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 the 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

	Data Span Inc.
1)	Throughput time=Process Time+Inspection time+Move Time+Queue Time
		Month 1	Month 2	Month 3	Month 4
	Process Time	2.1	2	1.9	1.8	Days
	Inspection Time	0.6	0.7	0.7	0.6	Days
	Move Time	0.4	0.3	0.4	0.4	Days
	Queue Time	4.3	5	5.8	6.7	Days
	Throughput time=	7.4	8	8.8	9.5	Days
1b)	Delivery Cycle Time=Wait Time+Throughput Time
		Month 1	Month 2	Month 3	Month 4
	Wait Time per order =(I)	16	17.5	19	20.5	Days
	Throughput Time=(II) (Calculated in 1 above)	7.4	8	8.8	9.5	Days
	Delivery Cycle Time=(I)+(II)	23.4	25.5	27.8	30	Days
1c )	Manufacturing Cycle Efficiency (MCE)=Process Time/Throughput Time
		Month 1	Month 2	Month 3	Month 4
	Process Time=(I)	2.1	2	1.9	1.8	Days
	Throughput Time=(II)(Calculated in (1) above	7.4	8	8.8	9.5	Days
	Manufacturing Cycle Efficiency=(I)/(II)	28.38%	25.00%	21.59%	18.95%
2)	In all the cases performance are not favorable due to :
a)	Throughput time is continuously increasing.
b)	Delivery Cycle time is also in increasing trend.
c )	Manufacturing Efficiency has declining trend.
3a)
		Month 5
	Process Time	1.8
	Inspection Time	0.6
	Move Time	0.4
	Throughput time=	2.8
		Month 5
	Process Time=(i)	1.8
	Throughput time=(II)	2.8
	Manufacturing Cycle Efficiency=(I)/(II)	64.29%
3b)		Month 5
	Process Time	1.8
	Move Time	0.4
	Throughput time=	2.2
		Month 5
	Process Time=(I)	0.7
	Throughput time=(II)	2.2
	Manufacturing Cycle Efficiency(I)/(II)	31.82%