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 4 185 46 102 163 39 96 124 30 79 91 27 58 8 days 7 days 4 days 5 days 2% 1% 1% 3% 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 3% 95% 4% 92% 10 4% 89% 11 6% 85% 12 00 n. n. n. n. ? ? ? 95% ? ? ? 89% ? 96% ? 92% 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:

Answer 1

1. a., b., and c.

	Month
	1	2	3	4
Throughput time in days:
Process time	2.1	2.0	1.9	1.8
Inspection time	0.8	0.7	0.7	0.7
Move time	0.3	0.4	0.4	0.5
Queue time during production	2.8	4.4	6.0	7.0
Total throughput time	6.0	7.5	9.0	10.0
Manufacturing cycle efficiency (MCE):
Process time ÷ Throughput time	35.0%	26.7%	21.1%	18.0%
Delivery cycle time in days:
Wait time to start of production	9.0	11.5	12.0	14.0
Throughput time	6.0	7.5	9.0	10.0
Total delivery cycle time	15.0	19.0	21.0	24.0

  

3. a. and b.

	Month
	5	6
Throughput time in days:
Process time	1.8	1.8
Inspection time	0.7	0.0
Move time	0.5	0.5
Queue time during production	0.0	0.0
Total throughput time	3.0	2.3
Manufacturing cycle efficiency (MCE):
Process time ÷ Throughput time	60.0%	78.3%

As non-value-added activities are eliminated, the manufacturing cycle efficiency improves. The goal, of course, is to have an efficiency of 100%. This is achieved when all non-value-added activities have been eliminated and process time equals throughput time.