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Chapter 4 Estimating and Reducing Labor Costs

Chapter 4 Estimating and Reducing Labor Costs. A Labor Intense Process ( Novacruz Case). Finished Xootrs. Components. Activity 3 8 minutes. Activity 2 11 minutes. Activity 1 13 minutes. Xootr Task Durations. Measures of Labor Productivity. Time to Process X Units Starting Empty.

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Chapter 4 Estimating and Reducing Labor Costs

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  1. Chapter 4Estimating and Reducing Labor Costs

  2. A Labor Intense Process (Novacruz Case) Finished Xootrs Components Activity 3 8 minutes Activity 2 11 minutes Activity 1 13 minutes

  3. Xootr Task Durations

  4. Measures of Labor Productivity

  5. Time to Process X Units Starting Empty What dictates flow from one step to the next?

  6. Lifecycle Demand Trajectory for Xooters

  7. Scaling Up to Higher Volumes/Increasing Efficiency • Line balancing • Takt time • Line replicating • Task specialization • Adding workers

  8. Balancing an Assembly Line (Fig 4.5) 10 9 8 7 5 4 2 3 1 1: Prepare cable 2: Move cable 3: Assemble washer 4: Apply fork, threading cable end 5: Assemble Socket head screws 6: Steer pin nut 7: Brake shoe, spring, pivot bolt 8: Insert front wheel 9: Insert axle bolt 10: Tighten axle bolt 11: Tighten brake pivot bolt 12: Assemble handle-cap 13: Assemble brake lever + cable 14: Trim and cap cable 15: Place first rib 16: Insert axles and cleats 17: Insert rear wheel 18: Place second rib and deck 19: Apply grip tape 20: Insert deck fasteners 21: Inspect and wipe-off 22: Apply decal and sticker 23: Insert in bag 24: Assemble carton 25: Insert Xootr and manual 26: Seal carton Cycle Time Before Line Balancing 900 800 12 700 10 11 20 9 600 19 8 500 18 Activity time [seconds] 7 26 400 17 6 25 5 300 16 15 24 4 23 200 22 14 2 3 100 13 21 1 0 Step 1 Step 2 Step 3 Cycle Time After Line Balancing 900 800 700 26 600 17 25 500 24 Activity time [seconds] 16 15 23 400 22 6 14 300 21 13 20 200 19 12 100 18 11 0 Step 1 Step 2 Step 3

  9. Productivity Measures 1/2 Bottleneck a4 a2 Activity Time a1 a3 1 2 3 4 =Idle Time Overall Performance Measures

  10. Productivity Measures 2/2 Bottleneck a4 a2 Activity Time a1 a3 1 2 3 4 Labor Productivity Measures =Idle Time • Labor Content=a1+a2+a3+a4 • If one worker per resource:Idle Time=(a4-a1) +(a4-a2) +(a4-a3) • Average labor utilization • Cost of direct labor

  11. Key-points to remember: Work Methods Design Exercise • Where process times & cost estimates • quoted by production managers • come from • How to make labor related decisions • pricing • hiring • Impact of process design on productivity • Line balance • Idle time • Direct labor content • Cost of direct labor Calculations: Determining resource requirements to support a volume target. Estimating direct labor content. Calculating direct manufacturing cost Adjusting for idle time The Importance of Process DESIGN Mechanics of a worker-paced line Mechanics of a work cell

  12. 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. • How long does it take to produce 100 units starting with an empty system? • What is the average labor content? • What is the average labor utilization? • What is the cost of direct labor?

  13. 4.5 Geneva Watch makes watches on a conveyor belt with six stations; one worker stands at each station and performs the following tasks: • What is the capacity of the assembly line? • What is the direct labor content for the processes on this line? • What is the utilization of the worker in station B? • How many minutes of idle time will the worker in station C have in one hour? • What time will it be when the assembly line has processed 193 watches on any given day?

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