- Steps needed in determining the value adding production activities.
The combination of all resources and activities that are needed in the generation of products and services can be defined using value chain criteria. The value adding activities are activities in a company set up which contribute to the intended services or products, and the organization gains profit by investing its capital in it. The steps mentioned below can be used by the management to determine the value adding production activities:
- The administration will consider those activities with the highest consumer preference and high demand.
- The management shall also determine the activities that a client can be willing to make payments.
- The activities involved in the process of product transformation shall also be determined.
The non-value adding activities do not fit in this criteria. An example of value-adding activities is where a customer will be willing to pay for the packaging and painting of finished products (Viale, 2016). Nevertheless, receiving and storage of the raw materials is not value adding activity although it is included in the product production process.
- The total cycle time in days.
When raw materials are converted into finished products, then the time involved in the process is called the total cycle time. The total cycle time stipulates the time that raw materials are received into the company and includes all the time that is used in all the processes up to when the products are finished. The time can be calculated as shown below:
The total cycle time (TCT) is the summation of Process Time (PT), Move Time (MT), Inspection Time (IT), and Wait Time (WT)
Process Time (PT)= Packing Time+ Painting Time
=1 day + 4 days
Move time is equivalent to 6 days
Inspection time is 4 days
Queue time is given by the summation of time used in setting up of equipment, cutting and assembling.
Queue Time=7+6+7= 20 days
Wait time is the summation of the time used for receiving the materials and the time for storage.
Wait Time= 1+9=10 days
Therefore the total cycle time= 5+6+4+20+10
- The manufacturing efficiency ratio.
The manufacturing efficiency ratio is given by:[Process Time (PT)/Manufacturing Cycle Time (MCT)]*100%
MCT=Process Time +Move Time +Inspection Time + Queue Time
MCT= Total Time Cycle (TTC)-Wait Time (WT)
WT= 10 days
Process Time (PT) = Summation of the time for painting and the packing time
Therefore, PT=5 days
Move Time (MT)= 4 days
Queue Time= 20 days
Manufacturing cycle time= 5+6+4+20=35 days.
Therefore, the efficiency ratio becomes (5/35)*100=14.3%
- Activities that might be reduced to implement an efficient JIT system.
The JIT inventory system refers to a system with zero inventory and stockless production in a business setting which is realized by advocating for a timely purchase and production of raw materials. To effectively use the JIT system, an enterprise has to establish a good connection with the suppliers and organize for a regular supply of raw materials in smaller quantities before a production process takes place. With the implementation of the criteria, the costs of holding raw materials are eliminated, and the inefficiencies are reduced (Vollmann, Berry & Whybark, 2013). Hence, all parties should give higher quality services for this to be achieved. The JIT inventory system will lead to the following:
- The time for setting up the equipment can be reduced.
- As the JIT system uses zero inventory holding, then, the storing materials shall be eliminated.
- There will be a reduction in the number of days for packaging and painting of the finished products because of the smaller quantities involved.
- There will be no inspection of raw materials because of the reduction in the time for cutting the material because of much emphasis on the quality offered by all the parties.
- The number of days for moving the materials will also be reduced because of the reduced flow of materials.
Vollmann, T. E., Berry, W. L., & Whybark, D. C. (2013). Integrated production and inventory management: Revitalizing the manufacturing enterprise. Homewood, Ill: Business One Irwin.
Viale, J. D. (2016). JIT forecasting and master scheduling: Not an oxymoron. Menlo Park, Calif: Crisp Publications.