Detailing a solution for the demand spike problem faced by Schneider Electric.

1. Demand Spike at
Schneider UNF
NIKHIL KEJRIWAL – NIKHILKEJRIWAL.PGP2013@IIMKASHIPUR.AC.IN - 8191898099
PRASHANT GAUR - PRASHANT.PGP2013@IIMKASHIPUR.AC.IN – 8191898040
Team - LeanMeanMen

2. Schneider Electricals, a global specialist in energy
management
Schneider plans to launch STAR, a smart UPS in a month
time
12 Central hubs across the country asked for 100% stock
Current plant capacity is 15000/month, working for 2
shifts/day and 6 days a week
37000 Units required within a month which is 700% of
current production capacity
Production capacity to be revamped in order to meet new
capacity
Budgetary constraints , limits investment in any
additional machinery and other resources
Optimizing other processes to fulfill the spike in demand,
reduce wastage and fix other problem areas
Executive Summary
Production Management
More testing machines, layout changes
3rd shift production, Lean optimization
Defect prevention and rework minimization
Vendor Management
Co-invest with suppliers
Use simple pull contracts
Form Join Ventures
Strategic Outlook
Schneider Best Practices
•A self-help methodology conceptualized and practiced at
shop floor. This system provides a scope for seeking help
from operators from across the lines to rebalance the
workload and also maximize the output from each line
through mutual help
Mutual Aid
Signaling
•This denotes the level of expertise of the shop floor workers
and also creates a healthy competition among them. This
also raises their self-motivation to rise quickly to the level of
“expert”, who also act as mentors
Color-coded
Collars

3. Current Value Stream – Problem Area Identification
• Build line & Testing process is the bottleneck process as its cycle time is
greater than the Takt time
• Push type production: each process produces and pushes the material as
per the schedule received from factory planner instead of the actual
needs of the downstream customer process
Inventory is being observed at all the workstations .
Overproduction
More storage space is needed, hence more people are
needed to handle this inventory
Storage
Due to improper online programming of microcontroller at
ICT tester, defects can only be identified after the
assembly
Rework
Closing the top cover of the unit causes delay due to a
short screw length, Product design hinders assembly of
switch & selector PCBA, Manual tightening is time
consuming
Manual Work
for parts due to low on-time delivery of plastic parts,
damaged or inferior components, high changeover times
Waiting
Testing process - high testing cycle time, serial placement
of testing machines
Motion
Process Time/Units
Current Takt Time 87 sec
Production Lead time 2.95 days
Low value added Ratio 0.6%
Production Per month 15000 units
Star model 5000 Units
Other Products 10000 Units
Process Workers Inventory CT
SMT 3 50 0.33
THT 1 20 0.3
Slide line & Wave 6 20 0.27
Lead Cutting & Touch Up 3 42 0.39
ICT 2 12 0.41
Build Line & Testing 10 36 1.22
Boxing 1 5 0.36

4. Supplier
Central Warehouse
Factory Warehouse
Manufacturing Facility
Distribution Centers
Consequences of the spike in demand
• Overall demand in July = 37000 units of STAR + 10000 units
of other products = 47000 units
• New Takt time = 45 sec (435 min per shift *3 shifts * 60sec *
27days / 47000 units demand)
• Cycle time (max.) is more than the Takt time for ‘Build Line
& Testing’ process (1.22 min = 73 sec)
• Supplier: Current supplier capacity may not be sufficient to
meet the demand spike of UNF plant
• Warehousing: Central warehouse space may not
accommodate the rise in parts quantity
• Testing machine is at capacity and cannot meet the
requirements of the new Takt time
Flow of Material in the system
• Distribution Centre: Insufficient space available at
distribution center
• If assurance of similar demand for STAR fails in later
months, additional investment may lead to excess
capacity
• Cannot buy any number of machines to increase
capacity due to limited funds
• Workers may not easily accept to work for this increase
in demand
• May need to hire more workers for the 3rd shift
• May need to employ more trucks for raw material and
finished goods transportation

