1) The document discusses two improvement options - Option A and Option B - for reducing production times on processes for product BX2. 2) Option A reduces times on two processes by 1 minute each for a total reduction of 2 minutes, while Option B increases time on one process by 3 minutes and reduces another by 1 minute, resulting in a net increase of 2 minutes. 3) A financial analysis shows that Option A has a greater positive impact on company profitability than Option B, despite Option B's lower initial investment cost, making Option A the preferred choice according to lean principles.

1. Figure : Overall production information of AX1 and BX2
I have conducted many improvement projects and the most importance question which I was always asked is that how the improvement projects
which I have done improve the company P&L. First of all, before we start our improvement journey, we have to ask ourselves 5 questions.
1. What is the goal?
2. What to change?
3. What to change to?
4. How to change them?
5. What are the benefits from change?
All the improvement starts with the business objective which is business goal. The improvement illusion is the conventional costing system that
allocates the overhead cost to the products and services and this causes local optimize such as lot production the bigger production lot size is
cheaper than the small lot size. Therefore before select the improvement proposal we should ask for throughput not only the cost of the product that
completely allocate by the cost accountant. Throughput is the missing link of Lean and Six Sigma improvement.
Throughput = (Sale price - Variable cost)/ processing time on the constrain resource.
By Sornrakrit@gmail.com
Internal constraint: (Improvement selection)

2. Process A
C/T : 6 Minute
C/O : 60 Minute
Takt : 18.4 Min
Shift : 1 shift
Available : 9,600
minute
Process B
C/T : 7 minute
C/O : 60 Minute
Takt : 18.4 Min
Shift : 1 shift
Available : 9,600
Minute
Process C
C/T : 8 Minute
C/O : 60 Minute
Takt : 18.4 Min
Shift : 1 shift
Available : 9,600
Minute
Process D
C/T : 7 minute
C/O : 60 Minute
Takt : 18.4 Min
Shift : 1 shift
Available : 9,600
Minute
I I I
I
I
120 pcs 120 pcs 120 pcs
6 min 7 min 8 min 7 min
360 min 840 min 960 min
260 pcs
2880 min
28.0 min
720 min
1 X Weekly shipment
1 X Monthly shipment
500 pcs
90/60/30 day forecasts
Weekly order
3/1 Month forecasts
Monthly order
Production control
Daily order 130 PCS/Week
Tray = 52 PCS
Figure : Value stream mapping for product AX1
Throughput concept
By Sornrakrit@gmail.com

3. Process A
C/T : 3 Minute
C/O : 60 Minute
Takt : 18.4 Min
Shift : 1 shift
Available : 9,600
minute
Process B
C/T : 3.5 minute
C/O : 60 Minute
Takt : 18.4 Min
Shift : 1 shift
Available : 9,600
Minute
Process C
C/T : 14 Minute
C/O : 60 Minute
Takt : 18.4 Min
Shift : 1 shift
Available : 9,600
Minute
Process D
C/T : 3.5 minute
C/O : 60 Minute
Takt : 18.4 Min
Shift : 1 shift
Available : 9,600
Minute
I I I
I
I
120 pcs 120 pcs 120 pcs
3 min 3.5 min 14 min 3.5 min
360 min 1680 min 420 min
260 pcs
2280 min
24.0 min
420 min
1 X Weekly shipment
1 X Monthly shipment
500 pcs
90/60/30 day forecasts
Weekly order
3/1 Month forecasts
Monthly order
Production control
Daily order 130 PCS/Week
Tray = 52 PCS
Figure : Value stream mapping for product BX2 (Before improvement)
Throughput concept
By Sornrakrit@gmail.com

4. Hereafter is the example of how conventional costing give us the illusion. Throughput is the indicator to measure process rate at the constrain resource of the organization.
In order to simplify, I will use the value stream mapping of the product as example and we will consider only the production process time improvement only. We will not
consider the inventory reduction and the lead time reduction which could impact to the customer satisfaction even these are also importance KPIs which most of the conventional
company use them.
In this example, Assume that there are 2 improvement options which propose from the different engineer:
Option A:
Mr. A proposes to reduce production time of product BX2 in process B and D from 3.5 minute to 2.5 minute and this require investment 10,000 THB. For this improvement
proposal, the production lead time reduces 2 minute which equal -7%.
Option B:
Mr. B proposes to reduce production time of product BX2 in process C from 14 minute to be 13 minute, but it need to increase production time in process A from 3 minute to 6
minute. This improvement requires investment 15,000 THB. For this improvement proposal, the production lead-time increase 3 minute which equal +8%.
As you are the management which option you will select and why.
In Lean and Six sigma Concept we all will select Option A instead of Option B because option A we reduce the process time in Process B 1 minute from 3.5 minute to 2.5 minute
(28.57%) and Process D 1 minute from 3.5 minute to 2.5 minute (28.57%) and the total process will reduce 2 minute from 24 minute to 22 minute (8.33%). Moreover, the investment
cost for option A is only 10,000 THB which less than Option B around 33 %. In option B, we reduce the process time at process C 1 minute from 14 minute to 13 minute (7.14%),
but in process A the process time will increase 3 minute from 3 minute to 6 minute (100%) and the total process time increase 2 minute from 24 minute to 26 minute (8.33%).
However, we should consider both option A and B base on the financial result as well.
Figure : Company profitability before improvement
Throughput concept
By Sornrakrit@gmail.com

5. Figure : Company profitability after improvement (Option B)
Figure : Company profitability after improvement (Option A)
The profitability after improvement option B is higher than option A and higher than before improvement due to
the company can produce the product BX2 30 unit more than before improvement and this product still can be sold
because production mix is lower than the market demand. In short, the real improvement of the system is the
improvement that increase the capability of the system.
Throughput concept
By Sornrakrit@gmail.com

6. Improvement projects
Cost saving
Positive impact to P&L
project
Negative impact to
P&L project
Capital for reinvestment in the
improvement projects
Company profit Investors attractiveness
Stock price
New investment capital
New investors
I would like to explain about the green loop which is the reinforce loop first. If we selected the improvement projects that have positive impact to
P&L, we will gain more cost saving and we can use the cost saving for reinvestment in the remaining improvement projects that have positive
impact to P&L also. More cost saving will increase company profit. Once the company profit higher than the industrial average, it will increase
the investment attractiveness. When the investment attractive increase, it will lead to the increasing in stock price. Once stock price increase, the
new investors will willing to invest in the company stock. Then the company will gain the new investment capital from the new investors which
the company will invest in the improvement projects. When the company profit increase, The company can pay more dividend to the
stockholder, employee welfare, salary adjustment and bonus. Good salary, welfare and bonus will attract the talent people to join the company.
The more talent people join the company, the more improvement project will be proposed and it will start the process again as cycle. The red path
is the contrary with the green path.
Employee welfare and bonus Dividend Amount
Talent people join the company
Reinforce loop
By Sornrakrit@gmail.com