JIT and Process Cycle Efficiency (PCE) Zodiac Sound Co. manufactures audio syste
ID: 1199974 • Letter: J
Question
JIT and Process Cycle Efficiency (PCE)
Zodiac Sound Co. manufactures audio systems, both made-to-order and more mass-produced systems that are typically sold to large-scale manufacturers of electronics equipment. For competitive reasons, the company is trying to increase its processing cycle efficiency (PCE) measure. As a strategy for improving its PCE performance, the company is considering a switch to JIT manufacturing. While the company managers have a fairly good feel for the cost of implementing JIT, they are unsure about the benefits of such a move, both in financial and nonfinancial terms. To help inform the ultimate decision regarding a move to a JIT system, you’ve been asked to provide some input. Fortunately, you’ve recently attended a continuing professional education (CPE) workshop on the costs and benefits of moving to JIT and therefore feel comfortable responding to management’s request.
Required Answers (please include the math used)
1. Define the terms value-added time, non-value-added time, and process cycle efficiency (PCE). Conceptually, how are activities included in the first two categories determined? (That is, how does one know what activities are considered “value-added”?)
2. Define the terms cycle time and processing (manufacturing) time. How can processing time be broken down further?
3. Given the estimated data below, calculate and interpret the PCE for both the current manufacturing process and the proposed process after implementing JIT:
4. What is the percentage change in average PCE anticipated under JIT?
5. What additional nonfinancial performance indicators might management monitor in conjunction with the move to JIT?
Activity Current System After JIT Implementation Storage 60 minutes 20 mintues Inspection 30 mins 15 mins Moving 45 mins 15 mins Processing 60 mins 30 minsExplanation / Answer
1. Define the terms value-added time, non-value-added time, and process cycle efficiency (PCE). Conceptually, how are activities included in the first two categories determined? (That is, how does one know what activities are considered “value-added”?)
1. Value-added and non-value-added are defined from the view of the customer i.e., an external perspective is taken. Because the perspective is external, the notions of value-added vs. non-value- added are not strictly or uniquely defined.
Thus from customer’s perspective non-value-added time is the step which does not add form, function, or assist in the finished goods manufacturing of the product.
The term processing time or processing cycle time refers to actual production time (i.e., time expended for the product to be made). Excluded from this measure are non-value-added times associated with moving, storing, or inspecting the product. A measure of processing time efficiency is called processing cycle efficiency (PCE), which is defined as follows:
Process Cycle Efficiency = (Value-added Time / Cycle Time)
Or
PCE = Processing Time ÷ (Processing Time + Moving Time + Storage Time + Inspection Time)
2. Define the terms cycle time and processing (manufacturing) time. How can processing time be broken down further?
Cycle Time is more mechanical measure of process capability. The time it takes to do one repetition of any particular task typically measured from “Start to Start” the starting point of one product’s processing in a specified machine or operation until the start of another similar product’s processing in the same machine or process. Cycle time is commonly categorized into:
Thus, cycle time is the total time required from the start of production to completion of outputs.
A process is a series of independent tasks that transforms an input into output material of higher value for the organization. Therefore process or processing or manufacturing time represents the time actually required for processing. As such, process time excludes waiting time, storage time, moving time, set-up time, and inspection time, all of which can be considered non-value-added from the standpoint of the customer.
Further simplification of processing (manufacturing) time may be as below
Phase 1: Transactional Launch
Phase 2: Function and Value Analysis
Phase 3: Process Preparation
3. Processing Cycle Efficiency (PCE), Pre- and Post-JIT Implementation:
Pre Post
Numerator (Processing Time) = 60.00 30.00
Denominator (Total Cycle Time) = 195.00 80.00
PCE = 30.77% 37.50%
4. Percentage Change in PCE, Pre- versus Post-JIT Implementation :
Numerator = 6.73%
Denominator = 30.77% %
Change = 21.88%
5. What additional nonfinancial performance indicators might management monitor in conjunction with the move to JIT.
Quantitative nonfinancial measures of performance in a manufacturing organization include:
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