INME 321: MANUFACTURING SYSTEMS ENGINEERING

LECTURE 5- MANUFACTURING METRICS AND ECONOMICS

AGENDA
Production Performance Metrics
 Cycle time and Production Rate
 Production capacity and Utilization
 Manufacturing lead time and work in Process

Manufacturing Costs
 Fixed and Variable costs
 Direct labor, Material and Overhead
 Cost of Equipment usage
 Cost of a Manufactured Part
PRODUCTION PERFORMANCE METRICS
The logical starting point is the cycle time for a unit operation, from which the
production rate for the operation is delivered.
These unit operation metrics can be used to develop measures of performance at the
factory level: production capacity, utilization, manufacturing lead time, and work in
process
Cycle time analysis- Is the time that one unit spends being processes or assembled.
Cycle time is the time an individual part spends at the machine, but not all of this is
processing time. In a typical processing operation, such as machining, consists of
(1) actual processing time, (2) work part handling time, and (3) tool handling time
per work piece. As an equation, it can be expressed as:
= ++
 PRODUCTION PERFORMANCE METRICS
Where = cycle time, min/pc; = time of the actual processing or assembly operation,
min/pc; = handling time, min/pc; and = average tool handling time, min/ pc, if such an
activity is applicable
PRODUCTION RATE
Work units completed per hour (pc/hr), usually expressed as an hourly rate.
Types of production operations that exists are job shop production, batch
production and mass production.
In job shop production, quantities are low (1 ≤ Q ≤ 100). At the extreme low end of
the range, when quantity Q = 1, the production time per work unit is the sum of
setup and cycle times;
= +
Cntd………….
Where = average production production time, min/pc; = setup time to prepare the
machine to produce the part; and = cycle time. The production rate for the unit
operation is simply the reciprocal of production time, usually expressed as an hourly
rate
=
Where = hourly production rate pc/ hr; = production time from previous equation,
and the constant 60 converts minutes to hours. When the production quantity is
greater than one, the analysis is the same as in batch production.
Sequential batch processing is usually a batch production that involves work units
that are processed one at a time. Examples include machining, sheet metal stamping,
and plate injection molding.
Simultaneous batch processing involves work units that are processed together in
batches. Examples include heat treating and electroplating operations, in which all
of the parts in the batch are processed once.
PRODUCTION PERFORMANCE METRICS
In sequential batch processing, the time to process one batch consisting of Q work
units is the sum of the setup time and processing time, where the processing time is
the batch quantity multiplied by the cycle time; that is,
= +
Where = batch processing time, min/batch; = setup time to prepare the machine for
the batch, min/batch; Q = batch quantity, pc/batch; and = cycle time per work unit,
min/cycle.
In simultaneous batch processing, the time to process a batch consisting of Q work
units is the sum of the setup time and processing time, where the processing time is
the time to simultaneously process all of the parts in the batch; that is,
= +
Where = batch processing time, min/batch; = setup time, min/batch; and = cycle time
per batch, min/cycle.
PRODUCTION PERFORMANCE METRICS
To obtain the average production time per work unit for the unit operation, simultaneous
batch processing time is divided by the batch quantity:

=
For quantity type – type mass production, the production rate equals the cycle rate of the
machine (reciprocal of operation cycle time) after production is underway and the effects of
setup time become insignificant. That is, as Q becomes very large (/ Q) ⇾ 0 and
⇾ =
Where = operation cycle rate, and = operation cycle time, min/pc.
For flow- line mass production, the production rate approximates the cycle rate of the
production line, again neglecting setup time.
PRODUCTION PERFORMANCE METRICS
Operation of production lines is complicated by the interdependence of the workstations on
the line. One complication is that it is usually impossible to divide the total work equally
among all of the workstations on the line; therefore one station ends up with the longest
operation time and this station sets the pace for the entire line, termed bottleneck station.
Time to move parts from one station to another is also considered.
Taking this factors into account; the cycle time of a production line is the longest processing
(or assembly) time plus the time to transfer work units between stations.

