• Pennsylvania State University

• IE 550

FACTORY PHYSICS Solutions Manual for Even Numbered Problems Wallace J. Hopp Mark L. Spearman www.factoryphysics.com 2 FACTORY PHYSICS® is a registered trademark of Factory Physics Inc. All rights reserved. Factory Physics principles were invented at Northwestern University in the late 80’s and early 90’s. At that time, Mark Spearman and Wally Hopp were both professors in the Industrial Engineering Department. Having both been physics majors in their undergraduate years, they looked at manufacturing the way a physicist would look at the natural world—by trying to understand the natural laws and relationships that would explain the behavior of manufacturing operations and supply chains. The fundamental insight of the Factory Physics approach is that there is a comprehensive, practical framework and set of concepts for predictively and profitably explaining and managing manufacturing operations and supply chains—a practical science of manufacturing. Executives and managers who imbed these principles into their management intuition will advance both their companies’ profitability and their own careers. In my 23 years in manufacturing, it has been disconcerting to see that many, if not most, American manufacturers have approached profitability in operations performance using three primary methods: information technology, academics, or improvement initiative. Information technology is a massive business but there is no software program in the world that will run your supply chain for you. It is discouraging to see how much money has been spent on massive software systems with the long term result being that planners and managers mostly use spreadsheets to run operations. A primary cause of this has been a lack of understanding of the science involved with managing the underlying operations, both on the part of the software vendors and the end users. “ Academics have placed so much emphasis on mathematical precision that they have shied away from realistic problems that did not lend themselves to clever quantitative solutions. Note that this was a more a matter of trying to ‘look scientific’ than of actually being scientific.” –Spearman and Hopp, Factory Physics Improvement initiatives have mass appeal; it’s easy to agree with the mantra, “Reduce waste.” On the other hand, it’s also easy to agree with the financial strategy of “Buy low, sell high.” I wouldn’t claim that either was a guiding policy that provides enough information to make predictive strategic and tactical decisions. Yet there is any number of examples of manufacturing executives whose strategy to improve performance is to implement Lean Manufacturing or Lean Sigma or Six Sigma or Theory of Constraints. Implementing an initiative is a tactic not a strategy. Sustainable results in initiative implementation have been mixed at best. Through a practical scientific understanding of operations and supply chain behavior, the tools of Lean, Six Sigma, information technology and any appropriate others can be brought to bear quickly and effectively. The practical science and the tools of operations performance are not mutually exclusive. They are, in fact, all necessary to profitably design, implement, and control manufacturing operations and supply chains. In 1992 as an MBA student at Northwestern, all I had was class notes. There was no book but, having already worked in manufacturing for four years, I knew Mark and Wally were on to something. “Factory Physics” was first published in 1995 and was awarded book of the year by the Institute of Industrial Engineers in 1998. Nowadays, the book sells more to industry users than to academia. This solution manual was prompted by constant requests from industry. Profitable manufacturing is typically a difficult business. Lots of complexity and uncertainty. Since Factory Physics Inc. was formed in 1991, we have received support from the National Science Foundation to develop advanced software (www.fpcsuite.com) now being used around the www.factoryphysics.com 3 FACTORY PHYSICS® is a registered trademark of Factory Physics Inc. All rights reserved. world at Fortune 500 companies. The seminars and training we provide is much advanced, i.e. simpler and more practical, than the typical university classroom approach. Factory Physics Inc. still shares the original goal of Drs. Hopp and Spearman—improve the management of manufacturing and supply chain operations. More simply, as one seminar participant put it, “I’d like to [work in manufacturing and] have a Saturday off every now and then.” If you want to address that goal by picking up the book and working through the concepts, we hope this solution manual helps. Edward S. Pound COO Factory Physics Inc. www.factoryphysics.com 4 FACTORY PHYSICS® is a registered trademark of Factory Physics Inc. All rights reserved. Using the Book Recommended use of the book in industry is a bit different than the typical academic classroom approach. Start at the end. Chapter 19 provides a good vignette as a description of applying the principles in practice. Mark and Wally also claim it provides their first and last attempt at nonfiction prose. The next recommended sequence would be the heart of the book: Chapters 6 though 9. Here is where the foundation of the Factory Physics framework is laid out. Sections 6.2 and 6.3 provide the underlying philosophical approach. Section 6.5 lays out a simple but time-tested approach for application in practice. Chapters 7 though 9 provide the basic science of the Factory Physics framework. The remaining chapters provide observations of manufacturing management, e.g.  Chapter 1 – Manufacturing in America  Chapter 5 – What Went Wrong or in-depth discussions of topics in manufacturing and supply chain management, e.g.  Chapter 2 – Inventory Control: From EOQ to ROP  Chapter 13 – A Pull Planning Framework based on the framework and approach laid out in Chapters 6 through 9. www.factoryphysics.com 5 FACTORY PHYSICS® is a registered trademark of Factory Physics Inc. All rights reserved. Contents Chapter 1 ................................................................................................................................................. 6 Study Questions.................................................................................................................................... 6 Chapter 2 ................................................................................................................................................. 8 Study Questions.................................................................................................................................... 8 Problems .............................................................................................................................................. 9 Chapter 3 ............................................................................................................................................... 14 Study Questions.................................................................................................................................. 14 Problems ............................................................................................................................................ 15 Chapter 4 ............................................................................................................................................... 19 Study Questions.................................................................................................................................. 19 Chapter 5 ............................................................................................................................................... 20 Study Questions.................................................................................................................................. 20 Chapter 6 ............................................................................................................................................... 21 Study Questions.................................................................................................................................. 21 Problems ............................................................................................................................................ 21 Chapter 7 ............................................................................................................................................... 24 Study Questions.................................................................................................................................. 24 Problems ............................................................................................................................................ 24 Chapter 8 ............................................................................................................................................... 27 Study Questions.................................................................................................................................. 