KEYWORDS Logistics, TOC, Theory of Constrains, ABC analysis, XYZ Analysis, bottleneck INTRODUCTION

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1 THE RATIONALIZATION OF LOGISTIC PROCESSES Ing. Tomáš Kamaryt and Ing. Tereza Vyskočilová West Bohemia University Univerzitni 8, Pilsen Czech Republic ABSTRACT The internal logistic of supplying production lines in industrial enterprises can be divided in to three areas warehouse management, the way how the inventories get on to the stock and the means of its distribution on to production lines. These characteristics also determine the amount of financial resources consumed. This is the reason for the important goal of lowering costs and times by supplying whole production (with conditions of continuous and trouble-free production) in the area of internal resource management. It also means the enterprises have to focus on the overall process not only its parts. The contribution introduces the complex approach to the warehouse processes rationalization where in foreground is the TOC (Theory of Constrains). KEYWORDS Logistics, TOC, Theory of Constrains, ABC analysis, XYZ Analysis, bottleneck INTRODUCTION Among the essential items in terms of share in the assets of the company certainly includes an inventory item, which usually forms the most important part. Inventories bind significant capital of the company for some time. Likewise logistical processes associated with the acquisition, storage and distribution of inventories also require significant costs. From the above it can be concluded that every company should strive to minimize inventories and to "hold" the minimum amount. Among the essential items in terms of share in the assets of the company certainly includes an inventory item, which usually forms the most important part. Inventories bind significant capital of the company for some time. Likewise logistical processes associated with the acquisition, storage and distribution of inventories also require significant costs. From the above it can be concluded that every company should strive to minimize inventories and to "hold" the minimum amount. As soon as the optimal level of the inventories is reached the bottleneck in the overall logistics process should be examined and the flow of the material among inventories maximized. To increase the flow Eliyahu M. Goldratt (Goldratt, E. (1999)), created a method for increasing the flow through the system. Illustratively we can define constraint as a place with the smallest flow. It is exactly the place, whose maximal flow rate determines the maximum output flow through pipe. In the production management this analogy can be found, for example, in production lines, which build on each other several stations linked, for example, by a conveyor belt. For each machine station the time that is required to meet specific operations can be assigned (either by calculation - MTM methods or elevation - REFA analysis). After that the operation with the longest duration of time determines flow through (production capacity) lines. Operation with the longest time duration are called by (Goldratt, E. (1999)) bottlenecks. Figure 1 shows a production line balancing. Height of the bar indicates the time of the operation. For the calculation of the production line capacity is required to use the longest operation.

2 Figure 1: Production line balancing During the rationalization of the storage process we are getting to the same situation, only the columns of manufacturing operations are replaced by the columns of the processes associated with receiving the material, its physical unloading, marking, unwrapping, handling, storage, etc. Above-mentioned facts are the reason why it is necessary to pay proper attention to the issue of inventory management and associated processes. But interests of different departments across the company are as contradictory as the above mentioned facts. While business and production departments prefer to keep a sufficient amount of inventory, including emergency inventory, economic department would prefer to purchase them just before consumption. A logistic department are facing a difficult task, namely somehow manage the discrepancy between the needs of sales and financial pressure. ANALYSIS OF INVENTORIES The workers of the logistics department can effectively manage inventories. The main goal of the analysis is to know not only patterns of production and company inventories but they also need to get a comprehensive view on the inventories. The figure 2 below outlines solution procedure of the inventory analysis. Figure 2: The solution procedure The analyses have been widely described in various articles such as Pekarčíková, Trebuňa, Filo (2014) or Scholz-Reiter, Heger, Meinecke, Bergmann (2012). Because of it this article describes only the basic principles of analysis without detailed description. Subsequently, a case study from which the use and outputs of these analyses in practice is obvious, is described.

3 ABC analysis ABC analysis is a widely used method in the corporate logistics. The analysis is based on the so-called Pareto rule, which says that 80 % of all consequences are caused only about 20 % of causes. ABC analysis is thus based on division of items into three categories in terms of their importance, the parameter determining their importance may vary depending on the observed problem. By the categorization it is possible to achieve considerable savings, as the attention of the company and the associated time, space and money are devoted to significant items, it means items for which it makes sense. XYZ analysis XYZ analysis is an analysis used for an evaluation of inventories in terms of their timing of the consumption or sale, reliability and predictability of their consumption. The analysis is used as a basis for decisions which logistics technology would be the ideal one for inventories management. XYZ analysis itself does not provide complete result therefore it is advisable to combine it with the above described ABC analysis. ABCXYZ matrix So called ABCXYZ matrices, which adds further insight into the way of work with different inventories and which serves as a basis for possibility of effective inventory management, is formed by combining above mentioned analysis. Matrices divides inventories into nine categories, depending on their significance and regularity respectively predictability of consumption. Features of each group can be seen in the table below. Attention should be paid to items of AX, AY and AZ as they form a major part of the turnover and therefore are assumed for the high inventory levels. Items BX and CX have a very regular consumption and can therefore be relatively easily predicted. Due to lower significance of these items they are not assumed as core items of the company. A B C X a large share of turnover regular consumption medium proportion of turnover regular consumption small share of turnover regular consumption Y a large share of turnover consumption with fluctuations medium proportion of turnover consumption with fluctuations small share of turnover consumption with fluctuations Z a large share of turnover irregular consumption Figure 3. medium proportion of turnover irregular consumption ABCXYZ matrices small share of turnover irregular consumption Appropriate logistics technologies are then recommended for each category. There are several approaches, one of them is shown on the scheme below. It should be realized that these recommendations cannot be taken as dogma. It is always necessary to take the specific nature of materials, nature of particular production and other conditions into account. amount Consumption management Needs management Compensatory warehouses Figure 4: ABCXYZ matrices logistics approaches

