Managerial Accounting Practices
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Operations deals with how the company is performing. Operations may be refined into different manufacturing processes such as design, material acquisition, assembly, testing and so on.
A VP of operations has asked you to make recommendations at the weekly status meeting on how to improve the efficiency and effectiveness of each manufacturing sub processes individually and as a whole.
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The solution discusses manufacturing from a Six Sigma standpoint, and provides additional references for the student to look at.
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It is my goal to provide ideas, definitions, research help, and instructions on how you, the student, should approach the assignment.
First, let's look at lean manufacturing from a Six Sigma standpoint:
"Calculating Process Efficiency in Transactional Projects
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Discussion Forum
"My objective is to measure 'efficiency' of a process from cost/resource/process.... Problem is it is a really big process that runs across the company, multiple countries, and multiple sub-processes. Has anyone done something like this?"
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By Dr. Alastair Muir
The principals of Lean Manufacturing are applicable to any business process. This article reviews some of the common problems seen in transactional projects and outlines an example where simple graphical methods are used to interpret cycle time data. Identifying and characterizing the non-Lean processes facilitates the application of 5S, brainstorming and other improvement tools with realistic goals for improvement.
When Lean principles are applied to transactional projects, data related problems might occur during the Measure and Analyze phases. Incomplete or non-normally distributed data and data system confusion of cycle time and execution time definitions are typical issues that may arise. This article uses cycle time data to estimate process efficiency and average execution time and explores ways to statistically determine the Vital Xs that drive inefficiencies in a process.
Process Capability and Gaussian Processes
Six Sigma involves a measure of process capability. The Mean and Standard Deviation of the business process is combined with the Upper and Lower Specification Limits (USL, LSL) from the customer with the result reported in the form of Defects per Million Opportunities (DPMO). The business process data usually results from the additive errors of a large number of random variations and follows the Gaussian, or normal distribution (Figure 1). The areas falling outside of the customer specifications represent defects within the process.
Figure 1: Process Capability
Gaussian distributions are commonly found in data generated by manufacturing processes. My experience is that very few transactional processes have the properties of a Gaussian distribution. By definition, transactional here means processes such as order entry, release of items from inventory or delivery to a customer site where the unit of measure is time. There is a groundswell of other practicing Six Sigma professionals that have also found the assumption of normality does not hold well in a transactional environment. In some cases, Black Belts will attempt to transform the data to force normality without considering the reason why the data has a non-normal probability distribution.
Lean Manufacturing - Time Is Money
Lean Manufacturing, a process improvement discipline that evolved from solving manufacturing problems, concentrates on speed of execution. There is a large amount of data to support the business benefit of rapid execution. Internal metrics include the reduction of Work in Process (WIP) and a reduction in excess inventory, ...
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