= Max +
Where = cycle time of the production line, min/cycle; Max = the operation time at the
bottleneck station (the maximum of the operation times for all stations on the line,
min/cycle); and = time to transfer work units between stations each cycle. Theoretically, the
production rate, precisely cycle rate() can be determined by taking the reciprocal of as
= , units are (cycles/hr)
EXAMPLES
2. A batch of parts is produced on a semiautomated production machine. Batch size is 250 units.
Setup requires 50 min. A worker loads and unloads the machine each cycle, which takes 0.40 min.
Machine processing time is 2.50 min/ cycle, and tool handling time is negligible. One part is produced
each cycle. Determine (a) average cycle time, (b) time to complete the batch, and © average
production rate.
3. In a batch machining operation, setup time is 1.3hr and batch size is 60 units. The cycle time
consists of part handling time of 20 sec and processing time of 1.25 min. One part is produced each
cycle. Tool changes must be performed every 10 parts and this takes 1.0 min. Determine (a) average
cycle time, (b) time to complete the batch, and © average production rate.
4. A batch production operation has a machine setup time of 4.0 hr and a processing time of 1.50 min
per cycle. Three parts are produced each cycle. No tool handling time is included in the cycle. Part
handling time each cycle is 30 sec. It consists of the worker obtaining three starting work units from a
parts tray, loading them into the machine, and then after processing, unloading the completed units
and placing them into the same tray. Each tray holds 27 work units. When all of the starting work
units have been replaced with completed units, the tray of the completed parts is moved aside and a
new tray of starting parts is moved into position at the machine. This irregular work element takes
4.0 min. Batch quantity is 2,700 units. Determine (a) average cycle time, (b) time to complete the
batch, and (c) average production rate.
EQUIPMENT RELIABILITY
Lost production time due to equipment reliability problems reduces production rates
determined by the previous equations
The most useful measure of reliability is availability, defined as the uptime
proportion of the equipment; that is, the proportion of time that the equipment is
capable of operating (not broken down) relative to the scheduled hours of production.
The measure is especially appropriate for automated production equipment.
Availability can be defined using two reliability terms, mean time between failures
(MTBF) and mean time to repair (MTTR).
MTBF is the average length of time the piece of equipment runs between breakdowns,
and MTTR is the average time required to service the equipment and put it back into
operation when a breakdown occurs.
EQUIPMENT RELIABILITY
A=
Where A= Availability (Proportion); MTBF = Mean time between failures, hr; and
MTTR = mean time to repair, hr. The mean time to repair may include waiting time
of the breakdown equipment before repairs begin.
Availability is typically expressed as a percentage.

Example
1. A batch of 50 electronic components is tested for 2,000 hours. Four of the
components fail during the test as follows: Calculate MTBF given the following,
Failure 1 occurred at 1,200 hours
Failure 2 occurred at 1,450 hours
Failure 3 occurred at 1,720 hours
Failure 4 occurred at 1,905 hours
PRODUCTION CAPACITY AND UTILIZATION
Defined as the maximum rate of output that a production facility (or production line,
or group of machines) is able to produce under a given set of assumed operating
conditions.
Production facility refers to a plant or factory. The number of hours of plant
operation per week is a critical issue in defining plant capacity.
Plant capacity can be developed based on the production rate models.

PC = n
Where PC = production capacity, pc/period; n = number of machines; = the number of
hours in the period being used to measure production capacity (or plant capacity);
and hourly production rate, pc/hr.
 PRODUCTION CAPACITY AND UTILIZATION
Table 1: Number of hours of Plant Operation for Various Periods and Operating Conditions

Period
Operating Conditions Week Month Year
One 8-hr shift, 5 days/week, 50 weeks/year 40 167 2000
Two 8-hr shifts, 5 days/week, 50 weeks/year 80 333 4000
Three 8-hr shifts, 5 days/week, 50 weeks/year 120 500 6000
One8-hr shift, 7 days/week, 50 weeks/year 56 233 2800
Two 8-hr shifts, 7 days/week, 50 weeks/year 112 467 5600
Three 8-hr shifts, 7 days/week, 50 weeks/year 168 700 8400
24 hr/day, 7 days/week, 52 weeks/ year 168 728 8736
PRODUCTION CAPACITY AND UTILIZATION
Example
1. The automatic lathe department has five machines, all devoted to the production
of the same product. The machines operate two 8-hr shifts, 5 days/ week, 50
weeks/ year. Production rate of each machine is 15 unit/ hr. Determine the weekly
production capacity of the automatic lathe department.

