
5. If, in the previous steps, a constraint has been broken, return to step 1, without letting inertia cause a system constraint.

Check the detailed solution in the books “The Haystack Syndrome” by Eliyahu M. Goldratt and Business Amplifier by José Motta.

Published in Business Amplifier, also e-book and Amplificador de Negócios.