Bottleneck Management Sample Problem

# Demand for each product is 160 units each work center

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Demand for each product is 160 units Each work center operates for 40 hours & has 2 workers = 4800 mins Work Center A \$50 revenue \$20 mat'l \$20 labor \$10 profit B \$75 revenue \$40 mat'l \$20 labor \$15 profit C \$100 revenue \$ 25 mat'l \$ 30 labor \$ 45 profit D \$150 revenue \$ 75 mat'l \$ 40 labor \$ 35 profit W (160 units x 6 mins) = 960 mins (A+B+C+D = ?) X Y Z Processing Time (min/unit) Total time need in each work area to satisty ALL demand

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Calculate profit margin per minute at bottleneck A B C D Profit Margin: Time at bottleneck : Profit margin/minute: * calculations are per unit Determine the order you would want to build, to maximize profit:
Determine how much you can build with the time available at the constraint Bottleneck is area:_______ with 4,800 mins of available capacity 4800 mins capacity is available - mins to build 160 of ( ) the highest profit/min product = mins left to build the next product - mins to build 160 of ( ) the next highest profit/min product = mins left to build the next product - mins to build 160 of ( ) the next highest profit/min product = mins left to build the next product Given the time left, you can only build ______ units of product _____

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Compute profitability for the product mix. A B C D Total Revenue = Materials = Labor = Profit =
SOLUTION

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Demand for each product is 160 units Each work center operates for 40 hours & has 2 workers = 4800 mins Work Center A \$50 revenue \$20 mat'l \$20 labor \$10 profit B \$75 revenue \$40 mat'l \$20 labor \$15 profit C \$100 revenue \$ 25 mat'l \$ 30 labor \$ 45 profit D \$150 revenue \$ 75 mat'l \$
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