Hint: PC = n
PRODUCTION CAPACITY AND UTILIZATION

In cases in which different machines produce different parts at different production rates, the
following equation applies for quantity – type mass production:
PC =
Where n= number of machines in the plant, and = hourly production rate of machine i, and all
machines are operating full time during the entire period defined . In job shop and batch
production, each machine may be used to produce more than one batch, where each batch is
made up of a different part style j. Let = the fraction of time during the period that machine i is
processing part style j. Under normal operating conditions; 0 where for all i.
0 indicates machine is idle; indicates machine being used overtime
HOURLY - & WEEKLY PLANT PRODUCTION RATE

The production output of the plant must include the effect of operation sequence for part or product j. This is
accomplished by dividing the production rate for each machine that participates in the production of part j by
the number of operations in the operation sequence for that part, :

Where = average hourly plant production rate (pc/hr); = production rate of machine i when processing part j
(pc/hr); = the number of operations required to produce part j.
where
where = average production time for part j on machine i, (min/pc); = setup time for part j on machine i,
(min/batch); and = batch quantity of part j, (pc/batch).
Plant output for a given period (e.g., week, month, year) can be given as follows;

Where = weekly plant production rate for the plant, (pc/wk); = average hourly production rate for the plant,
(pc/hr),
& ; Due to Bottlenecks;
EXAMPLES
1. A small machine shop has two machine and works 40hr/wk. During a week of interest, four
batches of parts were processed through these machines. Batch quantities, batch times, and
operation sequences for the parts are given in the table below. Determine (a) weekly
production output of the shop and (b) whether this represents the weekly plant capacity.
Machine 1 Machine 2
Part Duration Duration
A 25pc/ hr 12 hr 30 pc/ hr 10 hr
B 10pc/ hr 20 hr
C 7.5 pc/ hr 24 hr
D 20pc/ hr 6 hr

Hints: (a) [ = 20pc & = 40hr; = 800pc/hr]

(b) Use bottleneck concept & consider demand availability
PRODUCTION CAPACITY AND UTILIZATION
Example
1. A mass- production plant has eight machines and currently operates two 8-hr
shifts per day, 5 days per week, 50 weeks per year. The eight machines produce
the same part each at a rate of 15pc/ hr. (a) Determine the annual production
capacity of this plant. (b) If the plant were to operate three 8-hr shifts per day, 7
days per week, 52 weeks per year, determine the annual percentage increase in
plant capacity.

Hints: (a) & (b) PC = n

Note: the significant effect that hours of operation can have on plant capacity
UTILIZATION

Utilization: is the proportion of time that a productive resource (e.g a production machine) is
used to the time available under the definition of plant capacity. Expressed as an equation,
=
Where = utilization of machine i, and = fraction of time during the available hours that
machine i is the processing part style j. An overall utilization for the plant is determined by
averaging the values over the number of machines.

Workload is defined as the total hours required to produce a given number of units during a
given week or other period of interest. That is,

Where = workload, (hr); = number of work units produced of part style j on machine i during
the period of interest; and = average production time of part style j on machine i.
PRODUCTION CAPACITY AND UTILIZATION
Adjusting Plant Capacity
Changes that can be made to increase or decrease plant capacity over the short term are listed
below:
Increase or decrease the number of machines n in the plant. It is easier to remove machines
from operation than to add machines if adding them means purchasing equipment that may
require long lead times to procure. Adding workers in the short term may be easier than
adding equipment.
Increase or decrease the number of shifts per week. For example, Saturday shifts might be
authorized to temporarily increase capacity, or the plant might operate two shifts per day
instead of one.
Increase or decrease number of hours worked per shift. For example, overtime on each
regular shift might be authorized to increase capacity.
PRODUCTION CAPACITY AND UTILIZATION
Over the intermediate and longer terms, the following changes can be made to increase plant
capacity:
Increase the number of machines of n in the shop. This might be done by using equipment that
was formerly not in use, acquiring new machines, and hiring new workers.
Increase the production rate by making improvements in methods and/or processing
technology.
Reduce the number of operation in the operation sequence of parts by using combined
operations, simultaneous operations, and/or integration of operations.
Other adjustments that can be considered to affect plant capacity in the short term or long term
include the following:
Identify the bottleneck operations in the plant and somehow increase the output rates of these
operations using the USA Principle and other approaches outlined in previous sections.
Bottleneck operations in a batch manufacturing plant usually reveal themselves in one or both of
the following ways: (1) These machines are always busy; they operate at 100% utilization; and
(2) they have large queues of work waiting in front of them.
PRODUCTION CAPACITY AND UTILIZATION
 Stockpile inventory to maintain level employment during slow periods,, trusting (and betting)
that the goods can later be sold when demand increase
 Backlogging orders, which means delaying deliveries to customers during busy periods to avoid
temporary and potentially costly increases in production capacity
 Subcontracting work to outside vendors during busy periods or taking in extra work from other
firms during slack periods
Manufacturing lead time and Work in Process
Manufacturing lead time is defined as the total time required to process a given part or product
through the plant, including any time due to delays, parts being moved between operation, time
spent in queues, and so on. Between the unit operations are these non productive elements, which
typically consume large blocks of time. Some of the reasons why nonoperation time occurs between
unit operations are the following: (1) time spent transporting batches of parts between operations,
(2) buildup of queues of parts waiting before each operation, (3) buildup of queues of parts after
each operation waiting to be transported to the next operation, (4) less than optimal scheduling of
batches, (5) part inspections before and/ or after operations, (6) equipment breakdowns resulting
in lost production time, and (7) workload imbalance among the machines that perform the
operations required for a given part or product style, with some machines being 100% utilized while
others spend much of the time waiting for work.
MANUFACTURING LEAD TIME (MLT)
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

