Step 1. Calculate the Total Available Employee Time (#employees x #days x Labor Hrs per shift) x 3,600 seconds Step 2. Calculate the Employee Productive Time (Qty per Month – (Qty x (scrap + rework rate))) x Cycle Time x Crew Size) Step 3. Calculate the Employee Productive Capacity Percentage. (Employee Productive Time / Total Available Time) Step 4. Calculate the change-over time, scrap & rework time, downtime, inspection time. C/O = (quantity/batch size) x Change-over time Scrap/rework = Qty x (scrap + rework rate) x Cycle Time x Crew size D/T = Downtime% x Total Available Time Inspection= (Inspect% x Quantity) x Inspection time Step 5. Calculate the Total Non-Productive Time Step 4 plus 5S & meetings Step 6. Calculate the Employee Non-Productive Capacity Percentage Total Non-Prod Time / Total Available Time Step 7. Calculate the Employee Available Capacity Percentage. 100% - (Prod. Capacity + Non-Prod Capacity) Calculate the Employee Capacity for this small value stream. 1 2 3 4 5 6 7
Calculate the Inventory Value Using the Days of Inventory Method 1.Calculate the material cost per day. 2.Calculate the conversion cost per day 3.Calculate Raw Material value (#days * material cost per day) 4.Calculate the Finished Goods value (#days *( material + conversion cost per day)) 5.Calculate WIP value (#days * material cost per day + #days/2 * conversion cost per day) 6.Calculate total inventory value by adding the three together
Total Units Manufactured Total Material Cost Average Material Cost per Unit Total Conversion Cost Average Conversion cost per Unit 22,861$849,526$37.16$876,550$38.34 QuantityMaterial ValueConversion ValueTotal Value Raw Material 11,430$424,744$0$424,744 Work in Process 3,430$127,460$65,758$193,218 Finished Goods 4,573$169,898$175,341$345,276 TOTAL INV 19,433$963,238 $722,140$241,098 Calculate the Inventory Value Using the Number of Units Inventory Method 1.Calculate average material cost and average conversion cost 2.Calculate Raw Material value (#units * material cost per unit) 3.Calculate the Finished Goods value ((#units * material + conversion cost per unit)) 4.Calculate WIP value (#units * material cost per unit + #units/2 * conversion cost per unit) 5.Calculate total inventory value by adding the three together
Calculate the Inventory Value Using the Days of Conversion Cost Method This method is used when the company tracks inventory but maintains inventory value for the,material content only. The conversion cost is then applied based upon the number of days of material. 1.Calculate the number of days of inventory. (Days in the month * Inventory value / Monthly Material Cost) 2.Calculate the Conversion Cost Applied. (Number of days of inventory * total conversion cost / Number of Days in the Month) 3.Calculate total inventory cost. (Add materials value plus conversion cost applied) REVENUE Materials Direct Labor Support Labor Machines Outside process Facilities Other Costs TOTAL COST VALUE STREAM PROFIT Return on Sales Total Conversion Cost Conversion Cost Applied Total Inventory Cost $876,550$489,115$963,151
Calculate the Inventory Value Using the Monthly Average Cost Method 1.Calculate Days of This Month. (Lower of # Days and Days in the Month 2.Calculate Days for Last Month (# Days minus Days of This Month 3.Calculate Current Month Average Value (Days of This Month * Average Cost this Month * Average Daily Demand for this Month 4.Calculate Last Month Average Value (Days of Last Month * Average Cost Last Month * Average Daily Demand This Month 5.Calculate the Inventory Value (Current Month Average Value + Last Month Average Value) Month Average Value February March April Average Cost Quantity in Stock Average Daily Demand # Days Days in the Month Inventory Value January$10.2312,4603563521$130,015 February$11.4314,9124663220 March$9.2210,2953552922 April$9.147,5623981921 Days of ThisDays of LastCurrent MonthLast Month
Exercise: Defining Value Streams In your group discuss the possible ways in which you might define the Value Streams for the Universal Valve Company. What are the advantages and disadvantages of each ? State your preferred selection with reasons. Remember: Order Fulfillment Value Streams are primarily defined by materials flow.
Value Streams by Market Sample Answer #1 Value Streams by Materials PLASTICS BRASS large & Manifolds ALLOY BRASS Mini, Small, Medium Plastic Small LP 7% 2cells Brass Small LP 3% 1 cell Plastic Med LP 8% 2 cells 18 people Brass Mini MP 9% 3 cell Brass Small MP 13% 4 cell Brass Medium MP 12% 2 cell Alloy Mini HP 10% 1 cell Alloy Small HP 9% 1 cell Brass Medium LP 5% 1cell Alloy Medium HP 6% 1 cell Manifolds HP 10% 2 cell Brass Large MP 8% 2 cell 10 people 6 people 5 people 11 people 55 people