JIT and Process Cycle Efficiency (PCE) Zodiac Sound Co. manufactures audio systems, both m...

JIT and Process Cycle Efficiency (PCE) Zodiac Sound Co. manufactures audio systems, both made-to-order and more mass-produced systems that are typically sold to large-scale manufacturers of electronics equipment. For competitive reasons, the company is trying to increase its processing cycle efficiency (PCE) measure. As a strategy for improving its PCE performance, the company is considering a switch to JIT manufacturing. While the company managers have a fairly good feel for the cost of implementing JIT, they are unsure about the benefits of such a move, both in financial and nonfinancial terms. To help inform the ultimate decision regarding a move to a JIT system, you’ve been asked to provide some input. Fortunately, you’ve recently attended a continuing professional education (CPE) workshop on the costs and benefits of moving to JIT and therefore feel comfortable responding to management’s request.

Required

1. Define the terms value-added time, non-value-added time, and process cycle efficiency (PCE). Conceptually, how are activities included in the first two categories determined? (That is, how does one know what activities are considered “value-added”?)

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2. Define the terms cycle time and processing (manufacturing) time. How can processing time be broken down further?

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3. Given the estimated data below, calculate and interpret the PCE for both the current manufacturing process and the proposed process after implementing JIT:

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4. What is the percentage change in average PCE anticipated under JIT?

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5. What additional nonfinancial performance indicators might management monitor in conjunction with the move to JIT?