Productivity Analysis & KPIs - 01!03!2019

‫وما توفيقي إال باهلل‬
Productivity Analysis
Key Performance Indicators (KPIs)
Dr. Attia Gomaa

Industrial Engineering Professor & Consultant
Mechanical Eng. Department – Shoubra Faculty of Eng. - Benha University
& Engineering and Science Services - American University in Cairo
Facebook: Attia Gomaa & Group: Supply Chain Management – Dr. Attia
SCM Productivity Analysis & KPIs – Dr. Attia

March – 2019
Gomaa2019 1
Contents:
1. Overview
2. Productivity Analysis
3. Productivity Improvement (PI)
4. Capacity Analysis
5. Process Time Analysis
6. Total Productive Maintenance (TPM)
7. Overall Equipment Effectiveness (OEE)
8. Cost Analysis
9. Inventory Turnover Analysis
10. Case Studies
SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 2

Rules of the Course:
This is an Open Discussion Course:
– Share Knowledge ‫– تبادل المعرفة‬

– Share Experiences ‫– تبادل الخبرات‬ Team Approach
– Share Best Practices ‫– تبادل التجارب الجيدة‬
– Share Questions ‫– تبادل األسئلة‬
Remember … You can’t do it alone!
Let us be a teamwork.
Project Constraints: Project KPIs:
Quality Time
KPIs KPIs
Scope
KPIs
Cost Resources
KPIs KPIs

Product Constraints: Product KPIs:
Quality Market
KPIs KPIs
Process
KPIs
Cost Resources
KPIs KPIs

Resources Analysis (5 M’s):
4) Method 1) Material
5) Money
(Cost)
3) Manpower 2) Machine

Operation Management:
Operation management is a systematic design, direction, and control of
operations that transform inputs into useful services & products
Suppliers Customers
Management
Inputs (I) Outputs (O)
Resources Products
O Services
I
Performance Management
Various types of processes Departments in the organization

Objectives:
Improve
Customer
Satisfaction
Low Cost
Right In Right At Right At Right

Products Quantity Time Cost
Objectives:
Delivery Inventory
4 Rights Flexibility
Reliability
Lead Time
Level
KPIs (Key Performance Indicators); for examples:
√ 9) Inventory
1) Profit
2) Value
Ratio
Turn Over Added Factor
8) OEE 3) Market
Share
KPIs
7) Capacity 4) Production
Utilization Rate
6) Labor 5) Quality
Productivity Rate

SCM System Thinking:
Planning Control
Main Modules
(Main Plans) (Target KPIs)
(1) • Business Plan • Profit Ratio
Business (Master Plan) • Value Added
Management • Budget Plan • Inventory Turnover
(2) • Market Plan • Sales Revenue
Market • Distribution Plan • Market Share
Management • Logistic Plan • Claim Ratio
(3) • Production Rate
• Process Plan
Process • Quality Rate
• Quality Plan
Management • Labor Productivity
(4) • Average Stock level
• Inventory Policy
Inventory • Inventory Days of Supply
• Material Plan
Management • Shortage Losses
(5) • Procurement Plan • Delivery Reliability
Procurement • Logistic Plan • Material Quality Rate
Management • Supplier Evaluation • Average Material Cost
Productivity Analysis:
Productivity is a measure of how efficiently inputs
are converted to outputs
Productivity = Outputs / Inputs
• Total Productivity Measure:

Total Productivity = (Total output) / (Total of all inputs)
• Partial Productivity Measure:

Partial Productivity = (Total output) / (Single input)
• Multifactor Productivity Measure:

Multi-factor Productivity = (Total output) / (Several inputs)

Productivity = Output / Input
Effectiveness X Efficiency = Productivity

Productivity Improvement (PI)
PI is the result of managing and intervening in
transformation or work processes.
Productivity = Outputs / Inputs  100/50 = 2 / 1 = 2
PI will occur if:

Improvement Policy
(1) (2) (3) (4) (5)
O O O O O
I I I I I
Increase - Reduce – Maintain
Productivity Analysis & Improvement - Example:
Daily Production Information:
Net Production = 300 units Number of Workers = 3 man
Working Conditions: 8 hours/day Material Quantity = 600 kg
Financial Information:
Labor Cost Rate = $20 / man hour Material Cost Rate = $1 / kg
Overhead = 1.5 * Labor cost Unit Price = $7 /unit
Based on this information, discuss the following:

