Determining a standard for Heat Treat operations 1

[purdueIE]

Currently at my company, our MRP system determines cost by using a pcs/hr standard. These production rates also generate earned hours which is a nesacery management measurement tool.

Currently our heat treatment operations have the same estimated pcs/hr rate for all products. The cycle time is 8 hrs, regardless of the number of pieces in the furnace. I am trying to implement an accurate measurement tool, which will capture the correct cost as well as generate earned hours.

I have devoloped a formula to determine an accurate cost per piece by using constrait of the furnace, which is weight per cycle. But this method will not generate earned hours which i was told is unacceptable.

Can you have a pcs/hr rate for an operation with an 8 hour cycle time?

Any suggestions are greatly appreciated.

 

[leanIE]

Does your MRP system have a standard lot size feature? If so, is it being utilized by scheduling/production control?

If so, you can get a standard time/pc by dividing your batch process time (e.g - tumbling, heat treating, plating, et al) by the standard lot size. So, in your case parts that have 100 pcs requirements/day will have less standard time (8 hrs/100pcs) than a part that has 50 pc requirements (8 hrs/50 pcs). Therefore less standard labor cost. Depending on what system you’re using it may be possible to have someone in IT ‘automate’ this calculation.

Now the problem w/ most standard cost accounting systems is that labor costs are calculated by multiplying the standard hours for a given part by a standard or average wage rate(e.g 0.08 hrs/pc x $10.00 = $.80/pc). The problem with this is that it encourages bigger batches. Decreased standard time does not always mean lower cost. Likewise, your standard hour based efficiency report can be 100% in every dept. while driving WIP up and putting your cash flow in a head-lock.

Also, the standard lot size feature can be use to capture set-up time/pc. Again, refrain from the lure of running bigger lots to drive this cost down.