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A variety of metrics help manage the operations of manufacturing companies. Manufacturing metrics are divided into two basic categories: 1. Production performance measures Production rate, plant capacity, proportion uptime on equipment (reliability measure), manufacturing lead time 2. Manufacturing costs Labor and material costs, the costs of producing the products, the costs of operating a given piece of equipment
Cycle time Tc: The time that one work unit spends being processed or assembled. It is the time between when one work unit begins processing or assembly and when the next unit begins. Typical cycle time for a production operation: Tc = To + Th + Tth where Tc = cycle time (min/pc), To = processing time for the operation (min/pc), Th = handling time (min/pc), (e.g., loading and unloading the production machine), and Tth = tool handling time (min/pc), (e.g., time to change tools).
Batch production: batch time Tb = Tsu + QTc where Tb = batch processing time (min), Tsu = setup time to prepare for the batch (min), Q = batch quantity (pc), Tc = cycle time per work unit (min/cycle). Average production time per work unit Tp = Tb/Q Production rate (pc/min) Rp = 1/Tp or Production rate (pc/hr) Rp = 60/Tp
For high quantity production or mass production, the production rate equals the cycle rate of the machine (reciprocal of operation cycle time) because the effects of setup time become insignificant, i.e., as Q becomes very large, Tsu/Q 0.
Rp = Rc = 60/Tc where Rc = operation cycle rate of the machine (pc/hr), Tc = operation cycle time (min/pc).
For flow line production, the production rate approximates the cycle rate of the production line, i.e., neglecting setup time. Tc = Tr + Max To and Rc = 60/Tc
where Tc = cycle time of the production line (min/cycle), Tr = time to transfer work units between stations each cycle (min/cycle), Max To = operation time at the bottleneck station (the maximum of the operation times for all stations on the line, min/cycle), Rc = theoretical or ideal production rate or cycle rate (cycle/hr).
Definition The maximum rate of output that a production facility (or production line, work center, or group of work centers) is able to produce under a given set of a assumed operation conditions. It usually refers to a plant or factory so that it is also termed plant capacity.
3.1.2 Production Capacity Plant capacity for facility in which parts are made in one operation (no = 1):
PCw = nSwHshRp
where PCw = weekly plant capacity (unit/wk), n = number of machines or work centers in the facility, Sw = number of shifts per week, Hsh = number of hours per shift, Rp = hourly production rate of each work center (unit/hr).
Plant capacity for facility in which parts require multiple operations (no > 1): nS w H sh R p
no where no = number of operations in the routing.
PCw =
Utilization U
It refers to the amount of output of a production facility relative to its capacity.
U=
Q PC
Utilization can be assessed for an entire plant, a single machine in the plant, or any other productive resources, i.e., labor. It is also defined as the proportion of time that the facility is operating relative to the time available under the definition of capacity.
1000 H 50 hr 20
H is the time during the week that the machine was actually used.
50 U 0.625 62.5% 80
3.1.3 Utilization and Availability Availability A It is a common measure of reliability for equipment. It is especially appropriate for automated production. Mean time between failure (MTBF)
Average length of time the piece of equipment runs between breakdowns
Mean time to repair (MTTR) Average time required to service the equipment and put it back into operation when a breakdown occurs.
3.1.3 Utilization and Availability Example 3.3 Effect of Utilization and Availability on Plant Capacity
The turret lathe section has six machines, all devoted to the production of the same part. The section operates 10 shift/wk. The number of hours per shift averages 8. Average production rate of each machine is 17 unit/hr. The availability of the machine is 90% and the utilization of the machine is 80%. Determine the weekly production capacity of the turret lathe section.
Solution
Q = AU (nSwHshRp) = 0.9 0.8 6 10 8 17 = 5875 output unit/wk
Activities of production:
Operation Performed on a work unit when it is in the production machine Nonoperation Handling, temporary storage, inspection, and other sources of delay when the work unit is not in the production machine
where MLTj = manufacturing lead time for Part or Product j (min), Tsuji = setup time for operation i (min), Qj = quantity of part or product j in the Batch being processed (pc), Tcji = operation cycle time for operation i (min/pc), and Tnoji = nonoperation time associated with operation i (min), and i indicates the operation sequence in the processing; i = 1, 2,, noj, noj = number of operations on part j.
where MLT = manufacturing lead time for a part or product, no = number of operations, Tsu = setup time, Q = batch quantity, Tc cycle time per part, and Tno = nonoperation time
Averaging procedure In an actual batch production factory, the terms no, Q, Tsu, Tc, and Tno would vary by product and by operation. These variations can be accounted for by using properly weighted average vales of the various terms. The average procedure is explained in Appendix.
