Operations Management Basics: Scrapping or reworking?
Should a damaged unit be dropped from the process or should it be reworked? In order to answer that question it has to be noted, that reworking defects can turn a process step into a bottleneck, which has not been the bottleneck before. Reworking defects (and thus, defects themselves) can have a significant impact on the process flow and on the location of the bottleneck. The bottleneck can therefore not longer be determined by just looking at the capacity of the process steps. Instead, one has to take into account the capacity changes in relation to the scrap and reworking rates.
To figure out where the new bottleneck is, we have to assume that the process as a whole will be executed in a way in which the demand is met, so that there is a match between the process output and the demand at the end of the process. The process therefore needs to start with more flow units then actually needed, so that enough flow units will be left over to satisfy demand. By working the process diagram backwards and determining the new demand for each process step, we can then discover where the new bottleneck will be located.
Instead of completely scrapping a flow unit, flow units can also be reworked, meaning that they can be re-introduced to the process and given a work-over to get rid of defects. This must also be taken into account when trying to figure out whether the location of the bottleneck changes, because some of the process steps will now have to process the same flow unit twice in rework, which will have an impact on their implied utilization. The location of the bottleneck can be determined by finding the process step with the highest implied utilization.
(1) Assume that the flow rate is an unknown demand D (e.g. 100 flow units).
(2) Figure out the demand D_x for each process step if D is to be reached.
(3) Divide D_x by the capacity of the process step to get the implied utilization.
(4) Identify the process step with the highest implied utilization. This step is the bottleneck.
These lecture notes were taken during 2013 installment of the MOOC “An Introduction to Operations Management” taught by Prof. Dr. Christian Terwiesch of the Wharton Business School of the University of Pennsylvania at Coursera.org.