Manufacturing Metrics | Performance and Cost

Summary

This lecture dives into critical manufacturing metrics and cost structures essential for evaluating production efficiency. Key topics include cycle time, equipment availability, production capacity, and utilization, with a focus on how these factors impact output and performance. The lecture also explores the difference between fixed and variable manufacturing costs, comparing manual and automated systems. It emphasizes the significance of manufacturing lead time and work in progress (WIP), as well as how these elements influence the overall production process. The financial breakdown of manufacturing costs helps to determine the most cost-effective production approach.

Takeaways

• 😀 Manufacturing metrics help assess whether a production system is meeting its targets, ensuring value is added to raw materials.
• 😀 Cycle time refers to the time taken for a work unit to be processed and assembled at a workstation, impacting production rate.
• 😀 Availability is a key metric for equipment reliability, calculated as the ratio of machine uptime versus downtime due to repairs.
• 😀 Production capacity is the maximum rate at which a manufacturing setup can produce, helping in calculating factory resource utilization.
• 😀 Manufacturing lead time (MLT) includes both operation and non-operation times, with most delays being non-operation time like waiting and transportation.
• 😀 High Work in Progress (WIP) can lead to inefficiencies in the factory, causing longer wait times and increased manufacturing lead time.
• 😀 Manufacturing costs are split into fixed costs (e.g., machinery) and variable costs (e.g., electricity), influencing production cost calculations.
• 😀 Automated production systems have higher fixed costs but lower variable costs, becoming more cost-effective at higher production volumes.
• 😀 Manual production systems have low fixed costs but high variable costs, making them more suitable for low production quantities.
• 😀 The total manufacturing cost consists of direct labor, material costs, and overhead, with overhead being divided into factory and corporate costs.

Q & A

What are the two broad categories of manufacturing metrics mentioned in the lecture?

The two broad categories of manufacturing metrics are 'production performance measures' and 'manufacturing costs.' Production performance measures focus on output, while manufacturing costs deal with the financial aspects of production.

How is cycle time defined in the context of a manufacturing system?

Cycle time is the time required for a work unit to be processed and assembled on a workstation. It includes the time from the arrival of the work unit on the machine until the next work unit arrives on the same machine.

What is the significance of 'availability' in manufacturing equipment?

Availability refers to the time during which equipment is actually available for processing. It is calculated by the ratio of the difference between the mean time before failure and the mean time to repair to the mean time before failure.

What is the meaning of 'production capacity' in manufacturing?

Production capacity is the maximum production rate that a particular setup can achieve. It defines the highest output the system can handle within a certain period (e.g., hours, days, or years).

How do you define 'utilization' in a manufacturing context?

Utilization is the proportion of the time a production resource is used relative to the time available. It helps measure how effectively a factory’s resources are being utilized.

What is 'manufacturing lead time' (MLT), and how is it divided?

Manufacturing lead time is the total time required to process a raw material or part through the plant. It includes both operation time (when work is being performed) and non-operation time (such as waiting time or transportation).

What does 'work in progress' (WIP) refer to in manufacturing?

Work in progress (WIP) refers to the number of work units that are currently being processed or are in between processing operations. High WIP levels indicate inefficiencies and can increase lead time.

What are the two types of manufacturing costs discussed in the lecture?

Manufacturing costs are divided into fixed costs and variable costs. Fixed costs remain constant regardless of production levels, while variable costs change with the production rate.

What is the difference between manual and automated production systems in terms of costs?

Manual systems typically have low fixed costs but higher variable costs, while automated systems have higher fixed costs but lower variable costs. The choice between the two depends on production quantities and cost-effectiveness.

How are manufacturing costs typically divided within a manufacturing system?

Manufacturing costs are typically divided into three categories: direct labor costs (wages and bonuses of workers), material costs (raw materials used), and overhead costs (all other expenses related to running the factory and the business).