1. Total Productivity ($ output / $ input)
2. Labor Productivity (units / man hour)
3. Material Productivity (units / kg material)
4. Total Cost Productivity (unit / $ input)
5. How to improve the labor productivity by 20%
6. How to improve the material productivity by 20%
Net Production = 300 units Number of workers = 3 man
Labor cost Rate = $20 $/ man hour Material cost Rate = $1 / kg
Overhead = 1.5 Labor cost Unit Price = $7 /unit
Total Productivity:
Outputs = Net Production * Unit Price =
Total Inputs = Labor + Material + Overhead
=
Total Productivity = O / I =
Labor Productivity:
Outputs = Net Production =
Labor Inputs = Labor hours =
Labor Productivity = O / I =
Material Productivity:
Material Inputs = Material quantity =
Labor Productivity = O / I =
Multi-factor Productivity:
Total Cost Inputs = Labor + Material + Overhead =
Total Cost Productivity = O/I =

Net Production = 300 units Number of workers = 3 man
Labor cost Rate = $20 $/ man hour Material cost Rate = $1 / kg
Overhead = 1.5 Labor cost Unit Price = $7 /unit
Total Productivity:
Outputs = Net Production * Unit Price = 300 * 7 = $ 2100
Total Inputs = Labor + Material + Overhead
= 480 + 600 + 720 = $ 1800
Total Productivity = O / I = $ 2100 / $ 1800 = 1.17 $ output / $ input  (Profit Ratio = 17%)
Labor Productivity:
Outputs = Net Production = 300 units / day
Labor Inputs = Labor hours = 3 * 8 = 24 man hour / day + 20%
Labor Productivity = O / I = 300 / 24 = 12.5 units / man hour
Material Productivity:
Material Inputs = Material quantity = 600 kg + 20%
Material Productivity = O / I = 300 / 600 = 0.5 units / kg material  2 Kg material / unit
Multi-factor Productivity:
Total Cost Inputs = Labor + Material + Overhead = $ 1800
Total Cost Productivity = O/I = 300 / 1800 = 0.167 unit / $ input = 167 units / $ 1000 input
(Unit Cost = 1000 / 167 = $ 5.99 / unit)

Productivity Improvement (PI)
Old System New System %
Parameters
(Current) (Target) Change
Total Productivity $ output / $ input 1.17
Labor Productivity units / man hour 12.5 + 20%
Material Productivity units / kg material 0.5 + 20%
Total Cost Productivity Units / $ inputs 0.17
Production Rate
(1) Increase Workers
Number of workers 3
Working Conditions Fixed 8 hours/day 8 hours/day -
Material Quantity Rate Fixed
Labor Cost Rate Fixed 0.5
Material Cost Rate (2) Change Material $1 / kg
Overhead Fixed 1.5*Labor 1.5*Labor
Unit Price Market Base $7 /unit $7 /unit

Case Study: Operation Control (Performance Analysis)
Company: ABC Product: Casting products
Item Unit Jan. 2015 Feb. 2015

Sales Quantity ton 1000 980
Outputs
Sales Revenue M.LE 4.0 4.1

Overdue Quantity ton 200 150
Customer Claims ton 10 8
Net Production ton 1200 1000
Defective Quantity ton 100 110
Actual Working Hours hours 260 240
Raw Material Quantity ton 1400 1200
Inputs
Labor Effort Man-hour 2700 2500

Used Energy 1000 kwh 720 680
Total Production Cost M.LE 3.6 3.2
Raw Material Cost M.LE 2.4 2.1
Raw Material Defects ton 30 25
Raw Material Shortage ton 50 20
Based on this information; discuss the performance analysis for this product.
Case Study: Operation Control (Performance Analysis)
Company: ABC Product: Casting products
Jan. Feb.
Item Unit
2015 2015
Proposed Indicators
Sales Quantity ton 1000 980
Effectiveness:
Outputs
Sales Revenue M.LE 4.0 4.1 Unit Price

Overdue Quantity ton 200 150 Overdue %
Claims %
Customer Claims ton 10 8
Net Production ton 1200 1000
Defective Quantity ton 100 110 Productivity:
Efficiency:
Actual Working Hours hours 260 240 Profit %
Production Rate
Value Added
Raw Material Quantity ton 1400 1200 Defect %
Sales productivity
Material Utilization
Inputs
Labor Effort Man-hour 2700 2500 Labor Efficiency

