Ch 3 Manufacturing Models

and Metrics

Sections:
1. Mathematical Models of Production Performance
2. Manufacturing Costs
 Why use metrics

“A system of related measures that facilitates the

quantification of some particular characteristic”

 To track performance in successive periods,

 Try out new technologies and systems to determine their
merits, identify their problems,
 To compare alternative methods, and
 To make good decisions.

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 Production Concepts and
Mathematical Models

Production performance metrics:

 Production rate Rp for an individual processing or

assembly operation is usually expressed as an hourly rate,
that is, number of work units completed per hour (pc/hr).
 Cycle time Tc is defined as 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.

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 Production Concepts and
Mathematical Models

Production performance metrics:

 Production capacity PC
 Utilization U
 Availability A
 Manufacturing lead time MLT
 Work-in-progress WIP

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 Operation Cycle Time

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)

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 Production Rate (batch/job shop/flow)

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

Tp = Tb/Q= Tsu/Q + Tc

Hourly production rate Rp = 60/Tp

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 Production Rate (batch/job shop/flow)

Job shop production:

For Q = 1, Tp = Tsu + Tc
For Q > 1, Tp is determined as in batch production

Mass production:
Rp  Rc = 60/Tc since Tsu/Q  0 (Q is very large)
where
Rc = operation cycle rate of the machine (pc/hr)
Tc = operation cycle time (min/pc)

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 Production Rate (batch/job shop/flow)

Flow line production:

Bottleneck station is the station with the largest operation
time (with highest utilization)
Tc = Tr + Max To
Tc = cycle time of the production line (min/cycle)
Tr = time to transfer work units between workstations each
cycle (min/cycle)
Max To = operation time at the bottleneck station
(min/cycle)

Rc = 60/Tc
Rc = theoretical (ideal) production rate (cycles/hr) 8
 Production Capacity

“Max rate of output that a production facility is able to produce

under a given set of assumed operating conditions”

Operating conditions:
 Number of shifts per day
 Number of days per week
 Employment levels

A work center is a manufacturing system in the plant typically

consisting of one worker and one machine.

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 Production Capacity

Plant capacity for facility in which parts are made in one operation (no = 1):
PC = n Sw Hsh Rp
where
PC = weekly plant capacity (units/wk)
n = number of work centers working in parallel
Sw = number of shifts per week
Hsh = hr/shift
Rp = hourly production rate of each work center (output units/hr)

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 Example 3.1 Production 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. Determine the
weekly production capacity of the turret lathe section.

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 Production Capacity

Plant capacity for facility in which parts require multiple operations (no > 1):
nSw H sh R p
PCw = no
where no = number of operations in the routing

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 Production Capacity

This capacity model assumes that all n machines are producing 100% of
the time and there are no bottleneck operations due to variations in
process routings to inhibit smooth flow of work through the plant.

There are some operations that are fully utilized while other operations
occasionally stand idle waiting for work.

That is, utilization varies.

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 Utilization and Availability
Q
Utilization: U =
PC
where Q = quantity actually produced, and PC = plant capacity

“the amount of output of a production facility relative to its capacity”

Utilization can be assessed for an entire plant, a single machine in the

plant or any other productive resource.

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 Example 3.2 Utilization

A production machine operates 80 hr/wk (2 shifts, 5 days) at

full capacity. Its production rate is 20 units/hr. During a
certain week, the machine produced 1000 parts and was idle
the remaining time.
a)Determine the production capacity of the machine.
b)What was the utilization of the machine during the week
under consideration?

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 Utilization and Availability

MTBF  MTTR
Availability: A =
MTBF
where MTBF = mean time between failures, and
MTTR = mean time to repair
“a common measure for reliability of equipment”

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Availability -
MTBF and MTTR Defined

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 Utilization and Availability

Production capacity calculation can be altered to include

availability and utilization as

Q  A  U  PC
Q  A  U  nS w H sh R p 

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 Example 3.3 Availability

Consider previous example 3.1. Suppose the same data

from that example were applicable, but that the availability of
the machines A=90%, and the utilization of the machines
U=80%. Given this additional data, compute the expected
plant output.

Example 3.1. 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.
Determine the weekly production capacity of the turret lathe
section.
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 Manufacturing Lead Time
noj

MLT j   Tsuji  Q jTcji  Tnoji 

where i 1

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)
Tnoji = non-operation time (handling, temporary storage, inspections)
associated with operation i (min)

“the total time required to process a given part/product through the

plant including any lost time due to delays, time spent in storage,
reliability problems, and so on”

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 Manufacturing Lead Time

MLT = no (Tsu + QTc + Tno)

where
MLT = manufacturing lead time,
no = number of operations,
Tsu = setup time,
Q = batch quantity,
Tc = cycle time per part, and
Tno = non-operation time (handling, temporary storage, inspections)

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 Example 3.4 Manufacturing Lead Time

A certain part is produced in a batch size of 100 units. The

batch must be routed through 5 operations to complete the
processing of the parts. Average setup time is 3 hr/operation,
and average operation time is 6 min. Average nonoperation
time due to handling, delays, inspections, etc., is 7 hours for
each operation. Determine how many days it will take to
complete the batch, assuming the plant runs one 8-hr
shift/day.

