Analysis of Direct Cost
January 14, 2021
Understanding and coping with change
January 14, 2021

Problelm 11-14 Measures of Internal Business Process Performance

PROBLEM 11–14 Measures of Internal Business Process Performance LO11–3

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

92%

87%

84%

81%

Total sales (units)

2,340

2,240

2,125

2,044

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

0.9

0.6

0.7

0.7

Process time per unit

2.3

2.2

2.1

2.0

Wait time per order before start of production

18.0

19.7

22.0

23.8

Queue time per unit

4.8

5.4

6.1

6.9

Inspection time per unit

0.9

1.1

1.1

0.9

Required:

  1. For each month, compute the following:
    1. The throughput time.
    2. The delivery cycle time.
    3. The manufacturing cycle efficiency (MCE).
  2. Evaluate the company’s performance over the last four months.
  3. Refer to the move time, process time, and so forth, given above for month 4.
    1. 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.
    2. 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.

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