REPLY Production Systems Diagramming (SD6504)

[SDMAIL John Gunkler]

Posted by  "John Gunkler" <jgunkler at sprintmail.com>

Ralf,

What management is held accountable for is decisions about "policies" --
which translate, in the model, to rate equations, for the most part.

So, in your case, the two production goals are the responsibility of middle
and upper management -- therefore, anything that results from having these
goals in the system are the responsibility of middle and upper management.
We sometimes don't show this with causal loops in an SD model.  But in my
humble opinion, we almost always should.  We should look at the dynamics of
how management sets or changes goals, and include these loops in the model.

So, again in your case, I might want to include a "production goal setting"
loop -- it would probably include a comparison of daily production with the
goal (that's the obvious part) -- but you would need to investigate what
kinds of situations would make management change the production goals, and
then include those influences in your model.  Off the top of my head these
might include a threshold difference (negative or positive) between goal and
production, a threshold level of change in customer demand (up or down),
profit down trends, rising costs of production, quality problems, etc.

Lean Production advocates, by the way, would look askance at how these
production goals are set.  Yours is not a "pull" system, and therefore it
creates a lot of waste and unhappy customers.  A pull system sets production
goals implicitly by using the (averaged) rate of customer demand as the
production rate.  There are various ways of accomplishing this.  The
simplest (called "CONWIP") looks at the total amount of Work-in-Process
(WIP) within the production system, tries to reduce it to the lowest
possible levels consistent with meeting customer daily demand swings (there
is a minimum amount of WIP required by an efficient process, plus "safety
stocks" to ensure that no workstation is starved for things to work on
because upstream processes encounter problems, plus a "buffer stock" of
finished goods to deal with daily demand swings.)  This total amount of
minimized WIP is then held constant -- CONWIP stands for "CONstant WIP" --
which means that no raw materials or sub-assemblies are allowed to enter the
process until a piece of finished goods (a finished bag) leaves the process.
This is a kind of "generic pull system."

The buffer stock resides in a finished goods "supermarket" -- and as
customers purchase the bags, the production process replaces bags into the
supermarket:  this is called a "replenishment pull system."  [It is called a
"supermarket" by analogy to how food is replenished on supermarket shelves
when customers pull it off and put it in their shopping carts.]

Most of your "reasons for not reaching the goals" are due quite directly to
the production goal setting system you describe.  Lean methods, and
particularly generic and replenishment pull systems, are designed to
eliminate the causes of these reasons.


John Gunkler
Posted by  "John Gunkler" <jgunkler at sprintmail.com>
posting date  Mon, 23 Jul 2007 12:39:36 -0400