Used Energy 1000 kwh 720 680 Energy Efficiency
Unit Cost
Total Production Cost M.LE 3.6 3.2 Unit Material Cost
Raw Material Cost M.LE 2.4 2.1 Material Shortage %
Production Losses
Raw Material Defects ton 30 25
Raw Material Shortage ton 50 20
Based on this information; discuss the performance analysis for this product.
Target
(Improving 20%)
Unit Price LE/ton 4000 4183 4183 – 5020
(?) (8) (8-10)
F
Profit % % 33 31 33 – 40 %
(8) (?) (8-10)
Overdue % % 20% 15% 15 – 12.5 %
(?) (8) (8-10)
M
Claims % % 1% 0.8% 0.8 – 0.67
(?) (8) (8-10)
Production Rate Ton/hr 4.62 4.16 4.62 – 5.5
(8) (?) (8-10)
O
Defect % % 7% 9% 7 – 5.8
(8) (?) (8-10)
Material Defect % % 2.1% 2.0% 2 – 1.66
(?) (8) (8-10)
P
1000 LE 86 34.6 34.6 – 28.3
Production Losses
(?) (8) (8-10)

Target
(Improving 20%)
Unit Price LE/ton 4000 4183 4183 - 5020
F
Profit % % 33 31 33 – 40 %
Overdue % % 20% 15% 15 – 12.5 %
M
Claims % % 1% 0.8% 0.8 – 0.67
Production Rate Ton/hr 4.62 4.16 4.62 – 5.5
O
Defect % % 7% 9% 7 – 5.8
Material Defect % % 2.1% 2.0% 2 – 1.66
P
Production Losses 1000 LE 86 34.6 34.6 – 28.3

Capacity Analysis: Process Labor
Capacity is a measure of output units/hr (hr/day)
- Design capacity =Maximum capacity = Optimal
maximum output rate or service capacity an
40 12
operation, process, or facility is designed for.
- Effective capacity = Standard = Available

Design capacity minus allowances such as personal 30 10
time, maintenance, and scrap.
- Planned capacity = Target

25 8
- Actual output = Used capacity

20 6
rate of output actually achieved--cannot
exceed effective capacity.
Capacity is a dynamic concept Examples?
Capacity Analysis
Operational Management:
Performance = Actual Capacity / Planned capacity 80 to 100%
Quality Rate = (Total units – Rejected) / Total units 90 to 100%
Middle Management:
Efficiency = Actual output / Effective capacity 70 to 90%

Load ratio = Planned Capacity / Effective capacity 70 to 90%
Top Management:
Utilization = Actual output / Design capacity 60 to 80%
Effectiveness = Effective Capacity / Design capacity 60 to 80 %
Bottleneck Problems
Example:

Capacity Analysis - Example:
System
A B C
2 min/unit 4 min/unit 3 min/unit

1) Bottleneck process (Slowest process in the system) =
2) System capacity (Output per hour) = units / hour
3) Through put time (Time spent by unit) = min / unit
4) Capacity utilization (Actual / Maximum)
A ( %) , B ( %) , C ( %), System ( %), Unused ( %)
5) How to improve the capacity utilization?

A B C
60 min/2 = 60 min/4= 60 min/3 = 15

30 units/hour 15 units/hour 20 units/hour units/hour
1) Bottleneck process (Slowest process in the system) = B

2) System capacity (Output per hour) = 15 units / hour
3) Through put time (Time spent by unit) = 2 + 4 + 3 = 9 min / unit
4) Capacity utilization (Actual / Maximum)
A (15/30=50%) , B (15/15 = 100%) , C (15/20= 75%),
System (50+100+75)/3 = 75% , Unused(25%)
5) How to improve the capacity utilization?

Capacity Analysis: Takt time , Cycle time, Lead time
Takt time is the rate at which a finished product needs to be completed in
order to meet customer demand. (Inverse of the demand flow rate “min/unit”)
Cycle time is the period required to complete one cycle of an operation.
(Inverse of the production flow rate “min/unit”)
Lead time is the estimated time between ordering and receiving the product
or service. (Process (A)  Process (B)  ….  Customer )
Takt time = Working time available / Customer demand
Cycle time = Working time available / Actual Production
Lead Time = The total production time from start to finish
Example:
Customer orders 3000 unit in 25 days, (8 hours/day)
Takt time = 4 min / 1 unit
Process (A, 2 min)  Process (B, 4 min)  Process (C, 3 min)

Cycle Time = 4 min / 1 unit ≤ Takt time
Process (A)  Process (B)  Process (C)  Customer
Lead Time = 2 + 4 + 3 = 9 min / unit

Customer demand = 80 units Order lead time = 10 days
Working conditions: 8 hours/day
Process A B C D
Process Lead Time (min) 50 40 65 45
Actual Cycle Time = 65 min

Working time available = 10 days * 8 hours/day * 60 min/hour = 4800 min
Customer demand = 80 units
Takt time = 4800 min / 80 units = 60 min.
Target Cycle Time = 55 min.
65
55
Improvement

System
A B C
Process A B C
Process Lead Time (min/unit) 2 4 3
Weekly Customer Demand = 1300 units

