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Learning Objectives

Power Notes. Chapter M11. Cost Management for Just-in-Time Manufacturers . 1. Just-in-Time Principles 2. Applying a Just-in-Time Approach 3. Accounting for Just-in-Time Operations 4. Accounting for the Costs of Quality. Learning Objectives. C11. Just-in-Time Principles.

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Learning Objectives

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  1. Power Notes Chapter M11 Cost Management for Just-in-Time Manufacturers 1. Just-in-Time Principles 2. Applying a Just-in-Time Approach 3. Accounting for Just-in-Time Operations 4. Accounting for the Costs of Quality Learning Objectives C11

  2. Just-in-Time Principles Traditional Manufacturing Just-in-Time Manufacturing Increases inventory to protect against process problems Increases lead time to protect against uncertainty Disregards setup time as an improvement priority Emphasizes process-oriented layout Reduces inventory Reduces lead time Reduces setup time Emphasizes product-oriented layout

  3. Traditional Manufacturing Just-in-Time Manufacturing Emphasizes work of individuals, following manager instructions Emphasizes push manufacturing Tolerates defects Treats suppliers as “arms-length,” independent entities Emphasizes team-oriented employee involvement Emphasizes pull manufacturing Emphasizes zero defects Emphasizes supplier partnering

  4. Reducing Lead (Throughput) Times Start of production for a single item End of production for a single item Conversion Time Wait Time Move Time Down Time Value-added Nonvalue-added Total Lead Time

  5. Traditional Operations Technical Offices: Design Scheduling Manufacturing Administrative Offices: Accounting Sales Customer Service Maintenance and Tooling Receiving and Raw Materials Inventory Stamping WIP Finished Goods Inventory Forming Punching Shipping Department WIP WIP Work in Process Areas

  6. Stamping Punching Forming Stamping Punching Forming Receiving Stamping Punching Forming Just-in-Time Operations Technical Offices: Design Scheduling Manufacturing Administrative Offices: Accounting Sales Customer Service Maintenance and Tooling Small covers Shipping Maintenance and Tooling Medium covers Maintenance and Tooling Large covers

  7. Quality Control Activity Analysis Quality Control Activities Activity Cost Classification Rework $ 380,000 Internal failure Warranty work 225,000 External failure Disposing of scrap 195,000 Internal failure Disposal of rejected materials 160,000 Internal failure Processing returned materials 150,000 External failure Finished goods inspection 140,000 Appraisal Preventive maintenance 80,000 Prevention Materials inspection 70,000 Appraisal Design engineering 55,000 Prevention Assessing vendor quality 45,000 Prevention Total activity cost $1,500,000 Internal failure External failure Internal failure Internal failure External failure Appraisal Prevention Appraisal Prevention Prevention

  8. Value-Added / Nonvalue-Added Activity Analysis Quality Control Activities Activity Cost Rework $ 380,000 Warranty work 225,000 Disposing of scrap 195,000 Disposal of rejected materials 160,000 Processing returned materials 150,000 Finished goods inspection 140,000 Preventive maintenance 80,000 Materials inspection 70,000 Design engineering 55,000 Assessing vendor quality 45,000 Total activity cost $1,500,000 Nonvalue-added $1,110,000 74% Value-added $390,000 26%

  9. Pareto Chart of Quality Costs $400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Costs Rework Activity Categories

  10. Pareto Chart of Quality Costs $400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Costs Warranty work Activity Categories

  11. Pareto Chart of Quality Costs $400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Costs Disposing of scrap Activity Categories

  12. Pareto Chart of Quality Costs $400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Costs Disposal of rejected materials Activity Categories

  13. Pareto Chart of Quality Costs $400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Costs Processing returned materials Activity Categories

  14. Pareto Chart of Quality Costs $400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Costs Finished goods inspection Activity Categories

  15. Pareto Chart of Quality Costs $400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Costs Preventive maintenance Activity Categories

  16. Pareto Chart of Quality Costs $400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Costs Materials inspection Activity Categories

  17. Pareto Chart of Quality Costs $400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Costs Design engineering Activity Categories

  18. Pareto Chart of Quality Costs $400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Costs Assessing vendor quality Activity Categories

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