Measuring performance and setting production standards is critical in today's manufacturing environment because it has a significant impact on company profitability.
Today’s highly competitive environment, with shrinking margins and overseas competition, has forced domestic manufacturers of all types to strive for as high a degree of productivity as possible, but measuring that productivity maybe difficult without some specific measures that can be applied across a wide variety of manufacturing environments.
This article is the 3rd in this multi-part series examining performance measures geared at the manufacturing and production environment. Article One looked at the concepts of performance measures, and defined the various metrics. Article Two examined 3 such measures: Capacity Utilization, Labor Productivity and Yield, the computation of each, interpretation of the measures, and a real world example applying all 3 within a single scenario. In this article we will look at four (4) additional and closely-related manufacturing production measures in order to understand how these measurements impact both production efficiency and profitability.
Manufacturing Cycle Time
Manufacturing Cycle Time is the time it takes for a manufacturer to produce a specified product from the time the order is released to production, to finished goods.
Manufacturing Cycle Time = Process Time + Inspection Time+ Move Time + Queue Time
Process Time is the amount of time the actual work associated with the manufacturing process or production steps. Inspection Time is the amount of time spent on quality control. Move Time is the time required to move/locate raw materials, partially completed products and completed products prior to delivery/stock status. Queue Time is the amount of time during production when production components are not actually in production, but unavailable for use elsewhere.
A manufacturing company can sometimes reduce Manufacturing Cycle Time by minimizing the time consumed by inspecting, moving and queuing activities. As a result of minimizing any of these activities, the overall Manufacturing Cycle Time is reduced and performance is improved.
But the reality is that many manufacturers may not ‘have a clue' as to each of the four time measures needed to compute Manufacturing Cycle Time unless they are using a sophisticated shop/batch control system that includes time tracking. In such case simpler measure referred to as ‘throughput time', is commonly used to represent the time required to turn raw materials into completed products, also representing the efficiency of the production or manufacturing process.
Throughput Time = Total Time to Produce Total Quantity / Total Quantity
Let’s return to our example of the Concrete Manufacturer from Part 2 of this series, and the initial example of production. As a concrete plant we would most likely measure cubic yards of concrete being produced in a given period of time. If our plant produces 120 cubic yards of concrete in an 8-hour day, and it requires the efforts of 3 workers working the entire 8 hours to produce that number of cubic yards, we can calculate their productivity as:
120 cubic yards produced / 24 man (3 X 8) hours = 5 cubic yards per man hour
Of course it rarely is this simple, there are a lot of different factors that go into play, even when making concrete. Things like supply availability may impact Labor Productivity, for example if you start the day with a shortage of ‘Portland cement’ with which to make the concrete, and have to wait for an hour to get an additional delivery, before resuming production, you still have paid your people for that hour (3 man hours total), but have produced nothing.
Well using this example let’s computer Throughput Time first using our formula (above). Well the total time to computer the 120 yards was 8 hours (1 day) even though part of the day (1 hour) was associated with ‘down time’ we might classify as Queue Time. If we computer Throughput Time then
8 hours / 120 yards = 480 minutes (8 hours X 60 minutes per hour) / 120 yards = 4 minutes per yard
So our plant has a Throughput time of 4 minutes per yard of concrete produced based upon that day’s work.
As you might expect Throughput is closely related to Throughput Time, in fact it is the countermeasure since it measures how much product is being manufactured over a specified period of time.
Throughput = Total Quantity/Total Time to Produce Total Quantity
In our above example the computation would be like this:
120 yards / 8 hours = 120 yards / 480 minutes = .25 yards per minute
In other words our plant produced 1/4 of a yard of concrete during the 8 hour day. But while the total amount of concrete was indeed produced in the 8 hour period as a whole, it really was produced in only 7 hours, because 1 hour was wasted time. So the throughput during actual production was much better than the 1/4 yard per minute. Let’s look at the results if we consider that the 120 yards was produced in 7 actual production hours.
120 yards / 7 hours = 120 yards / 420 minutes (7 hours X 60 minutes/hour) = .2857 yards per minute.
That represents more than a 10% increase in actual throughput efficiency. Just goes to show how cutting out ‘wasted time’ (no matter what the cause) can really impact the efficiency of a manufacturing or production process.
Manufacturing efficiency can be calculated by dividing process time by the total wait time, inspection time, move time and queue time. The resulting percent is the portion of production time that consists of non-value-added time, which is time spent on activities other than producing the end product.
It’s easy to see how these four performance measures are tied together, and how they can help us identify areas of efficiency and inefficiency that impact the ‘bottom line’ of our manufacturing and production processes. In our next article we will look at a few more critical metrics used to analyze and enhance manufacturing performance.