Problem 12-15 (Algo) Internal Business Process Performance Measures [LO12-3]

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:

Month1234Quality control measures: Number of defects199 177 138 97 Number of warranty claims60 53 44 41 Number of customer complaints116 110 93 72 Material control measures: Purchase order lead time8days7days5days4daysScrap as a percent of total cost2% 2% 3% 6% Machine performance measures: Machine downtime as a percentage of availability5% 6% 6% 10% Use as a percentage of availability96% 93% 90% 86% Setup time (hours)8 10 11 12 Delivery performance measures: Throughput time? ? ? ? Manufacturing cycle efficiency (MCE)? ? ? ? Delivery cycle time? ? ? ? Percentage of on-time deliveries97% 96% 93% 90%

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)1234Wait time per order before start of production9.011.112.014.0Inspection time per unit0.80.70.70.7Process time per unit2.82.62.21.3Queue time per unit4.04.95.47.2Move time per unit0.40.70.70.8

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.

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

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