Question

# Exercise 12-3 Measures of Internal Business Process Performance [LO12-3] Management of Mittel Rhein AG of Köln,...

Exercise 12-3 Measures of Internal Business Process Performance [LO12-3]

Management of Mittel Rhein AG of Köln, Germany, would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current year the following data were reported:

 Inspection time 0.5 day Wait time (from order tostart of production) 16.4 days Process time 3.2 days Move time 0.5 day Queue time 3.9 days

Required:

2. Compute the manufacturing cycle efficiency (MCE) for the quarter. (Round your percentage answer to nearest whole percent.)

3. What percentage of the throughput time was spent in non–value-added activities? (Round your percentage answer to nearest whole percent.)

4. Compute the delivery cycle time. (Round your intermediate calculations and final answer to 1 decimal place.)

5. If by using Lean Production all queue time during production is eliminated, what will be the new MCE? (Do not round intermediate calculations. Round your percentage answer to nearest whole percent.)

Answer:- 1)- Throughput Time = Process time + Inspection time + Move time + Queue time

=3.2 days+ 0.5 days+ 0.5 days+ 3.9 days

= 8.1 days

2)-Manufacturing cycle efficiency (MCE)= Value added time/ Throughput time

=(3.2 days/8.1 days)*100 = 40%

Where:-

3)- The percentage of throughput time was spent in non-value-added activities= 1- Manufacturing cycle efficiency

= 1.00-0.40

=0.60 or 60%

4)- Delivery cycle time = Wait time + Throughput time

= 16.4 days+ 8.1 days

= 24.5 days

5)- New Manufacturing cycle efficiency (MCE)= 76%

Explanation- New Throughput Time = Process Time + Inspection Time + Move Time

= 3.2 days+0.5 days+ 0.5 days

= 4.2 days

New Manufacturing cycle efficiency (MCE)= Value added time/ New Throughput

Time

= 3.2 days/4.2 days

= 76%