For flow-line mass production, the entire production line is set up in advance. If the
workstations are integrated so that all stations are processing their own respective
work units, then the time to accomplish all of the operations is the time it takes each
work unit to progress through all of the stations on the line plus the nonoperation
time.

Where = number of operations on the line; = tranfer time (min); = operation time at
bottleneck station (min); = cycle time of production line (min/pc)
Number of stations = number of operations, i.e., = n
PRODUCTION CAPACITY AND UTILIZATION
Work In Process
Is the quantity of parts or products currently located in the factory that either are processed
or are between processing operation. WIP is inventory that is in the state of being
transformed from raw material to finished part or product.
MANUFACTURING COSTS
Manufacturing can be classified into two major categories; (1) Fixed costs and
(2)Variable costs
Fixed costs – is one that that remains constant for any level of production output
Examples are insurance, and property taxes
Variable costs – is one that varies in proportion to production output
Examples are direct labor, raw materials, and electric power

TC = + Q
Where TC = total annual cost, Pula/year; = fixed annual cost, Pula/ year; = variable
cost Pula/pc and Q =annual quantity produced, pc/ yr
MANUFACTURING COSTS
MANUFACTURING COSTS
Direct labor, Material and Overhead
Alternative classification of costs in a manufacturing include (1) direct labor, (2) material,
and (3) overhead.
Direct labor cost is the sum of the wages and benefits paid to the workers who operate
the production equipment and perform the processing and assembly tasks
Material cost is the cost of all raw materials used to make the product
Overhead cost – are all of the expenses associated with running the manufacturing firm.
Overhead is divided into two categories (1) factory overhead and (2) corporate overhead.
Factory overhead – consists of the costs of operating the factory other than direct labor
and materials such as the factory expenses (e.g line foreman, supervision, insurance and
e.t.c)
Corporate overhead – is the cost not related to the company’s manufacturing activities
such as the corporate expenses (engineering, corporate executives, sales and marketing,
and e.t.c)
MANUFACTURING COSTS AGGREGATION
TYPICAL MANUFACTURING COSTS
MANUFACTURING COSTS
MANUFACTURING COSTS
GENERIC MANUFACTURING COST CONTROL ARCHITECTURE
OVERHEAD RATES
Factory overhead rate:

FOHC
FOHR =
DLC

Corporate overhead rate:

COHC
COHR = DLC

where DLC = direct labor costs

COST OF EQUIPMENT USAGE
Is the initial cost of the machine apportioned over the life of the asset at the appropriate rate
of return used by the firm.

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
COST OF A MANUFACTURED PART
Defined as the sum of the production cost, material cost, and tooling cost

Cost for each unit operation = CoiTpi + Cti

where Coi = cost rate to perform unit operation i, Tpi = production time for
operation i, Cti = tooling cost for operation i

Total unit cost is the sum of the unit costs plus material cost

Cpc = Cm + (CoiTpi + Cti)

where Cpc = cost per piece, Cm = cost of starting material