5 performance measurement financial u net profit – an absolute measurement in dollars u return on...

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Performance MeasurementFinancial

Net profit– an absolute measurement in dollars

Return on investment– a relative measure based on investment

Cash flow– a survival measurement

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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

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Productivity

Does not guarantee profitability

– Has throughput increased?

– Has inventory decreased?

– Have operational expenses decreased?

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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

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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

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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

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Saving Time

Bottleneck Nonbottleneck

What are the consequences of saving time at each process?

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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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