Manufacturing

Business Process Improvement - Simulation Software ROI

With the current state of today's economy, industry professionals throughout the nation are looking for process improvement methods to lower cost and increase efficiency; while achieving sustainable, competitive edge. With many challenges surrounding the validation of a proposed solution, process optimization often evades the best of us.

As a result, money which could otherwise be used to improve cash flow or implement process improvement initiatives is now tied up in the operation. The total savings in such an implementation is $9500.00 off the bottom line inventory cost. This amount was tied up in in-production inventory used mainly to keep production Simulation technology has evolved exponentially over the last few years, providing users a dynamic interface which drastically reduces the time required to create the model and improve the overall accuracy of the simulation run. The simulation model not only provides guidance to the areas that require immediate attention, but allows users to gain an unprecedented insight of the process flow prior to the lean transition.

Using dynamic simulation, a replica of the current operation is created and validated to prove that the baseline model behavior and results are comparable to existing data. Once the ideal process improvement solution is determined, the transition plan can be tested and analyzed to minimize the impact on current production schedules, allowing for optimum efficiency during an otherwise hectic phase of the improvement project.

For instance, during analysis the model may show excessive resource travel within an operation. More specifically, costs are progressively incurred through the non-value added time to the total product lead time. A resource that travels to move parts from one location to another 30% of the time will cost the company 30% of salaries, benefits and intangibles without generating a return. Furthermore, the excessive travel causes an increased inventory on the production floor and longer product lead time.
 

Current Operation
Resource
Travel
30% of the 
work time
Hourly wage:
$15.00
Total Non-Value cost $4.5/hr.
Additional
Inventory (WIP)
1000 Parts $10/part $10,000.00 in inventory cost to
keep production flowing.
Lead Time 3 Days
4 Hours
Total Cycle
time: 2 Days
1 Day and 4 hours of lost
production time per part.
Future State - Derived through Simulation Analysis
Resource
Travel
Down to 15% Hourly wage:
$15.00
Total Non-value cost $2.25/hr.
Additional
Inventory (WIP)
50 parts $10/part $500.00 in inventory cost. More
streamlined operation, less stored parts to keep production flowing.
Lead Time 2 Days
4 Hours
Total Cycle
time: 2 Days
4 Hours of lost production per
part.


As a result, money which could otherwise be used to improve cash flow or implement process improvement initiatives is now tied up in the operation.

The total savings in such an implementation is $9500.00 off the bottom line inventory cost. This amount was tied up in in-production inventory used mainly to keep production flowing. In addition, eliminating a $2.25/hour per person, in a 200 employee factory equals $3600.00 per shift compounded over a year (340 days) $1,224,000.00 per year per shift. Add to that the reduced lead time, which increases the production throughput by 46% using the same equipment, resources, and schedules. The bottom line? One less production shift.

Since dynamic simulation not only provides a Risk Management and Reduction environment, but a comprehensive view into the intricate details of the operation, there is no longer the need to take an uncalculated risk in determining the best flow for an operation. Bypassing the use of simulation is a liability to companies faced by fierce competition to reduce production cost and lead time. Companies in all sectors, from manufacturing and automation to healthcare and banking are utilizing dynamic simulation technology to identify optimum process solutions and maximize their overall bottom line. Are you?

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