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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:
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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 =
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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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