Question

Currently, jobs arrive at 12 per day and you have (just) enough capacity at each station (i.e., the departure rate is also 12 per day). If you want to change to a contract that promises a throughput time of at most 0.25 days to reap the full profits, then what should you set your WIP Limit as?

Answer 1

Question: Currently, jobs arrive at 12 per day and you have (just) enough capacity at each station (i.e., the departure rate is also 12 per day). If you want to change to a contract that promises a throughput time of at most 0.25 days to reap the full profits, then what should you set your WIP Limit as?

Answer: WIP limit = 0.5

Explanation:

Given that:

Arriving Time = 12 days

Departure Time = 12 days

Throughtput Time = 0.25

Now:

Efficiency is given by:

Efficiency = Arriving Time / (Arriving Time + Departure Time)

Therefore:

Efficiency = 12 / (12 + 12)

Efficiency = 12 / 24

Efficiency = 0.5

Efficiency% = 50%

Now:

Work-In-Progress (WIP) is given by:

WIP = Throughput Time / Efficiency

Therefore;

WIP = 0.25 / 50%

WIP = 0.25 / 0.5

WIP = 0.5