ABC Mfg. is evaluating the desirability of implementing process improvements and
ID: 2466129 • Letter: A
Question
ABC Mfg. is evaluating the desirability of implementing process improvements and is seeking your help in determining whether it should proceed with the proposed improvements. One area of focus is how the improvements will affect processing time (cycle-time efficiency). Estimated activities and associated times for these activities under both the current process and after process improvements are as follows:
Required Answers (explain the math used)
1. Determine the production (manufacturing) lead time for each of the two decision alternatives.
2. Determine the processing cycle efficiency (PCE) for each decision alternative.
3. Based on only the PCE figures calculated in requirement 2, should the company implement the proposed process improvements? Why or why not?
4. Why would process improvements, such as those referenced above, likely lead to improved financial results?
Process Activity Current Process After Process Improvements Wait Time 4 hours 1 hour Inspection 40 minutes 5 minutes Moving 80 minutes 20 minutes Processing (manufacturing) 2 hours 75 minutesExplanation / Answer
Answer: 1
Production (manufacturing) lead time = wait time + inspection time+ moving time
Current process:
Production (manufacturing) lead time = (4*60) minutes+ 40 minutes + 80 minutes = 360 minutes
After process improvements:
Production (manufacturing) lead time = (1*60) minutes+ 5 minutes + 20 minutes = 85 minutes
Answer:2
Processing cycle efficiency (PCE) = Value added time/Production (manufacturing) lead time
Current process:
Processing cycle efficiency (PCE) = 2*60 minutes/360 = 33.33 %
After process improvements:
Processing cycle efficiency (PCE) = 75/85 = 88.23 %
Answer:3
Since PCE is greater for after process improvements, therefore, company should implement the proposed process improvements.
Answer:4
Process improvements would lead to improved financial results as production (manufacturing) lead time is very much less than what is with the current process which results in a greater MCE efficiency.