1:00

between any two units coming off of that activity right.

Â It's taking the processing time and

Â adjusting it for multiple units being made from that activity.

Â So it's computed as take the processing time,

Â divide that by either the number of full time equivalents if there

Â are multiple people working on that task, you are talking about.

Â Dividing it by the number of people that are working on that task or

Â it could be that there are multiple units being produced together from that task.

Â It's a machine that processes a certain number of units together, so

Â you put all the raw material in it and then it processes multiple units and

Â then they come out of that activity.

Â So that would be also, place where you would adjust for cycle time.

Â Now all these things become more clear rather than focusing on the definitions

Â when we focus on actual examples.

Â So here let's start taking look at the examples.

Â So let's think about an activity which has a multiple stations or

Â multiple employees, so you have a manual activity here.

Â And the example that I've used here is packing a ceramic vase with two

Â parallel stations.

Â Right, so there are two people who are doing the same task.

Â We put two people to do the same task and they're doing this in parallel,

Â they're doing it independently.

Â But we basically have capacity of two people,

Â working on this task they're doing essentially the same thing.

Â Each employee takes four minutes to pack one unit, so

Â what is the processing time of this activity.

Â It is essentially four minutes.

Â Four minutes is the time that it takes for one of them to package one unit.

Â 2:46

The cycle time is adjusting this processing time for

Â the fact that there are two people working here,

Â there are two units that are going to come off of this activity every four minutes.

Â So every four minutes you're going to get two units which means the cycle time is

Â two minutes.

Â Now, remember the distinction between these two concepts, processing time and

Â cycle time, processing time is the actual time that it takes to get something done.

Â Cycle time is a theoretical average based on multiple units being done.

Â So if I were to go this activity and say here's a unit,

Â you need to package this in two minutes, they are not going to be able to do it.

Â It still takes four minutes but we say it's a cycle time of two minutes based

Â on the fact that we're getting two units in every four minutes.

Â Let's take another example to make this even more clear when we're talking about

Â multiple units being processed at the same time.

Â So here's a machine activity such as firing

Â the ceramic vases with one kiln that can fire 40 vases at a time.

Â So it's making 40 units at a time, the time required to do this is 30 minutes.

Â So just by definition that is going to be our processing time.

Â So the processing time is going to be 30 minutes,

Â the time that's taken to complete the activity.

Â Now the cycle time is going to be based on the fact that 40 units come out in 30

Â minutes.

Â So it's going to be 30 minutes divided by 40 units and

Â that gives us 0.75 minutes or 45 seconds.

Â So every 45 seconds theoretically speaking, I can give you a unit.

Â I can never give you a unit in 45 seconds but

Â what I can do is every 30 minutes I can give you 40 units from this activity.

Â So that's the idea of taking processing time and adjusting it for

Â the number of units that are being made in parallel in order to get the cycle time.

Â Now why are we calculating cycle time?

Â And again, this will become clear when we start looking at the value stream map and

Â how we'll use this in terms of assessing the performance of the value stream map.

Â So just keep these calculations in mind as we go forward toward doing

Â the value stream map or doing the calculation for the values stream map.

Â A few other things about the idea of processing time, cycle time,

Â is the concept of set up time, change over time.

Â So what do we mean by set up time or change over time?

Â Change over time is basically you're making a particular kind of unit,

Â you want to change from that to make another kind of unit.

Â It's the time that's needed to be spend between making the end of the last unit

Â of the previous type and when you start making the first unit of the next type.

Â So that's the time being spent between those two types of products.

Â It's generally not affected by the batch size.

Â So it's a, sort of, a fixed cost that you're paying for doing the change over.

Â What do I mean by fixed cost?

Â It's not affected by how many units you made off the previous type and

Â how many units you are going to make off the next type.

Â It's a fixed cost, If it's going to take you

Â three hours to make a changeover from a particular type of product to another.

Â It's three hours, regardless of whether you make 100 units before or

Â you make 1,000 units before of one type, and similarly with after.

Â Now although It is not being affected by batch size, it does affect batch size.

Â So what are we saying here?

Â We're saying that if you have a large set up time, if you have a large change

Â over time It will force you, it will get you to think about larger batch sizes.

