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    Prescott Manufacturing Evaluates The Performance of Its Production Managers Based On A Variety of Factors

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    Elliot Richard
    Prescott Manufacturing evaluates its production managers on factors like cost, quality, and cycle time. In 2016-2017: 1. Manufacturing cycle efficiency improved from 0.28 to 0.31 as cycle time decreased from 29 to 26 days. 2. Quality measures like defective units reduced but goods returned increased slightly. On-time deliveries and training hours rose. 3. While efficiency and timeliness improved, management should ensure reduced rework does not increase defects shipped. More training should further boost future quality gains.

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    Prescott Manufacturing Evaluates The Performance of Its Production Managers Based On A Variety of Factors

    Uploaded by

    Elliot Richard
    341 views3 pages
    Prescott Manufacturing evaluates its production managers on factors like cost, quality, and cycle time. In 2016-2017: 1. Manufacturing cycle efficiency improved from 0.28 to 0.31 as cycle time decreased from 29 to 26 days. 2. Quality measures like defective units reduced but goods returned increased slightly. On-time deliveries and training hours rose. 3. While efficiency and timeliness improved, management should ensure reduced rework does not increase defects shipped. More training should further boost future quality gains.

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    Prescott Manufacturing Evaluates the Performance of Its Production Managers Based on a Variety of Factors

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    Prescott Manufacturing evaluates its production managers on factors like cost, quality, and cycle time. In 2016-2017: 1. Manufacturing cycle efficiency improved from 0.28 to 0.31 as cycle time decreased from 29 to 26 days. 2. Quality measures like defective units reduced but goods returned increased slightly. On-time deliveries and training hours rose. 3. While efficiency and timeliness improved, management should ensure reduced rework does not increase defects shipped. More training should further boost future quality gains.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    341 views3 pages

    Prescott Manufacturing Evaluates The Performance of Its Production Managers Based On A Variety of Factors

    Uploaded by

    Elliot Richard
    Prescott Manufacturing evaluates its production managers on factors like cost, quality, and cycle time. In 2016-2017: 1. Manufacturing cycle efficiency improved from 0.28 to 0.31 as cycle time decreased from 29 to 26 days. 2. Quality measures like defective units reduced but goods returned increased slightly. On-time deliveries and training hours rose. 3. While efficiency and timeliness improved, management should ensure reduced rework does not increase defects shipped. More training should further boost future quality gains.

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    Prescott Manufacturing evaluates the performance of its production managers based on a variety

    of factors, including cost, quality, and cycle time. The following are nonfinancial measures for
    quality and time for 2016 and 2017 for its only product:

    The following information relates to the average amount of time needed to complete an order:

    Required:
    1. Compute the manufacturing cycle efficiency for an order for 2016 and 2017.
    2. For each year 2016 and 2017, calculate the following:
    a. Percentage of goods returned
    b. Defective units reworked as a percentage of units shipped
    c. Percentage of on-time deliveries
    d. Percentage of hours spent by each employee on quality training
    3. Evaluate management’s performance on quality and timeliness in 2016 and 2017.

    SOLUTION

    (15 min.)  Nonfinancial measures of quality, manufacturing cycle efficiency.

    1. Manufacturing cycle time = Total time from receipt of an order by production until its
    completion.

    Manufacturing cycle time for 2016 = (13 + 4 + 8 + 4) days = 29 days


    Manufacturing cycle time for 2017 = (12 + 2 + 8 + 4) days = 26 days

    Manufacturing cycle efficiency (MCE) is defined as follows:

    MCE = Value-added manufacturing time ÷ Manufacturing cycle time

    MCE for Prescott Manufacturing for 2016 is:


    MCE = 8 days of processing time ÷ 29 days manufacturing cycle time = 0.28

    MCE for Prescott Manufacturing for 2017 is:

    MCE = 8 days of processing time ÷ 26 days manufacturing cycle time = 0.31

    Some students may argue that a part of inspection time is also value-added time. Prescott
    reduced inspection time to two days in 2017, so if we think of two days of inspection as value-
    added time in 2016 (out of four days) and in 2017:

    MCE in 2016 = (8 + 4) days ÷ 29 days = 12 ÷ 29 = 0.41


    MCE in 2017 = (8 + 2) days ÷ 26 days = 10 ÷ 26 = 0.38

    Prescott has become more efficient in its value-added manufacturing time as a percentage of total
    manufacturing time during the last year.
    Prescott has also shortened its lead time, which means that customers have a shorter
    waiting period between placing their order and receiving their shipment. This improvement in
    timeliness will likely lead to greater customer satisfaction. 
    Some students might ask if inspection has been excessively reduced or simply become
    more efficient. The key is to improve processes and only then reduce inspection so that the
    percentage of goods returned does not increase. 

    2.
    Non-Financial Quality Measure 2016 2017
    Percentage of goods returned (as a percentage of units shipped) 2.63% 2.72%
    (750 ÷ 28,480; 915 ÷ 33,668)
    Defective units reworked as a percentage of units shipped 7.72% 4.87%
    (2,200 ÷ 28,480; 1,640 ÷ 33,668)
    Percentage of on-time deliveries 87.15 88.91%
    (24,820 ÷ 28,480; 29,935 ÷ 33,668) %
    Percentage of hours spent by each employee on quality training 1.90% 2.20%
    (38 ÷ 2,000; 44 ÷ 2,000)

    3. Prescott has become more efficient in its value-added manufacturing time as a percentage
    of manufacturing cycle time and has improved the company’s lead time. This improved
    efficiency should result in cost savings for the company as well as greater customer satisfaction. 
    It is important to evaluate the other nonfinancial quality measures in relation to annual
    totals (total units shipped, etc.), rather than as absolute values. For example, the total number of
    on-time deliveries increased from 24,820 to 29,935 during 2017. This is an improvement in the
    timeliness of the company’s deliveries. As a percentage of total units delivered, the percentage of
    on-time deliveries increased from 87.15% to 88.88%.
    Management also had two noteworthy areas of improvement related to the nonfinancial
    quality measures mentioned above. The first is the reduction in the total number of defective
    units reworked. This is a significant improvement compared to the prior year. However, it should
    be noted that a greater percentage of goods were returned in 2017 than in 2016. Prescott may
    want to investigate if the reduction in rework led to more defective units being shipped to the end
    consumer. Secondly, the company spent an increased amount of time per employee on quality
    training. As quality-training programs are considered lead measures of performance, it is likely
    that the company will, as a result, see improvements in the quality of its output in the future.

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