Analysis of the Effect of Ordering Policies for a Manufacturing Cell Transitioning to Lean Production

Over the past two decades, Lean Production has begun to replace traditional manufacturing techniques around the world, mainly due to the success of the Toyota Motor Company. One key to Toyota's success that many American companies have not been able to emulate is the transformation of their suppliers to the lean philosophy. This lack of supplier transformation in America is due to a variety of reasons including differences in supplier proximity, supplier relationships, supplier performance levels, and the ordering policies used for supplied parts. The focus of this research is analyzing the impact of ordering policies for supplied parts of a manufacturing cell utilizing Lean Production techniques.

This thesis presents a simulation analysis of a multi-stage, lean manufacturing cell that produces a family of products. The analysis investigates how the ordering policy for supplied parts affects the performance of the cell under conditions of demand variability and imperfect supplier performance. The ordering policies evaluated are a periodic-review inventory control policy (s, S) and two kanban policies. The performance of the cell is measured by the flowtime of the product through the cell, the on-time-delivery to their customer, the number of products shipped each week, the amount of work-in-process inventory in the cell, the approximate percentage of time the cell was stocked out, and the average supplied part inventory levels for the cell. Using this simulation model, an experimental analysis is conducted using an augmented central composite design. Then, a multivariate analysis is performed on the results of the experiments.

The results obtained from this study suggest that the preferred ordering policy for supplied parts is the (s, S) inventory policy for most levels of the other three factors and most of the performance measures. This policy, however, results in increased levels of supplied part inventory, which is the primary reason for the high performance for most response variables. This increased inventory is in direct conflict with the emphasis on inventory and waste reduction, one of the key principles of Lean Production. Furthermore, the inflated kanban policy tends to perform well at high levels of supplier on-time delivery and low levels of customer demand variability. These results are consistent with the proper conditions under which to implement Lean Production: good supplier performance and level customer demand. Thus, while the (s, S) inventory policy may be advantageous as a company begins transitioning to Lean Production, the inflated kanban policy may be preferable once the company has established good supplier performance and level customer demand.