Question

DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations.

	Month
	1		2		3		4
Throughput time (days)	?		?		?		?
Delivery cycle time (days)	?		?		?		?
Manufacturing cycle efficiency (MCE)	?		?		?		?
Percentage of on-time deliveries	83	%	78	%	75	%	72	%
Total sales (units)	2700		2585		2453		2360

Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months:

	Average per Month (in days)
	1		2		3		4
Move time per unit	0.6		0.3		0.4		0.4
Process time per unit	2.0		1.9		1.8		1.7
Wait time per order before start of production	21.0		23.0		26.0		28.1
Queue time per unit	4.0		4.6		5.3		6.1
Inspection time per unit	0.4		0.5		0.5		0.4

Required:

1-a. Compute the throughput time for each month.

1-b. Compute the delivery cycle time for each month.

1-c. Compute the manufacturing cycle efficiency (MCE) for each month.

2. Evaluate the company’s performance over the last four months.

3-a. Refer to the move time, process time, and so forth, given for month 4. Assume that in month 5 the move time, process time, and so forth, are the same as in month 4, except that through the use of Lean Production the company is able to completely eliminate the queue time during production. Compute the new throughput time and MCE.

3-b. Refer to the move time, process time, and so forth, given for month 4. Assume in month 6 that the move time, process time, and so forth, are again the same as in month 4, except that the company is able to completely eliminate both the queue time during production and the inspection time. Compute the new throughput time and MCE.

Throughput Time Delivery Cycle Time Manufacturing Cycle Efficiency (MCE) Month 1 days days % Month 2 days days % Month 3 days days % Month 4 days days %

The Throughput Time measure displays		trends
The Delivery cycle time—days measure displays		trends
Manufacturing cycle efficiency—days measure displays		trends

Month 5 Month 6 Throughput time days days Manufacturing cycle efficiency (MCE) % %

Comparative data on three companies in the same service industry are given below.

Required:

2. Fill in the missing information. (Round the "Turnover" and "ROI" answers to 2 decimal places.)

	Company A B C Sales $3,519,000 $2,324,000 Net operating income $668,610 $348,600 Average operating assets $2,070,000 $3,290,000 Margin % % 8 % Turnover 1.60 Return on investment (ROI) % 10.50 % %

Answer 1

2.

	Company A	Company B	Company C
Sales	$ 3,519,000	$ 2,324,000	$ 5,264,000
Net Operating Income	668,610	348,600	421,120
Average Operating Assets	2,070,000	3,320,000	3,290,000
Margin	19 %	15 %	8 %
Turnover	1.7	0.7	1.60
Return on Investment ( ROI )	32.3 %	10.50 %	12.8 %

Margin = Net Operating Income / Sales * 100

Turnover = Sales / Average Operating Assets

ROI = Margin x Turnover