4 THE CASE STUDY The case study was prepared in the automotive enterprise, engaged in the manufacture of parts and accessories for motor vehicles, further processing and making-up of cables. The project of proposal for a new process of receiving material consists of an analysis of activities related to material income and material rationalization including the introduction of new technologies in order to: Minimization of error process (quality assurance) Minimization of complaints and the associated additional costs Streamlining the entire receipt of material process Shortening the duration of the process Increase the smooth flow of material The entire receiving process was mapped, described, analyzed and organized into four key parts Material receipt, Acceptance of material, Entering into the system, and Labelling, see Figure 5. Figure 5: Overall process The TOC method identified the bottlenecks of each sub processes which crucially affects the overall process efficiency. The article is focused only on the most obvious and important subprocess the distribution of the material in to the production. The examined sub process is highlighted red. The specific activity which affected the efficiency of the subprocess is circled red. The methods presented above sorted storage items in to the groups. The each group should be handled differently. The results of the ABC analysis are stated in the figure 6. The figure also shows that the most important materials participate only 6% on total goods storage. Figure 6: ABC analysis

5 The results of the XYZ matrix are show in the figure 7. The XYZ simply shows just the borders between stored items. It does not advise how to deal with items. Figure 7: XYZ matrix Therefore both analysis are performed together and purposely combined. The combination of both methods is shown in the figure 8. Figure 8: ABCXYZ matrix The biggest impact on the overall process efficiency have the AX items. Therefore it should be strictly controlled, e.g. by the KANBAN method. Therefore the KANBAN method was also selected as a cure for the examined bottleneck in the figure 5. To fully implement KANBAN method is not any piece of cake but it provides significant benefits such as the standardization of the logistics approaches the process predictability and transparency the reduction of inventories

6 the Reduces waste and scrap Provides flexibility in production Reduces Total Cost The KANBAN system totally differs and simplifies the process of the material distribution. First of all it eliminates the bottleneck at the beginning of the process the accumulation of the material before it gets in to the production. After detailed analysis and implementation of the pilot project among the part of the shopfloor have been verified the new process of the material distribution. The new process of material distribution is shown in the figure 9. Figure 9: KANBAN - The new process of material distribution CONCLUSION AND RECOMMENDATIONS Today s companies match with lot of challenges which pushes at product prices, quality and also delivery times. The nowadays highly competitive market environment represents another important factor that makes the whole issue even more complicated. If a company wants to be competitive in the market it must be able not only to maximally meet diverse wishes of its customers, but also to react quickly to these wishes. This fact leads to a tendency to keep large quantity of inventory which is however a significant economic burden for the company. The product or product parts spent approximately 95% of its lead time by transporting storing or waiting. Therefore it is vital to deal with logistics problems and search for the most effective way of transporting and storing. ABC, XYZ, ABCXYZ, TOC methods significantly help with streamlining logistics processes. In combination with KANBAN it offers strong tool logistic managing across whole company. Moreover by successfully implementation of the KANBAN we stabilized the manufacturing process (it terms of time and quality) and significantly reduced the amount of customers complains and therefore we achieved savings in costs too. Both verified alternative solutions even counts with bigger savings. About its full development will decide the company at the time are both solutions included in new company research.

7 ACKNOWLEDGMENTS This paper was created with the subsidy of the project: SGS under the Internal Grant Agency of the University of West Bohemia: The development of parameters of the sustainable manufacturing system REFERENCES Pekarčíková, M., Trebuňa, P. and Filo, M. (2014) Methodology for classification of material items by analysis ABC/XYZ and the creation of the material portfolio, Applied Mechanics and Materials 611, Scholz-Reiter, B., Heger, J., Meinecke, C. and Bergmann, J. (2012) Integration of demand forecasts in ABC-XYZ analysis: practical investigation at an industrial company, International Journal of Productivity and Performance Management, 61 (4), Kurkin, O., Šimon, M. (2010) Optimization of Layout using Discrete Event Simulation, Proceedings of the 14th Inernational Business Information Management Association (IBIMA), ISBN , June, Istanbul, Turkey, Kurkin, O. and Januska, M. (2010) Product Life Cycle in Digital factory, Proceedings of the 15th Inernational Business Information Management Association (IBIMA), ISBN , 6-7 November, Cairo, Egypt, Poor,P., Šimon, M., Karkova, M. (2015) CMMS as an effective solution for company maintenance costs reduction, Production Management and Engineering Sciences - Scientific Publication of the International Conference on Engineering Science and Production Management, ISBN , April, Tatranska Strba, Slovakia,