Question

Problem 11-19 Internal Business Process Performance Measures (LO11-3] Tombro Industries is in the process of automating one of its plants and developing a flexible manufacturing system. The company is finding it necessary to make many changes in operating procedures. Progress has been slow, particularly in trying to develop new performance measures for the factory. In an effort to evaluate performance and determine where improvements can be made, management has gathered the following data relating to activities over the last four months: Month 1 2 3 130 191 52 108 169 45 102 36 w 9 days 7 days 10 days 2% 3% 5 days 6% Quality control measures: Number of defects Number of warranty claims Number of customer complaints Material control measures: Purchase order lead time Scrap as a percent of total cost Machine performance measures: Machine downtime as a percentage of availability Use as a percentage of availability Setup time (hours) Delivery performance measures: Throughput time Manufacturing cycle efficiency (MCE) Delivery cycle time Percentage of on-time deliveries 10% 95% 10 6% 92% 12 89% 13 85% 14 96% 95% 92% 89% The president has read in industry journals that throughput time, MCE, and delivery cycle time are important measures of performance, but no one is sure how they are computed. You have been asked to assist the company, and you have gathered the following data relating to these measures: Average per Month (in days) 2 3 4 Wait time per order before start of production Inspection time per unit Process time per unit Queue time per unit Move time per unit 10.0 0.8 2.8 12.9 0.7 2.1 4.9 0.4 13.0 0.7 2.0 5.9 0.4 15.0 0.7 1.0 7.6 0.7 3.1 Required: 1-a. Compute the throughput time for each month. 1-b. Compute the manufacturing cycle efficiency (MCE) for each month. 1-c. Compute the delivery cycle time for each month.

Answer 1

SOLUTION

1A.

	Month 1	Month 2	Month 3	Month 4
Process time	2.8	2.1	2.0	1.0
Inspection time	0.8	0.7	0.7	0.7
Move time	0.3	0.4	0.4	0.7
Queue time	3.1	4.9	5.9	7.6
Throughput time	7.0	8.1	9.0	10.0

1B.

	Month 1	Month 2	Month 3	Month 4
Process time (A)	2.8	2.1	2.0	1.0
Throughput time (B)	7.0	8.1	9.0	10.0
MCE (A/B)	40.0%	25.9%	22.2%	10.0%

1C.

	Month 1	Month 2	Month 3	Month 4
Wait time (A)	10.0	12.9	13.0	15.0
Throughput time (B)	7.0	8.1	9.0	10.0
Delivery cycle time (A+B)	17.0	21.0	22.0	25.0

3A.

	Month 5
Process time	1.0
Inspection time	0.7
Move time	0.7
Queue time	0
Throughput time	2.4

MCE = 1.0 / 2.4 = 41.6%

3B.

	Month 6
Process time	1.0
Inspection time	0
Move time	0.7
Queue time	0
Throughput time	1.7

MCE = 1.0 / 1.7 = 58.8%