Snap Tab Project Charter:
Your team (a design engineer, a process engineer, and a quality engineer, each working 25% time) recently completed a successful six-month project. The main deliverable was a fastener design in 3D computer aided design (CAD) format. The result achieved a 50% increase in pull-apart strength by manipulating five KIVs in the design. The new design is saving $300K/year by reducing assembly costs for two product lines (not including project expense). A similar product line uses a different material. Develop a charter to tune the five KIVs for the new material, if possible.
Answer:
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Scope: |
Develop tuned design for new material
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Deliverables: |
One-page report clarifying whether strength increase is Achievable A 3D CAD model that includes specifications for the five KIVs
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Personnel: |
One design engineer, one process engineer, one quality engineer |
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Timing: |
One-page report after two months 3D CAD model after three months and completion
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Expected profit: |
$281K |
Predicting Expected Profits:
Often projects focus only on a small subsystem that is not really autonomous inside a company. Therefore, it is difficult to evaluate the financial impact of the project on the company bottom line. Yet an effort to establish this linkage is generally considered necessary. In this section, a formula is presented for predicting expected profits, specific to a certain type of production system improvement project. However, some of the associated reasoning may have applications to profit modeling in other cases The term “rework” refers to efforts to fix units not conforming to specifications.
The term “scrap” refers to the act of throwing away nonconforming items that cannot be effectively reworked. Often, the rework and scrap costs constitute the most tangible monetary figure associated with an improvement project.
Let “RC” denote the current rework and scrap costs on an annual basis. Let “f” denote the fraction of these costs that the project is targeting for reduction. Note that f equaling 1.0 (or 100%) reduction is usually considered unrealistic. Assuming that RC is known, a simple model for the expected savings is
Expected Savings = G × f × (2.0 × RC)
Where the 2.0 derives from considering savings over a two-year horizon
G is a “fudge factor” designed to account for indirect savings from increasing the fraction of conforming units.
Often, G = 1.0 which conservatively accounts only for directly measurable savings.
In some companies, G = 4.0 is routinely used out of concern for indirect losses including production disruption and lost sales... It is also only applicable for improvement projects related primarily to rework or scrap reduction. Often, salary expenses dominate expenses both for rework and running a project.
The term “person-years” refers to the time in years it would take one person, working full time, to complete a task. A rule of thumb is to associate every person-year with $100K in costs including benefits and the cost of management support. This simple rule can be used to estimate the rework costs (RC) and other project expenses. With these assumptions, a crude model for the expected profit is:
Expected Profit = Expected Savings – (Project Person-Years)