Solution MLT= no (Tsu + QTc + Tno) = 5 (3 + 100 0.1 + 7) = 100 hr = 100/8 days = 12.5 days
3.1.4 Manufacturing Lead Time For job shop production, Q = 1 MLT= no (Tsu + Tc + Tno)
For mass production, Q term in the MLT equation is very large and dominates the other terms. In the case of no = 1, the MLT simply becomes the operation cycle time. MLT= QTc
For Flow Line mass production, the entire production line is set up in advance. Also, the nonoperation time between processing steps is simply the transfer time Tr to move the part or product from one workstation to the next.
MLT= no (Tr + MAX To) = noTc or MLT= n (Tr + MAX To) = nTc where MLT= time between start and completion of a given work unit on the line, no = number of operations on the line, n = number of stations on the line, no = n, because each station completes one operation, Tr = transfer time, Max To = operation time at the bottleneck station, Tc = cycle time of the production line.
3.1.5 Work-in-Process Definition: Work-In-Process (WIP) is the quantity of parts or products currently located in the factory that either are being processed or are between processing operations. It is inventory that is in the state of being transformation from raw material to finished product.
AU PC MLT WIP = S w H sh
where WIP = work-in-process (pc), A = availability, U = utilization, PC = ideal plant capacity (pc/wk), MLT = manufacturing lead time (hr), Sw = shifts per week, Hsh = hours per shift (hr/shift).
Alternative classification of manufacturing costs: 1. Direct labor - Wages and benefits paid to workers 2. Materials - Costs of raw materials 3. Overhead - All of the other expenses associated with running the manufacturing firm Factory overhead Corporate overhead
3.2.2 Direct Labor, Material, and Overhead Costs for a manufactured product
Allocation of overhead costs: Direct labor cost Material cost Direct labor hours Space
Most common in industry is direct labor cost, which will be used to illustrate how overheads are allocated and subsequently used to compute factors such as selling price of the product.
FOHR =
FOHC DLC
COHR =
COHC DLC
where DLC = annual direct labor costs, FOHC = annual factory overhead costs, COHC = annual corporate overhead costs. If material cost were used as the allocation basis, then material cost would be used as the denominator in both ratios.
For plant 2,
FOHC2 1.1106 FOHR2 2.75 275% DLC2 4 105
(b)
COHC 7.2 106 COHR 6 600% DLC 1.2 106
Therefore, it is appropriate to divide the cost of a worker running a machine into two components:
Direct labor Machine
These costs apply not to the entire factory operations, but to individual work centers.
The direct labor cost consists of the wages and benefits paid to operate the work center.
UAC IC A / P, i, n
where IC = initial cost of the machine, (A/P, i, n) = capital recovery factor that converts initial cost at year zero into a series of equivalent uniform annual year-end values, where i = annual interest rate and n = number of years in the service life of the equipment.
i 1 i A / P, i , n n 1 i 1
n
The uniform annual cost can be expressed as an hourly rate by dividing the annual cost by the number of annual hours of equipment use. The machine overhead rate is based on those factory expenses that are directly assignable to the machine, including power to drive the machine, floor space, maintenance and repair expenses, and so on. The total cost rate for the work center is the sum of labor and machine costs.
For a work center consisting of one worker and one machine, hourly cost of worker-machine system: Co = CL(1 + FOHRL) + Cm(1 + FOHRm)
where Co = hourly rate to operate the work center, CL = direct labor wage rate, FOHRL = factory overhead rate for labor, Cm = machine hourly rate, FOHRm = factory overhead rate applicable to the machine.
3.2.3 Cost of Equipment Usage Example 3.7 Hourly Cost of a Work Center
The following data are given for a work center consisting of one worker and one machine: direct labor rate = $10/hr, applicable factory overhead rate on labor = 60%, capital investment in machine = $105, service life of the machine = 8 yr, rate of return = 20%, salvage value in 8 yr = 0, and applicable factory overhead rate on machine = 50%. The work center will be operated one 8 hr shift, 250 day/yr. Determine the appropriate hourly rate for the work center.
Solution
Labor cost per hour is CL(1 + FOHRL) = 10 (1 + 0.6) = $16/hr
n
Machine cost per hour is Cm(1 + FOHRm) = 13.03 (1 + 0.5) = $19.55/hr Total cost rate for the work center is Co = CL(1 + FOHRL) + Cm(1 + FOHRm) = 16 + 19.55 = $35.55/hr