Working conditions: 5 days/week & 2 Shifts & 8 hours/shift

1) Takt time
2) Cycle time
3) Lead Time
4) How to improve the actual cycle time (Target cycle time)

Process A B C
Process Lead Time (min/unit) 2 4 3
Weekly Customer Demand = 1300 units

Working conditions: 5 days/week & 2 Shifts & 8 hours/shift

Working time available = 5 days * 2 Shifts * 8 hours/day * 60 min/hour = 4800 min
Customer demand = 1300 units
Takt time = 4800 min / 1300 units = 3.69 min / unit
Cycle Time = 4 min/unit Target Cycle Time = 3 min/unit
Lead Time (A B  C Customer) = 2+4+3 = 11 min/unit
Actual 4
Optimal 3 Improvement

Time Analysis:
Value- and Non-value-Added Activities
Focus on reduction
Waste
(Non- Value Added Value Added
& not necessary)
Non- Value Added,
but necessary

Case Study (Lean): Machining Process (Spare Parts)
# Activity Actual Time
(min) Based on the following
1 Work Order Preparation 60 information; discuss the time
2 Material Receipt 60 analysis based on lean
3 Material Inspect 30 approach:
4 Material Handling 30
5 Machine startup 30
6 Machining Process (A) 60 Final Product
7 Machine failure & repair 30
8 Machine startup 30
ɸ 8.40.2
9 Machining Process (A) 30
10 Inspection 30
11 Rework 30
12 Finishing Process (B) 60 Total Time =
13 Inspection 30 600 min
14 Rework 30
15 Material Handling 30
16 Work Order Close-Out 30
Time Analysis:
Actual
Target
# Activity Time Type Recommendations
Time
(min)
1 Work Order Preparation 60 NVA 30 Standard Templets , Standard Time
2 Material Receipt 60 NVA 30
3 Material Inspect 30 NVA 15
4 Material Handling 30 NVA 15
5 Machine startup 30 NVA 15
6 Machining Process (A) 60 VA 60
7 Machine failure & repair 30 WS 0
8 Machine startup 30 WS 0
9 Machining Process (A) 30 VA 30
10 Inspection 30 NVA 15
11 Rework 30 WS 0
12 Finishing Process (B) 60 VA 60
13 Inspection 30 NVA 15
14 Rework 30 NVA 0
15 Material Handling 30 WS 15
16 Work Order Close-Out 30 NVA 15
Total Time 600 315
% 100% 52.5

Improvement Recommendations
# Recommendations Activities
1 Standard Time
2 Standard Information
3 Standard Templets
4 Work Statement
5 Planned Maintenance Program
6 Advanced Training Program
7 Visual Stock
8 Motivation Program

Case Study (Lean): Machining Process (Spare Parts)
Actual Time Actual Time

# Activity # Activity
(min) (min)
1 W/o Preparation 30 10 Inspection 15
2 Material Receipt 30 11 Rework 30
3 Material Inspect 30 12 Machine (B) startup 30
4 Material Handling 30 13 Process (B) 60
5 Machine (A) startup 30 14 Inspection 30
6 Process (A) 90 15 Rework 30
7 Failure & Repair 30 16 Process Packing 30
8 Machine (A) Startup 30 17 Material Handling 30
9 Process (A) 60 18 W/o Close-Out 30
Based on the following information; discuss the time analysis based

on lean approach:

Total Productive Maintenance (TPM)
TPM is a Japanese approach, 1951 TPM Goals: Zero Losses
• ZERO breakdowns
TPM is a Lean tool to optimize the
• ZERO failure
equipment effectiveness.
• ZERO defects
TPM is a Lean tool for Quality and • ZERO speed losses
Productivity • ZERO accidents
Vision: Maximizing equipment value & equipment life cycle

TPM in three words, Improve Total Productivity
Total  All individuals in the organization Through
Maintenance Management
working together.
Productive  Production of products that
meet or exceed customer’s expectations.
Maintenance  Keeping equipment and plant
in good condition at all times.
Total Productive Maintenance (TPM):
TPM is a systematic approach to maximize

the equipment effectiveness through
operators involvement.
Management + Operators + Maintenance
Autonomous Maintenance (AM):

Case Study
Process: Excavation Equipment: Excavator

Item Day #1
Total working hours 12
Planned Performance Rate, m3/hr 30
Net Quantity, m3 210
Capacity Analysis:
Maximum Quantity = 12 * 30 = 360 m3 (Optimal ??)
Net Quantity = 210 m3
Capacity Utilization = 210 / 360 = 58% Losses= 42%
Time Analysis:
Total Working Time = 12 hours
Net Quantity = 210 m3
Productive time = 210/30 = 7 hours
Capacity Utilization = 7 / 12 = 58% Losses= 42%
Case Study
Process: xxx Equipment: Compressor xxx

