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Chapter 4 Estimating and Reducing Labor Costs

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Chapter 4 Estimating and Reducing Labor Costs Powered By Docstoc
					             Chapter 4
Estimating and Reducing Labor Costs
     A Labor Intense Process (Novacruz Case)




Components                                           Finished Xootrs
              Activity 1   Activity 2   Activity 3
             13 minutes    11 minutes   8 minutes
                   Xootr Task Durations
          Worker 1                        Worker 2                    Worker 3
Prepare cable 30                 Assemble brake lever 110 Inspect & wipe off 95
Move cable 25                    Trim and cap cable 59        Apply decal 20
Assemble washer 100              Place first rib 33           Insert in bag 43
Apply fork 66                    Insert axles, cleats 96      Assemble carton 114
Assemble socket head 114         Insert rear wheel 135        Insert Xootr & manual 94
Steer pin nut 49                 Place 2nd rib 84             Seal carton 84
Brake shoe, spring 66            Apply grip tape 56
Insert front wheel 100           Insert deck fasteners 75
Insert axle bolt 30
Tighten axle bolt 43
Tighten brake pivot 51
Assemble handle cap 118
                   792 seconds                  648 seconds                450 seconds
Measures of Labor Productivity
   Labor content   activity times with direct labor
                                labor content
   Labor utilization 
                       labor content  direct idle time

                          Total wages per unit of time
   Cost of direct labor 
                           Flow Rate per unit of time
  Time to Process X Units Starting Empty
                                                  X 1
  Time to finish X units  Time through empty 
                                                Flow rate


  What dictates flow from one step to the next?


Time through empty worker paced   activity times


Time through empty machine paced  (# resources)  (bottleneck time)
Lifecycle Demand Trajectory for Xooters

     1200

     1000

      800

      600
                                 Weekly
      400

      200

       0
       March   July   November
          Scaling Up to Higher
      Volumes/Increasing Efficiency
• Line balancing
                                     operating time
   – Takt time          Cycle time 
                                     desired output


• Line replicating
                        Minimum # Stations 
                                              task times
                                              Cycle time
• Task specialization

• Adding workers
Balancing an Assembly Line (Fig 4.5)
                                     Cycle Time Before Line Balancing                   1: Prepare cable
                           900                                                          2: Move cable
                           800                                                          3: Assemble washer
 Activity time [seconds]


                                    12
                           700                                                          4: Apply fork, threading cable end
                               10   11                                                  5: Assemble Socket head screws
                           600                   9             20
                                                               19                       6: Steer pin nut
                           500       8                         18
                                  7                                        26           7: Brake shoe, spring, pivot bolt
                           400       6                         17
                                                                           25           8: Insert front wheel
                           300       5                                                  9: Insert axle bolt
                                                     15        16          24
                           200       4                              23             22   10: Tighten axle bolt
                                                               14
                           100 2     3
                                                               13                       11: Tighten brake pivot bolt
                                              1                            21
                            0                                                           12: Assemble handle-cap
                                    Step 1                 Step 2         Step 3        13: Assemble brake lever + cable
                                         Cycle Time After Line Balancing                14: Trim and cap cable
                           900                                                          15: Place first rib
                           800                                                          16: Insert axles and cleats
 Activity time [seconds]




                           700                                                          17: Insert rear wheel
                               10                                         26            18: Place second rib and deck
                           600               9
                                     8                    17              25            19: Apply grip tape
                           500
                                     7                                    24            20: Insert deck fasteners
                           400                       15   16        23
                                     6                                            22    21: Inspect and wipe-off
                           300       5                    14                            22: Apply decal and sticker
                                                          13              21
                           200       4                                    20            23: Insert in bag
                                                          12              19
                           100 2     3
                                                                          18
                                                                                        24: Assemble carton
                                             1            11
                            0                                                           25: Insert Xootr and manual
                                    Step 1                Step 2         Step 3         26: Seal carton
                     Productivity Measures 1/2

                                              Overall Performance Measures
                                     Bottleneck
                a4                                            Number of Resourcesi
Activity Time




                                                  Capacityi 
                a2                                               Activity Timei

                a1
                a3                                               Flow Rate
                                                  Utilizationi 
                                                                 Cacpacityi
                     1       2   3     4
                                              Process Capacity  Min{Capacityi }
                =Idle Time
                     Productivity Measures 2/2
                                                 Labor Productivity Measures

                                                • Labor Content=a1+a2+a3+a4
                                      Bottleneck
                a4
Activity Time




                                                • If one worker per resource:
                a2                                 Idle Time=(a4-a1) +(a4-a2) +(a4-a3)

                a1                               • Average labor utilization
                a3                                                labor content
                                                        
                                                          labor content + direct idle time

                        1    2    3     4        •Cost of direct labor
                                                                 Total wages per unit of time
                     =Idle Time                              
                                                                  Flow Rate per unit of time
       Key-points to remember:
     Work Methods Design Exercise
                                         Calculations:
Where process times & cost estimates
quoted by production managers        Determining resource requirements to
come from                            support a volume target.

                                         Estimating direct labor content.
How to make labor related decisions
• pricing                                Calculating direct manufacturing cost
• hiring
                                         Adjusting for idle time
Impact of process design on productivity
• Line balance
• Idle time                           The Importance of Process DESIGN
• Direct labor content
                                      Mechanics of a worker-paced line
• Cost of direct labor
                                        Mechanics of a work cell
4.1 Consider a process consisting of three resources in a worker-
   paced line and a wage rate of $10 per hour. Assume there is
   unlimited demand for the product.

     Resource    Activity Time   # Workers
        1             10            2
        2             6             1
        3             16            3

a. How long does it take to produce 100 units starting with an
   empty system?
b. What is the average labor content?
c. What is the average labor utilization?
d. What is the cost of direct labor?
4.5 Geneva Watch makes watches on a conveyor belt with six stations; one worker stands at each
    station and performs the following tasks:
a. What is the capacity of the assembly line?
b. What is the direct labor content for the processes on this line?
c. What is the utilization of the worker in station B?
d. How many minutes of idle time will the worker in station C have in one hour?
e. What time will it be when the assembly line has processed 193 watches on any given day?
A: Preparation 1                Heat stake lens                 14 seconds
                                Inspect bezel                   26
                                Clean switch                    10
                                Install Set switch              18/ 68 seconds total
B: Preparation 2                Check switch                    23 seconds
                                Clean bezel                     12
                                Install module                  25/ 60 seconds total
C: Battery installation         Install battery clip            20 seconds
                                Heat stake clip                 15
                                Install 2 batteries             22
                                Check switch                    13/ 70 seconds total
D: Band installation            Install band                    45 seconds
                                Inspect band                    13/ 58 seconds total
E Packaging preparation         Cosmetic inspection             20 seconds
                                Final test                      55/ 75 seconds total

F: Watch packaging              Place in box                    20 seconds
                                Place cover on box              14
                                Insert owners manual            30/ 64 seconds total

				
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