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Robust Production Management (RPM) Module 3: Complex Planning Calculations
 

Robust Production Management (RPM) Module 3: Complex Planning Calculations

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This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:

This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:
http://flevy.com/browse/business-document/robust-production-management-rpm-module-3-complex-planning-calculations-461


When it comes to managing teams to "get the job" done while also keeping costs under control, supervisors and managers sometimes err on the side of caution when it comes to scheduling - often thinking, "We've got a lot of extra work to do, so I'd better schedule some overtime." But is overtime always the answer? What if there was a simple way to pinpoint resource needs based on quality and productivity levels, and save money at the same even in complex, ever-changing environments? Robust Production Management (RPM) Module 3: "Complex Planning Calculations" can give you an edge as a supervisor or and be a hero at work! "Complex Planning Calculations" is the third module in the Metrilogics RPM management training series - more on the way.

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Robust Production Management (RPM) Module 3: Complex Planning Calculations Robust Production Management (RPM) Module 3: Complex Planning Calculations Presentation Transcript

  • Copyright © 2005 Metrilogics, LLC. All rights reserved. Robust Production Management Metrilogics Front-line controls for bottom-line savings. TM SM Module 3: Complex Planning Calculations By Lance Latham Senior Managing Partner
  • Copyright © 2005 Metrilogics, LLC. All rights reserved. Metrilogics TM The Definition of Process Capacity Task hourly capacity rates are established by performing a time study. v The maximum average # of quality output units for a given task… v …that can be steadily completed… v …during an uninterrupted and extended period (1 hour or more) of processing time. v …by a skilled and motivated subject matter expert… 2 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/robust-production-management-rpm-module-3-complex-planning-calculations-461
  • Copyright © 2005 Metrilogics, LLC. All rights reserved. Metrilogics TM Historically, quota rates have been used by the Strategic Management team to estimate annual resource needs instead of capacity rates. The Strategic Management team wants to determine the difference between calculated annual resource needs by running two analyses: one that assumes direct team members work at the task quota rates, and one that assumes team members are managed to work at capacity. The hourly quota rates and capacity rates for all 3 tasks are as follows: Task A 11.0 15.0 Task B 2.0 3.5 Task C 28.0 40.0 Hourly Quota Rate Hourly Capacity Rate Example of The Real-World Advantage of Managing to Capacity vs. Quota (cont.) 5 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/robust-production-management-rpm-module-3-complex-planning-calculations-461
  • Copyright © 2005 Metrilogics, LLC. All rights reserved. Metrilogics TM Example of The Real-World Advantage of Managing to Capacity vs. Quota (cont.) Planned Annual Cost of Work @ Quota and 100% Quality $796,812.50 Planned Annual Cost of Work @ Capacity and 100% Quality $521,437.50 Difference: $275,375.00 Planning and managing to capacity instead of to quota saves the company over $275K per year (almost 35%) in avoidable over- crewing costs. 8 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/robust-production-management-rpm-module-3-complex-planning-calculations-461
  • Copyright © 2005 Metrilogics, LLC. All rights reserved. Metrilogics TM In addition to quality, the number of required Direct Hours is also impacted by productivity (i.e., the rate at which quality direct work is completed per capacity standard). Continuing with our simplified example, assume an average productivity rate of 85%: Required Direct Hours @ 90% Quality and 100% Productivity = 5.56 Hrs. / Productivity of 85% Required Direct Hours @ 90% Quality and 85% Productivity = 6.54 Hrs. Simple Example of Deriving Direct Hours Requirements (cont.) In order to complete 5.00 Quality Work Credit Hours (and assuming 90% quality and 85% productivity) … …a manager needs to plan for 6.54 Direct Hours of work time in order to “get the job done.” 11 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/robust-production-management-rpm-module-3-complex-planning-calculations-461
  • Copyright © 2005 Metrilogics, LLC. All rights reserved. Metrilogics TM Example of Deriving Direct Hours Requirements in a Complex Operating Environment (cont.) Planned Annual Cost of Work @ Capacity and 100% Quality $521,437.50 Planned Annual Cost of Work @ 87% Productivity and Quality < 100% $615,536.50 By factoring in quality and productivity rates, managers are better able to plan resource work requirements and tighten controls on associated costs. In this way, premium overtime costs can be minimized. Difference: $94,099.00 14 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/robust-production-management-rpm-module-3-complex-planning-calculations-461
  • Copyright © 2005 Metrilogics, LLC. All rights reserved. Metrilogics TM Module 3 Summary v Process capacity rates challenge direct team members to perform at a higher level than asking them to perform at quota rates. v When teams perform as close as possible to capacity, they operate at a much more cost effective level than when they perform at quota rates. v The most effective way to plan team resource needs – and avoid unnecessary overtime costs - is to translate work units into Direct Hours. v To refine the team resource planning process, it is necessary to derive required Direct Hours by factoring in quality and productivity percentages (either historical or planned values). 17 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/robust-production-management-rpm-module-3-complex-planning-calculations-461
  • 1 Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational business documents. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All organizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn. Contact Us Please contact us with any questions you may have about our company. • General Inquiries support@flevy.com • Media/PR press@flevy.com • Billing billing@flevy.com