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Zodiac Sound Co. manufactures audio systems, both made-to-order and mass-produced systems, that are typically sold to large-scale manufacturers of electronics equipment. For competitive reasons, the company is trying to increase its manufacturing cycle efficiency (MCE) measure. As a strategy for improving its MCE performance, the company is considering a switch to JIT manufacturing. While the company managers have a fairly good feel for the costs of implementing JIT, they are unsure about the benefits of such a move, both in financial and nonfinancial terms. To help inform the ultimate decision regarding a move to a JIT system, you€™ve been asked to provide some input. Fortunately, you€™ve recently attended a continuing professional education (CPE) workshop on the costs and benefits of moving to JIT and therefore feel comfortable responding to management€™s request.
Required
1. Define the terms value-added time, non-value-added time, and manufacturing cycle efficiency (MCE). Conceptually, how are activities included in the first two categories determined? (That is, how does one know what activities are considered €œvalue-added€?)
2. Define the terms manufacturing cycle time and processing (manufacturing) time. How can processing time be broken down further?
3. Given the estimated data below, calculate and interpret the MCE (to 2 decimal places, e.g., 0.38456 = 38.46%) for both the current manufacturing process and the proposed process after implementing JIT:
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