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 Manufacturing Lead Time

Job shop when Q=1

MLT = no (Tsu + Tc + Tno)

Mass production when Q

MLT = no QTc

Flow line
MLT = no (Tr + Max To) = no Tc

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 Work-In-Process

AU  PC  MLT  Q  MLT 
WIP = 
S w H sh S w H sh
where WIP = work-in-process, pc;
A = availability,
U = utilization,
PC = plant capacity, pc/wk;
MLT = manufacturing lead time, wk;
Sw = shifts per week,
Hsh = hours per shift, hr/shift
“quantity of parts or products currently located in the factory that are
either being processed or between processing operations”
“the inventory in the state of being transformed from raw material to
finished product” 24
 Costs of Manufacturing Operations

 Two major categories of manufacturing costs:

1. Fixed costs - remain constant for any output level
2. Variable costs - vary in proportion to production
output level
 Adding fixed and variable costs
TC = FC + VC(Q)
where TC = total costs,
FC = fixed costs (e.g., building, equipment, taxes),
VC = variable costs (e.g., labor, materials, utilities),
Q = output level.

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Fixed and Variable Costs

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 Manufacturing Costs

 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 consists of the costs of operating
the factory other than direct labor and materials.
 Corporate overhead is the cost not related to the
company’s manufacturing activities.

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Typical Manufacturing Costs

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 Overhead Rates

FOHC
Factory overhead rate: FOHR =
DLC

COHC
Corporate overhead rate: COHR =
DLC

where
FOHC=annual factory overhead costs ($/yr)
COHC= annual corporate overhead costs ($/yr)
DLC = annual direct labor costs ($/yr)

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 Example 3.5 Determining Overhead
Rates
Expense Plant 1 ($) Plant 2 ($) Headquarters ($) Totals ($)
category
Direct 800,000 400,000 1,200,000
labor
Materials 2,500,000 1,500,000 4,000,000
Factory 2,000,000 1,100,000 3,100,000
expense
Corporate 7,200,000 7,200,000
expense
Totals 5,300,000 3,000,000 7,200,000 15,500,000
Determine
a. The factory overhead rate for each plant
b. The corporate overhead rate

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 Example 3.6 Estimating Manufacturing
Costs and Establishing Selling Price
A customer order of 50 parts is to be processed through plant
1 of the previous example. Raw materials and tooling are
supplied by the customer. The total time for processing the
parts (including setup and other direct labor) is 100 hr. Direct
labor cost is $10.00/hr. The factory overhead rate is 250%
and the corporate overhead rate is 600%.
a)Compute the cost of the job.
b)What price should be quoted to a potential customer if the
company uses a 10% markup?

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 Cost of Equipment Usage

Hourly cost of worker-machine system:

Co = CL(1 + FOHRL) + Cm(1 + FOHRm)

where
Co = hourly rate, $/hr;
CL = labor rate, $/hr;
FOHRL = labor factory overhead rate,
Cm = machine rate, $/hr;
FOHRm = machine factory overhead rate

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 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 = $10.00/hr
Applicable factory overhead rate on labor = 60%
Annual cost of the machine = $26,060
Applicable factory overhead rate on labor = 50%
The work center will be operated one 8-hr shift, 250 days/yr.
Determine the appropriate hourly rate for the work center.

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 Averaging Procedures for Production
Models

nQ  number of batches of the various part/product styles

Average batch quantity

nQ

Q
j 1
j

Q
nQ
Q j  batch quantity for part/product style j  j  1,..., n 
Q

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 Averaging Procedures for Production
Models

Average number of operations in the process routing

nQ

n
j 1
oj

no 
nQ
noj  number of operations in the process routing of
part/product style j

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 Averaging Procedures for Production
Models

Average setup time for part/product j

noj

T sujk
Tsuj  k 1

noj
Tsujk  setup time for operation k in the processing sequence
for part/product style j

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Averaging Procedures for Production
Models

Grand average setup time

nQ

n T
j 1
oj suj

Tsu  nQ

n j 1
oj

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 Averaging Procedures for Production
Models

Average operation cycle time for item j

noj

T cjk
Tcj  k 1

noj
Tcjk  cycle time for operation k for item j
 k  1, 2,..., n 
oj

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 Averaging Procedures for Production
Models

Grand average cycle time for all nQ items

nQ

n T
j 1
oj cj

Tc  nQ

n
j 1
oj

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 Averaging Procedures for Production
Models

Average nonoperation time for item j

noj

T nojk
Tnoj  k 1

noj
Tnojk  nonopertion time for operation k for item j

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Averaging Procedures for Production
Models

Grand average nonoperation time

nQ

n T
j 1
oj noj

Tno  nQ

n j 1
oj

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