5. Value Stream Mapping
0.018 days
2.87 days
2.89 days
0.62%
26*3 = 78
Value Added Time
Non-Value Added Time
Production Lead Time
Value Added Ratio
Manpower
FutureState - 3 Shifts
LT : 3.4
PT : 1.3
CTMAX : 0.33
CO : 5
#Persons :3
Supplier : A1 China
Capacity : 5000 units
DistributionCentre
-Req/Month= 47000
units
-Req/Shift=581 units(27
workingdays, 3 shift) out
of which460 are of STAR
-TaskTime = 45 sec
50
ERP
Factory
Warehouse
SMT THT
Daily
Weekly/Monthly
PO Weekly
Central Warehouse
Monthly
Daily
Size = 1400
units/day 600
20
LT : 0.9
PT : 0.4
CTMAX : 0.3
CO : 5
#Persons :1
Slide Line
and Wave
20
LT : 2.1
PT : 1.6
CTMAX : 0.3
CO : 5
#Persons :6
42
LT : 3.2
PT : 1.8
CTMAX : 0.39
CO : 0
#Persons :3
ICT
12
LT : 2.5
PT : 0.8
CTMAX : 0.41
FPY : 94.2%
#Persons :2
Lead Cutting,
Touch-Up
36
LT : 9.3
PT : 6.3
CTMAX : 0.73
MDR : 12000
#Persons :10
Building &
Testing
5
LT : 2.6
PT : 1.8
CTMAX : 0.36
CO : 0
#Persons :1
Boxing
15
0
Reduce changeovertime
to 5 minusingSMED
Reduce defectrate using
root cause analysis
Reduce CT to 44 sec (0.73 min) by
procuring2 more testingmachines
Material
Transfer = 460
units/shift
Once/Twice pershift
Order
Management
Factory
Planner
Weekly/Monthly
Call off Daily/
Weekly/Bi-Weekly
Daily
Timeline 1.3 + 0.1 days
3.4 min
0.04 days
0.9 min
0.04 days
2.1 min 3.2 min 2.5 min 9.3 min 2.6 min
0.09 days 0.02 days 0.06 days 0 0.32 days
Proposed VSM – Future State with 3 shifts
Old Bottleneck

6. •Build line and Testing Process is the bottleneck which limits UNF to achieve the STAR demand spike
•Testing processing time = 220 seconds (3.67 minutes)
•Cycle time mentioned in VSM = 1.22 minutes (73 seconds)
•Therefore, 3 testing machines in series are present (3.67 minutes / 3 = 1.22 minutes)
•Total number of testing machines to achieve Takt time = 220/45 = 4.89 ~ 5 machines
•Hence, to satisfy the Takt time of 45 seconds, TWO more testing machines need to be procured (Exhibit 7.12)
REMOVE BOTTLENECK AT TESTING PROCESS
Quality
- First Pass Yield at ICT is
94.2%
- Defect Rate found after
Testing is 6.5% which leads
to lot of rework
- These need to be
addressed so as to ensure
sufficient time is available
for the production of other
products
Changeover Time
- Changeover time for SMT,
THT AND, Slideline & Wave
processes is too high
- It should be reduced to
single digit minute in order
to increase overall time
available for production
Pull Production
- Pull production can be
ensured using Kanban
technique after the reliability
of machines is increased
It is intended to keep
the raw material for
one day in factory,
hence 1400 units can
be transferred from
factory warehouse to
the manufacturing
plant
460 units of Finished
Goods per shift are to
be transferred from
the plant to the
distribution center
VALUESTREAMMAPPINGRESULTS
Production lead
time = 2.89 days
Low value added
ratio = 0.62 %
Type of
production : Pull
Proposed VSM – Benefits and Improvements