27 Problems ............................................................................................................................................ 27 Chapter 9 ............................................................................................................................................... 32 Study Questions.................................................................................................................................. 32 Problems ............................................................................................................................................ 32 Chapter 10 ............................................................................................................................................. 38 Study Questions.................................................................................................................................. 38 Chapter 11 ............................................................................................................................................. 43 Study Questions.................................................................................................................................. 43 Chapter 12 ............................................................................................................................................. 44 Study Questions.................................................................................................................................. 44 Problems ............................................................................................................................................ 44 Chapter 13 ............................................................................................................................................. 47 Study Questions.................................................................................................................................. 47 Problems ............................................................................................................................................ 48 Chapter 14 ............................................................................................................................................. 56 Study Questions.................................................................................................................................. 56 Problems ............................................................................................................................................ 56 Chapter 15 ............................................................................................................................................. 58 Study Questions.................................................................................................................................. 58 Problems ............................................................................................................................................ 59 Chapter 16 ............................................................................................................................................. 71 Study Questions.................................................................................................................................. 71 Problems ............................................................................................................................................ 71 Chapter 17 ............................................................................................................................................. 78 Study Questions.................................................................................................................................. 78 Chapter 18 ............................................................................................................................................. 82 Study Questions.................................................................................................................................. 82 Problems ............................................................................................................................................ 82 www.factoryphysics.com 6 FACTORY PHYSICS® is a registered trademark of Factory Physics Inc. All rights reserved. Chapter 1 Study Questions 2. Some key impacts of Frederick W. Taylor's Scientific Management on the practice of manufacturing management in America were:  Recognition that management is something that can be studied and developed as a profession.  Separation of planning (i.e., by the managers) from doing (i.e., by the workers). Scientific Management was a result of and a contributor to the adversarial relationship between management and labor in America.  Emphasis on setting standards for how tasks should be done and at what rate.  Framed debate over what motivates workers. Although Taylor viewed money as the prime motivator for workers, he did recognize some psychological component. His followers, particularly Lillian Gilbreth, pursued this issue more explicitly. 4. Some signs of a decline of American manufacturing include:  Perceived inferior quality of American goods relative to some foreign goods, since at least the 1970's.  US Market share of the “Big Three” automakers (Chrysler, Ford and GM) has fallen from 70% in 1991 to 44% in 2010. In 2009, Toyota surpassed GM as the largest automobile manufacturer in the world. Recall that Robert MacNamara once said “What's good for GM is good for the country.”  The fraction of U.S. patents granted to foreigners has doubled since 1970.  Loss of some high visibility markets. For instance, there is no significant American manufacturer of flat panel TV screens.  China's manufacturing sector is on the brink of passing that of the United States, according to a report released in June 2010 by the economic research firm IHS Global Insight. The value of goods produced by China's factories reached about $1.6 trillion last year, compared to $1.7 trillion by U.S. manufacturers. 6. Some post WWII management trends that may have contributed to the decline of American manufacturing include:  Finance View: encouraged myopic focus on short-term returns.  Marketing View: fostered conservative view of product development (i.e., by relying too heavily on the numbers) and diminished use of manufacturing as a strategic weapon.  Fast Track Manager System: diluted experience of upper management. www.factoryphysics.com 7 FACTORY PHYSICS® is a registered trademark of Factory Physics Inc. All rights reserved.  Profit Center Approach: encouraged segmentation of business enterprise rather than integration of various functions with manufacturing to achieve business goals. 8. Pros of a portfolio management approach to managing a manufacturing enterprise are:  It encourages use of measurable performance criteria (e.g., ROI)  It encourages balancing activities with respect to risk (e.g., diversifying the product lines to avoid being catastrophically sensitive to conditions in a single market). Cons of this approach are:  It can pit parts of the firm against one another (e.g., as each tries to achieve individual numbers rather than supporting overall corporate performance).  It neglects the fact that performance of a manufacturing enterprise, unlike that of an externally purchased financial instrument, is subject to internal control. Too much effort spent trying to massage ROI by buying and selling companies can sap needed efforts in making better products and selling them profitably. 10. A “professional” manager (i.e., a manager who is allegedly capable of managing any business) and a manager of a purely financial portfolio both are accustomed to looking at businesses in general financial terms, the financial analyst to evaluate stocks, the professional manager to evaluate performance. Both view ``business as business,'' the financial analyst buying stocks from any sector, the professional manager managing any business. The professional manager is unlikely to appreciate the deeper non-financial determinants of a business's success and therefore may be prone to a conservative maintenance approach rather than a technologically innovative leadership approach. 12. Managers may pursue imitative designs even in circumstances where it can be documented that innovative designs have had markedly better long term performance, because imitation is safer. If you are evaluated on short-term criteria, then a high probability of a small success is better than a lower probability of a big success (with a significant probability of a high-visibility failure). 14. The essential skill a manufacturing manager requires to be able to appreciate the “big picture” and still pay attention to important details without becoming completely overwhelmed is good intuition. A manager with sound intuition can focus on the areas that offer leverage without being distracted by the myriad of details that do not.  Who knows? But, tomorrow's succe