Question

Problem 10-14 Measures of Internal Business Process Performance [LO10-3]

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	91	%	86	%	83	%	79	%
Total sales (units)	3,210		3,072		2,915		2,806

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	0.4		0.3		0.4		0.4
Process time per unit	2.1		2.0		1.9		1.8
Wait time per order before start of production	16.0		17.5		19.0		20.5
Queue time per unit	4.3		5.0		5.8		6.7
Inspection time per unit	0.6		0.7		0.7		0.6

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.

Answer 1

Ans.		Throughput Time		Delivery Cycle		Manufacturing Cycle
	Months			Time		Efficiency
	1	7.4	days	23.4	days	28.4%
	2	8	days	25.5	days	25.00%
	3	8.8	days	27.8	days	21.59%
	4	9.5	days	30	days	18.95%
	*Calculations for 1 a, b, c are shown below:
Ans. 1 a	Throughput time = Move time + Process time + Queue time + Inspection time
		Months
	Particulars	1	2	3	4
	Move time per unit	0.4	0.3	0.4	0.4
	Process time per unit	2.1	2	1.9	1.8
	Inspection time per unit	0.6	0.7	0.7	0.6
	Queue time	4.3	5	5.8	6.7
	Total (Throughput Time)	7.4 days	8 days	8.8 days	9.5 days
Ans. 1 b	Manufacturing cycle efficiency = Process time or value added time / Throughput time * 100
	Months
	1	2.1 / 7.4 * 100	28.4%
	2	2 / 8 * 100	25.00%
	3	1.9 / 8.8 * 100	21.59%
	4	1.8 / 9.5 * 100	18.95%
Ans. 1 c	Delivery cycle time = Throughput time + Wait time per order before start of production
	Months
	1	7.4 + 16	23.4	days
	2	8 + 17.5	25.5	days
	3	8.8 + 19	27.8	days
	4	9.5 + 20.5	30	days
Ans. 2	Throughput time		Favorable	trends
	Manufacturing cycle efficiency		Unfavorable	trends
	Delivery cycle time		Favorable	trends
	*Throughput time and delivery cylce time are increasing every month, so these are favorable trends and
	Manufacturing cycle efficiency is an unfavorable trend as it is decreasing every month.
Ans. 3		Month 5	Month 6
	Throughput time	2.8 days	2.2 days
	Manufacturing cycle efficiency (MCE)	64.29%	81.82%
	*Calculations:
Ans. 3 a	Month 5 :
	Throughput time:
	Move time per unit	0.4
	Process time per unit	1.8
	Inspection time per unit	0.6
	Total	2.8	days
	MCE (manufacturing cycle efficiency) = Process time / Throughput time * 100
		1.8 / 2.8 * 100
		64.29%
Ans. 3 b	Month 6 :
	Throughput time:
	Move time per unit	0.4
	Process time per unit	1.8
	Total	2.2	days
	MCE (manufacturing cycle efficiency) = Process time / Throughput time * 100
		1.8 / 2.2 * 100
		81.82%