Â If I have a three hour change over versus having an eight hour change over.

Â If I have an eight hour change over, I'd like to do a larger batch of product

Â one before I switch over to product two, simply because I want to take the eight

Â hours and spread it over a larger quantity.

Â 6:41

As opposed to if it had a three hour change-over,

Â I'm going to say I'm okay with doing a little bit of a smaller batch size.

Â And if you reduce the batch size even more,

Â then I'd be willing to do a smaller batch sizes.

Â If I were to reduce the setup time even more,

Â I'd be willing to do smaller batch sizes.

Â So the idea is that if I can reduce setup time, if I can reduce change-over time,

Â then I can do smaller batch sizes.

Â The idea of economies of skill trying to use up whatever

Â investment I have, whatever fixed cost and putting into the change over cost and

Â spreading it across many units, is the idea of economies of scale.

Â Now, what we can say about set up time and change over time is what would be ideal,

Â we can say that ideal change over time would be zero, right?

Â If I could have a completely flexible process and change over from making one

Â product to the other, that would be great because that would be a time of zero.

Â Because essentially setup time takes away from capacity from that activity,

Â takes away from capacity from the process.

Â So I would like to take you down to a zero.

Â Now if you think about Toyota,

Â they focus on reducing change over time to a great extent.

Â They have an acronym for quick changeovers and it's called SMED,

Â single minute exchange of dies, and they're talking about changing large

Â dies in less than a minute from making one product to the other.

Â And that gives them tremendous flexibility and

Â that's why it's an important concept for them to think about reducing set up time.

Â Now, how do we incorporate this idea into calculations.

Â Now, I'm going to show you how to incorporate this idea if you wanted to

Â incorporate it into your calculations.

Â But what you'll see later on is or

Â we will not really use the set up time in calculations, but just to have for

Â the point of completion, how would you account for set up time?

Â So here's an example, machine activity such as firing ceramic vases,

Â the same activity we looked at earlier, with one kiln that can fire 40 vases at

Â a time but now we're talking about a setup time of ten minutes between batches.

Â So, we make something, we have to change over and

Â it could be simply having to clean the kiln or do something of that sort or that

Â you have only one fixture that you can use for putting all the 40 vases in there.

Â So that's something that you have to stop, do unload all the vases from

Â the previous fixture, put it on the new fixture, put it on the same fixture and

Â then put it in the kiln and that's taking you ten minutes.

Â So it's whatever is taking you ten minutes between two different batches of that

Â product that you're making.

Â So 30 minute of time to actually get the baking done,

Â the firing done and then ten minutes of change over time.

Â That's what we're talking about here.

Â So we can say that the effective processing time is 30 plus ten.

Â We can say that it's 40 minutes, It's 40 minutes for

Â a batch of 40 vases to be done.

Â So, now, the cycle time is going to be 40 divide by 40, or, 1 minute.

Â So what have essentially done?

Â We've taken the ten minutes and

Â spread that across the whole batch of 40 units that we're making.

Â Now if you think about it,

Â how much you spread it is going to be affected by batch size.

Â It's also going to be affected by when you do have change overs and when you don't.

Â So the reason we don't use this concept when we talk about value stream mapping,

Â or when we start getting into calculations of value stream mapping, is because this

Â is something that you cannot really account in for any constant way.

Â It is going to be something that's going to vary, depending on the batch size, and

Â depending on how many change overs you have,

Â in the period that you're studying the value stream.

Â But that aside, you know how to do this calculation if you need to incorporate

Â it and when you get to value stream mapping in this session,

Â you'll see that we're not really including it in the calculations, all right.

Â Now, one more concept before we get to actually doing some calculations

Â on the value stream map example is the concept of implied utilization.

Â Now what do we mean by implied utilization?

Â Now if you might remember from other lessons,

Â that the idea of utilization is time required divided by time available, right?

Â That's a simple idea,

Â time required divided by time available is the idea of utilization.

Â And when we say implied utilization, we're simply saying it's the time

Â that is going to be required based on the demand, right?

Â So it's whatever the demand is, what is the time that's going to be required,

Â divided by time that's going to be available, that we expect to be available.

