The Press Cell That Cannot Feed Assembly
Kaveri Appliances runs a three-stage shop - cutting, pressing, assembly - making one product family. The plant works two shifts of 8 hours, 5 days a week. Weekly downstream demand is steady at 1,600 good units. Cutting can deliver 1,900 good units a week and assembly 1,700. The press cell has 12 changeovers a week averaging 45 minutes each, plus 6 hours of planned maintenance. Press cycle time is 2.7 minutes per unit, and 4% of pressed units are scrapped and cannot be reworked. Contribution is ₹180 per good unit. The plant manager has three proposals on the table. (i) Run the press cell up to 8 hours of overtime a week, all-in cost ₹3,000 per hour. (ii) Fund a quick-changeover project costing ₹2.5 lakh, expected to cut each changeover to 20 minutes. (iii) Run a ₹1.2 lakh defect study at pressing, expected to bring scrap from 4% to about 1%. Sales says every extra good unit in this range can be sold.
1. Calculate the true capacity of the press cell and quantify the gap against demand. Which stage is the constraint and why does the naive capacity comparison mislead?
Read the worked answer
Available press hours. Gross: 2 shifts × 8 h × 5 days = 80 h. Deduct planned maintenance 6 h and changeovers 12 × 0.75 h = 9 h → 65 productive hours.
Gross output. 65 × 60 / 2.7 = 1,444 pressed units.
Good output. 1,444 × 0.96 = 1,387 good units.
The gap. Demand 1,600 → shortfall of 213 good units a week, about 13%.
Why the naive comparison misleads. Reading the nameplate figures (cutting 1,900, pressing 1,450, assembly 1,700) suggests pressing supplies 1,450 units against demand of 1,600 - a 150-unit gap. That understates it twice. First, 1,450 is a gross figure; scrap removes 4% of it. Second, the 1,450 presumably ignores that changeover and maintenance time is not available for production. The effective constraint is 1,387, not 1,450 - 63 units a week worse than the naive view. Capacity must always be measured as good units out over net available time; anything else flatters the bottleneck and understates the improvement it is worth paying for.
Worth of closing the gap. 213 units × ₹180 = ₹38,340 per week, roughly ₹19.9 lakh a year. That is the ceiling on what any of the three proposals can be worth - a useful discipline before evaluating them, because a proposal that costs more than this cannot be justified however elegant it is.
2. Evaluate all three proposals financially and rank them. Show your workings for each.
Read the worked answer
Option (i) - Overtime. 8 h × 60 / 2.7 = 178 gross units; at 4% scrap, 171 good units. Contribution 171 × 180 = ₹30,780. Cost 8 × ₹3,000 = ₹24,000. Net gain ₹6,780 per week, about ₹3.5 lakh a year. Positive but thin: a 10% error in the overtime rate or scrap level wipes it out. Useful as a bridge, not a fix.
Option (ii) - Changeover reduction. Saving is 12 × 25 min = 300 min = 5 hours. Gain 5 × 60 / 2.7 = 111 gross units; at 4% scrap, 107 good units → 107 × 180 = ₹19,260 per week, about ₹10.0 lakh a year. One-time cost ₹2.5 lakh → payback roughly 13 weeks. Note the secondary benefit: it also cuts the overtime requirement, so options (i) and (ii) partly substitute rather than add.
Option (iii) - Scrap reduction. Gross stays 1,444. At 1% scrap, good output = 1,430 vs 1,387 → +43 units → ₹7,740 per week, about ₹4.0 lakh a year. Cost ₹1.2 lakh → payback roughly 15 weeks. The estimate is a forecast from a study, not a guarantee, so treat it as the least certain of the three.
Ranking by annual value: (ii) ₹10.0 lakh, (iii) ₹4.0 lakh, (i) ₹3.5 lakh. Ranking by payback: (ii) 13 weeks, (iii) 15 weeks, (i) immediate. Every option is worth less than the ₹19.9 lakh total gap, which is correct - they are partial recoveries, and their benefits overlap at the margin.
Recommendation: fund (ii) now. It addresses the constraint directly, has the shortest payback, and produces durable capacity rather than rented capacity.
3. Write the recommendation to the plant manager: what to do first, what to do next, and what could quietly erode the gain even if the projects succeed.
Read the worked answer
First 30 days: quick changeover. Approve the ₹2.5 lakh project and staff it with the setters themselves, not an external team - the changeover time lives in their hands and their buy-in determines whether the saved minutes are real. Target 20 minutes, verify with a stopwatch on at least six changeovers before declaring success.
Weeks 4–12: scrap study in parallel, not instead. ₹1.2 lakh against ₹4.0 lakh a year is easy to justify, but hold it to a measured result: if scrap is still above 2% after eight weeks, stop spending. Run overtime only as a bridge during the changeover project, and cap it, because at ₹6,780 a week it barely clears its own cost.
Where the gain will leak:
- The bottleneck will move. Once pressing delivers about 1,494 good units, assembly at 1,700 and cutting at 1,900 are still comfortable, but only just. Re-measure before celebrating.
- Variability, not average capacity. 65 hours is an average. A bad week - two press breakdowns, an urgent changeover - produces queues in front of pressing and idle assemblers behind it, so effective throughput will be below the calculated figure. Protect the constraint: no unplanned work, no interruptions, a buffer of work ahead of it.
- Changeover creep. Times drift back up unless recorded on a visible board and reviewed weekly.
- Scrap migrating downstream. Pushing more pressed units may simply reveal defects at assembly; watch assembly's rework rate alongside press scrap.
One metric to the plant manager: good units out of pressing per week, with changeover time and scrap as the two drivers.