Blog de David Pozo

Throughtput analysis of tools performance

Posted on: 2011/01/31

Years ago Godratt wrote “The Goal” and started what has been known from then as Theory of Constraints (TOC). Book is novel like written which makes it easy to read. But this easiness must not confuse ourselves: proposals from this book may have a deep impact in our companies. Basically:

1. – Every system, every organization has a constraint that limits the achievement of its goal. This constraint is where we should focus our efforts, because it is where we will obtain major results.

2. – Goal for a company is to earn money now and in the future. And throughput is the best indicator, defined as difference between sales and pure variable costs. This variable cost includes raw materials and tool cost, for example, since any increase in sales produces an increase in these costs. After throughput, inventory (short and long term) and finally operating expenses (for instance salaries) can define completely the profit generating system whose constraint we should manage as efficiently as we could.

One of the advantages of TOC is that it is easy to communicate and gives easy thumb rules to apply by all level through the organization. One of them is what we just said: throughput is the main figure to maximize and this is what we are going to use to evaluate different alternatives of diamond tools for a case of grinding and polishing granite in a CNC machine. Work is completed phase by phase for cut to polished kitchen top. We will evaluate 3 different set of tools including diamond tools at first stages and traditional abrasive at last for option B and C. Purchase prices are the following:

option A option B option C
Tool #1 price 350 € 325 € 300 €
Tool #2 price 325 € 300 € 275 €
Tool #3 price 300 € 275 € 250 €
Tool #4 price 550 € 275 € 250 €
Tool #5 price 200 € 110 € 75 €
Tool #6 price 110 € 75 €
Tool #7 price 110 € 75 €
Total set of tools price 1.725 € 1.505 € 1.300 €

Evaluating just price of buying the set of tool, option C is the one to choose. Let’s go one step further and introduce tool life, to get a more relevant figure such a cost per polished meter.

option A option B option C
Processed meters by tool #1

1.250

1.300

1.500

Processed meters by tool #2

1.300

1.350

1.500

Processed meters by tool #3

1.300

1.350

1.500

Processed meters by tool #4

1.250

1.350

1.500

Processed meters by tool #5

1.500

200

400

Processed meters by tool #6

200

400

Processed meters by tool #7

200

400

This gives us following tool cost per polished meter

option A option B option C
Tool #1 cost /meter 0,28 € 0,25 € 0,20 €
Tool #2 cost/meter 0,25 € 0,22 € 0,18 €
Tool #3 cost/meter 0,23 € 0,20 € 0,17 €
Tool #4 cost/meter 0,44 € 0,20 € 0,17 €
Tool #5 cost/meter 0,13 € 0,55 € 0,19 €
Tool #6 cost/meter   0,55 € 0,19 €
Tool #7 cost/meter   0,55 € 0,19 €
total tool cost/meter 1,33 € 2,53 € 1,28 €

Option C is still the best option. This is the analysis from the cost world perspective. Let´s see results from throughput point of view. In this case we need working speed for every tool.

Option A Option B Option C
Working speed tool # 1(m/min)
0,50 0,50 0,30
Working speed tool # 2(m/min) 0,50 0,50 0,30
Working speed tool # 3(m/min) 0,50 0,50 0,30
Working speed tool # 4(m/min) 0,20 0,50 0,30
Working speed tool # 5(m/min) 0,50 0,50 0,30
Working speed tool # 6(m/min) 0,50 0,30
Working speed tool # 7(m/min) 0,50 0,30

We want to know with is the rate of profit generation, of throughput. Since all stages go one after one, we must obtain time consumed for every step, add them up, including CNC changing tool time, and then working speed for total set to complete all work from start to end.

option A option B option C
Time per processed meter tool # 1 (min/m) 2,00 2,00 3,33
Time per processed meter tool # 2 (min/m) 2,00 2,00 3,33
Time per processed meter tool # 3 (min/m) 2,00 2,00 3,33
Time per processed meter tool # 4 (min/m) 5,00 2,00 3,33
Time per processed meter tool # 5 (min/m) 2,00 2,00 3,33
Time per processed meter tool # 6 (min/m) 2,00 3,33
Time per processed meter tool # 7 (min/m) 2,00 3,33
Subtotal time per processed meter (min/m) 13,00 14,00 23,33
Average m per production order 3,00 3,00 3,00
Tool change time (s) 10,00 10,00 10,00
Total tool change time per production order (min ) 0,83 1,17 1,17
Total time per processed meter with tool change(min/m) 13,28 14,39 23,72
Processed meters per minute (m/min) 0,075 0,069 0,042

Option A in this case is the one that generate polished meters at a higher rate. Since different options have different costs, we will include this in the analysis to get a more complete figure of throughput:

option A option B option C
Selling price of processed meter 50 € 50 € 50 €
Total tool cost per meter

1,33 €

2,53 €

1,28 €

Processed meters per minute (m/min) 0,075 0,069 0,042
Generated product at selling price/min 3,77 € 3,47 € 2,11 €
Tool cost per minute 0,10 € 0,18 € 0,05 €
Throughput per minute 3,67 € 3,30 € 2,05 €

Therefore we complete throughput analysis for every option ¡n and option A results to be the best, while C, the cheapest, is the one that gives less profit. Throughput is a complete figure since it includes different aspects of tools performance such as cost and working speed; and it is easy to get and to comprehend (option A is the best because it produces more profits). And the best is that we change our perspective from cost world to throughput: it is good to expend less, but it is better to obtain more profits, isn´t it?

 

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