Â So we put the word implied because it says the expected utilization,

Â the implied utilization could be greater than a 100%.

Â 11:43

We can get a number from this calculation that's greater than a 100%.

Â What would that be saying?

Â That would be saying that we simply don't have enough capacity to

Â serve this customer.

Â So it's the actual demand divided by expected, the hours that we have expected,

Â minutes that we have of the resource and we find that that's not going to be

Â enough, that would be indicated by a greater than 100% number.

Â Now that's your calculation of capacity utilization based

Â on using time required divided by time available.

Â But what you will also see when we get to the value stream map is

Â that capacity utilization can also be measured,

Â can also be calculated rather based on a comparison of cycle time and takt time.

Â So, capacity utilization can also be expressed as

Â the ratio of cycle time to takt time.

Â And we'll see this when we get to the value stream map.

Â So you're seeing a lot of build up to the actual case of the value stream map but

Â rest assured we are going to see that very soon, all right.

Â Inventory, and what do we mean by inventory?

Â We basically mean any units that are sitting, waiting for the next task.

Â That are sitting, waiting between two different tasks.

Â So inventory is a number of units that are sitting between two tasks, and

Â when we talk about total inventory in the value stream.

Â We simply mean all of the inventory that is sitting between tasks as well as

Â that is being worked on in the tasks.

Â So we are including everything that maybe in process in an activity

Â as well as all of the units that are waiting between the activities.

Â And although we'll be looking at a manufacturer kind of value stream map,

Â you can imagine inventory to be people waiting in a process.

Â This could be a fast food restaurant, the people waiting in the process.

Â The people waiting between tasks in a process and

Â the people who are actually at the register or waiting for

Â their food to be delivered or at the soda machine where they're getting their soda.

Â Those all are also considered inventory when your thinking about this.

Â So it's the sum of the units at different stages, In various levels of completion

Â between the stages and that are in the actual activity itself.

Â It's measured in units of units of whatever flow units you're talking about.

Â So it could be people, it could be it could be cars,

Â It could be bottles of water, whatever is the product you're talking about.

Â Now what you'll see happening in the value stream is that we will take the idea

Â of inventory in units and also convert it into the idea of inventory in time.

Â So how many days worth of demand does this inventory represent?

Â How many months worth of demand does this Inventory represent and

Â we will take that in to account when we're talking about it in

Â the value stream map that we will look at in a few slides.

Â All right, total lead time and what do we mean by total lead time?

Â So total lead time is the time that it takes for

Â raw material that's entering the system to get converted in to finished goods.

Â So if I were to start a stopwatch from when the raw material came from

Â the supplier and stop the stopwatch when the product became

Â finished goods that is going to the customer.

Â Now when it got loaded on that truck to go to the customer,

Â that would be my total lead time.

Â So that's the concept of it.

Â How would you calculate it?

Â You would calculate it based on summing, adding up all the times that you find

Â within the value stream within the process.

Â So the time that raw material comes in sets from the supplier to time that it

Â waits to get loaded onto a machine to actually being worked on in the machine,

Â to waiting for the next step.

Â So on and so forth, until it's finished goods sitting in the finished good

Â warehouse, and before it goes to the customer.

Â That would be the total lead time.

Â You would measure it in units of time.

Â It would be number of days or minutes or weeks or

Â whatever units you would be using.

Â 15:59

So, let's take all this information, I've given you quite a bit of build up for

Â the value stream map.

Â So finally we're getting the point where we're going to take this mini case

Â called Atlantic Corporation that I made up.

Â It's a very simple kind of case and it's meant to give you an idea of some of

Â the things, some of the calculations that you would do in a value stream map,

Â and then also give you an idea of how you would interpret what you find.

Â So you can think of this as being a current state map for

Â the situation that we're going to see.

Â Now you do have the case in a different format, but you also have the case,

Â entire case given to you on this slide deck as two different slides.

Â So, you will able to read it off, of from here or

Â you can refer to it from the case that you can download.

Â Also what I would suggest is getting a pencil and paper and working through

Â the calculations because that's the best way to learn through these calculations.

Â And then also a calculator would help in order to make these calculations or you

Â can refer to Excel on the computer or just use your computer to do the calculations.

Â