1. Performance Measurement Financial
Net profit
an absolute measurement in dollars
Return on investment
a relative measure based on investment
Cash flow
a survival measurement 5 5

2. Performance Measurement Operational
1. Throughput
the rate at which money is generated by the system through sales
2. Inventory
all the money that the system has invested in purchasing things it intends to sell
3. Operating expenses
all the money that the system spends to turn inventory into throughput 6 6

3. Productivity Does not guarantee profitability
Has throughput increased?
Has inventory decreased?
Have operational expenses decreased? 7 7

4. Some Capacity Related Terminology
Available time for production
Bottleneck
Capacity is less than demand placed on resource
Nonbottleneck
Capacity is greater than demand placed on resource
Capacity-constrained resource (CCR)
Capacity is close to demand placed on resource 10 10

5. Components of Production Cycle Time
Setup time
the time that a part spends waiting for a resource to be set up to work on this same part
Process time
the time that the part is being processed 15 15

6. Components of Production Cycle Time
Wait time
the time that a part waits not for a resource but for another part so that they can be assembled together
Idle time
the unused time
the cycle time less the sum of the setup time, processing time, queue time, and wait time 16 16

7. What are the consequences of saving
Saving Time
Bottleneck
Nonbottleneck
What are the consequences of saving
time at each process? 17 17

8. Drum, Buffer, Rope A B C D E F Bottleneck (Drum) Market Inventory
(time buffer)
Communication
(rope)
Market 18 18

9. Case: Kristen’s Cookies
Mixing
dishing
baking
cooling
packing
pay
6 min
2 min
10 min
5 min
2 min
1 min
(3 dozen)
(1 dozen)
K * *
R * *
How long will it take to fill an order?
How many orders can be filled in a four-hour period?
What happens if a second oven is added?
What happens if Kristen does this alone?
What happens if Kristen sells standardized cookies?