Capacity and cost analysis : Implementing a Just-in-time philosophy in annealing operations at Sapa Heat Transfer AB

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Our work focuses on an analysis of the processes for full and partial annealing of aluminium coils. Due to inefficient production management these processes show high inventory levels, long lead times and decreased delivery performance. We have also found inadequacies in the ways costs for these processes are distributed. We have established a new process mapping by initially investigating the strategic dimensions of the company and the processes for annealing, in order to later on establish performance measures congruent with the business objectives. Furthermore we have conducted extensive calculations and analyses to facilitate the successful implementation of a Just-in-time production philosophy, including necessary process improvements and redesigns to be made. Our proposed changes will lead to shorter lead times and low levels of WIP, which are important success factors of a JIT-based production philosophy. To do this we have developed a capacity analysis tool with which it is also possible to analyse other processing scenarios or the effect of load changes and/or product mix variations. This tool can also serve as a benchmark for capacity analysis of other processes. Finally, we have been able to establish more accurate costs per machine hour for full and partial annealing to be implemented in the managerial system. We believe that the processes for annealing are not the only ones suffering from poor cost control, why...