7. Addition of third shift- Consequences & Measures
• One more shift is to be added to the
existing two shifts
• The challenge of deciding between
hiring new workers for 3rd shift and
making the current employs to work
overtime arises
• Though expensive, going ahead with
current employs working overtime is
a better option, as training the new
workers would take time, which is
the major constraint
• Measures should be taken in order to
prevent the employs feeling
exhausted due to overtime
• They should me motivated through
non- monetary incentives etc.
• Extra breaks, while keeping
production running (rotational)
Production Strategy
Architecture Change – Linear to Cellular
M1 M2 M3
Present Layout – “I” Shape
From
Build Line
To
Boxing
M1
M2
M3M4
M5
Testing
Proposed Layout - Cellular
From
Build Line
To
Boxing
Testing
Structural decisions - Hard
• Purchase two new testing machines to
reduce the cycle time
Sub-structural decisions - Soft
• Managing labor- introduction of 3rd shift
by hiring new workers, contract
laborers, better overtime wages
• Supplier management - add or allot
capacity to fulfill our increased demand
of raw materials
• Production plan for three shifts like
inventory planning, quality assurance
• Quality can be improved by
implementing better testing
mechanisms after every stage of the
process and better programming
• Change the layout to Cellular
manufacturing to reduce defects,
deploy less man power, easy change
over and setups, etc.
Strategic Decisions

8. Vendor Management + Waste Management
Supplier Willingness to add capacity High
Complexityofaddingcapacity
High
Low
• Co-invest with suppliers
• Assure high margins
• Use Quantity flexibility
or backup agreements
• Form Join Ventures
• Acquire equity stakes
• Agree on marginal price
increase
• Use joint productivity
improvements
• Reallocate capacity
• Edge in backward
integration
• Sign contracts
• Wait for self-
resolution
• Use simple pull
contracts
• Reallocate capacity
• Engage in joint
productivity
improvements
• Modularize
• To ensure production of 1350 units/day - continuous raw material supply is important
• Alternate suppliers should be developed for the 110 critical parts (42 Import + 68 Local)
• Collaborating with local suppliers to produce the parts that are presently imported
• Use of multimodal logistics to avoid any delay in the production
• Proper monitoring of the suppliers so as to communicate them without any delay when
they are falling behind schedule
• As per the current status company needs to reallocate the extra capacity as most of the
suppliers will take time to develop extra capacity
• Capital expenditure involved in reallocating capacity will be low
• However in the long-run suppliers will be able to develop extra capacity and the
company can return to single source vendor policy

9. Recommendations
Need to procure 2 more testing machines
Testing
Third shift has to be introduced, labor management
Shifts
Current “I” shape layout needs to be changed to
“Cellular” Layout
Layout
Re-allocation, re-negotiation and inclusive growth
Supplier
Additional
Measures
The new heat sink line, that is multi-functional, can
be deployed to produce the required UPS
A 5S-Lean approach towards production
The SPS methodology has some prominent tools and
has been implemented in various Schneider plants
across the globe, we could ask for experts from other
plants for its quick implementation
Moreover, it will only reinforce the Schneider mantra
of “Mutual Aid” signaling, only extending the mantra
from a facility-strategy to a corporate way
Pull production Design correction
Changeover Time
reductionLabor
Use in-house
workforce
Already trained,
low defect rate
only more
overtime cost
Vendor
Alternate supplier
for 110 critical
parts
Real time
monitoring to
check supply gaps
Announce special rewards: To ensure motivation
announce direct rewards to match daily targets,
zero defects and other profit sharing programs
Be specific: Set numbered targets for shifts, days
and monitor
Follow up: Plan in advance and see to
implementation. Not every action will result in
improvement, but that is OK. The goal is to
create a habit of actively seeking out small wins
that add up over time.

11. Description Data
Production 300 units/shift
Current Platform (Buildline, Slide-line, SMT) Build Line
Number of Working Days 6 days per week
Number of working hours per shift 7.25 hour = 435 min
Bottle necks final testing
Test cycle time 220 sec
Current testing capacity (for 2 shifts) 950 units/day
Defect rate 6.50%
Current capacity (machine) utilization (%) 95%
Number of existing testing machines 3
Number of testing machines we can procure 2
Areas /machines which can be expanded 2 sq. m.
No of workers/station 2-3/station
Time required in each step of process 56 seconds
Current layout type I-line (straight line)
Number of current workers on this product 26 per shift * 2 shifts
Time taken to produce one unit (total lead time) 24 min
Vendor
Current Supplier capacity as per regular monthly demand of 5000 units
Vendor management Single source for major commodity
Total count of bottleneck parts identified 110 (Import 42 + Local 68)
Exhibit 1

12. Exhibit 2