5

Performance MeasurementFinancial

Net profit– an absolute measurement in dollars

Return on investment– a relative measure based on investment

Cash flow– a survival measurement

6

Performance MeasurementOperational

1. Throughput– the rate at which money is generated by the system

through sales 2. Inventory

– all the money that the system has invested in purchasing things it intends to sell

3. Operating expenses– all the money that the system spends to turn

inventory into throughput

7

Productivity

Does not guarantee profitability

– Has throughput increased?

– Has inventory decreased?

– Have operational expenses decreased?

10

Some Capacity Related Terminology

Capacity– Available time for production

Bottleneck– Capacity is less than demand placed on resource

Nonbottleneck– Capacity is greater than demand placed on resource

Capacity-constrained resource (CCR)– Capacity is close to demand placed on resource

15

Components of Production Cycle Time

Setup time– the time that a part spends waiting for a resource to

be set up to work on this same part Process time

– the time that the part is being processed

16

Components of Production Cycle Time

Wait time– the time that a part waits not for a resource but for

another part so that they can be assembled together

Idle time– the unused time

» the cycle time less the sum of the setup time, processing time, queue time, and wait time

17

Saving Time

Bottleneck Nonbottleneck

What are the consequences of saving time at each process?

18

Drum, Buffer, Rope

A B C D E F

Bottleneck (Drum)

Inventorybuffer

(time buffer)Communication

(rope)

Market

Case: Kristen’s Cookies

Mixing

6 min

dishing

2 min

baking

10 min

cooling

5 min

packing

2 min

pay

1 min

(1 dozen)(3 dozen)

1. How long will it take to fill an order?2. How many orders can be filled in a four-hour period?3. What happens if a second oven is added?4. What happens if Kristen does this alone?5. What happens if Kristen sells standardized cookies?

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