Item 2017
Total working hours 8760
Planned Performance Rate, ton/hour 15
Net Quantity, ton 100,000
Capacity Analysis:
Maximum Quantity = 8760 * 15 = 131400 ton (Optimal ??)
Net Quantity = 100,000
Capacity Utilization = 76% Losses= 24%
Time Analysis:
Total Working Time = 8760
Net Quantity = 100,000
Productive time = 100,000/15 = 6667
Capacity Utilization = 76% Losses= 24%
Process Time Analysis:
Non-Productive Time
(Time Losses)
Planned Quality
downtime losses
(t1) Unplanned Speed (t5)
downtime losses
Waiting
(t2) (t4)
time
(t3)
Availability & Quality

Reliability Rate
Utilization Performance
Ratios
Ratio Efficiency
Process Time Analysis
OEE Total time (T0)
A
Planned (target) time (T1) t1
PM
R Available time (T2) t2 Planned
U CM N
Unplanned
Operating time (T3) t3
P U
Delay /
Uptime (T4) t4 Waiting
Speed U N
Q
U
Productive time (T5) t5
Defect
(Value Added Time) U
Non-productive time (TL)
N Necessary
Total time losses
U Unnecessary (Non-value Added)
A = Availability = (Total Time – Down Time) / Total Time =

R = Reliability = Available Time / Planned Time =
U = Utilization = Operating Time / Available Time =
P = Performance = Actual Production / Target Production =
Q = Quality yield = Net Production / Total Production =
OEE = Availability * Performance * Quality yield =
OEE = Availability * Utilization * Performance * Quality yield =

Overall Equipment Effectiveness (OEE)
= Availability * Performance * Quality yield
Availability = (Total Time – Down Time) / Total Time  Downtime loss
Performance = Actual Production / Target Production  Speed loss
Quality Yield = Net Production / Total Production  Quality loss
(Target  Zero Losses)

Item Day #1
Planned working hours 10
Overtime hours 2
Planned downtime (PM), hours 1
Unplanned downtime (CM), hours 0.5
Used time, hours 10
Planned Performance Rate, m3/hr 30
Actual Quantity, m3 240
Defect Quantity, m3 30
Net Production = 240 -30 = 210 m3

Productive time = Value Added Time = 210 / 30 = 7 Hours = 7
Overall Equipment Effectiveness (OEE) = 7/12 = 58.3 %
Non-value Added Time = 12 – 7 = 5 Hours
Waste (Losses) Ratio = 5/12 = 41.7 %

Process Time Analysis For Day #1
OEE Total time (T0) = 12.0
A
Planned (target) time (T1) = 11.0 t1=1.0
PM
R Available time (T2) = 10.5 t2 =0.5 Planned
U CM N
Unplanned
Operating time (T3) = 10 t3=0.5
P U
Delay /
Uptime (T4) = (240/30)  8.0 t4=2.0 Waiting
Speed U N
Q
U
Productive time (T5) = 210/30=7.0 t5=1.0
Defect
(Value Added Time) = 7
U
N Necessary Non-productive time (TL)
U Unnecessary Total time losses
(Non-value Added) = 5
A = Availability = (Total Time – Down Time) / Total Time = 10.5/ 12 = 87.5%
R = Reliability = Available Time / Planned Time = 10.5/11 = 95.5%
U = Utilization = Operating Time / Available Time = 10.0 / 10.5 = 95.2 %
P = Performance = Actual Production / Target Production = 8.0 / 10 = 80.0%
Q = Quality yield = Net Production / Total Production = 7.0/ 8.0 = 87.5%
OEE = Availability * Performance * Quality yield = 61.25 %
OEE = Availability * Utilization * Performance * Quality yield = 58.3%
KPIs Report:
100 95.5 % 95.2 %
87.5 87.5
90
A = Availability
R = Reliability 80.0
U = Utilization 80
P = Performance
Q = Quality yield 70
OEE = Overall 58.3%
Equipment 60
Effectiveness
50
10
A R U P Q OEE
Conclusion: Recommendations:

Pareto Chart: Category Hours % Rank Responsible
Planned downtime losses 1 20 3 Maintenance
(Rule 80/20) Unplanned downtime losses 0.5 10 4 Maintenance
Waiting time losses 0.5 10 5 Logistic
Speed losses 2.0 40 1 Process
Quality losses 1.0 20 2 Quality
Total 5.0 100 Business

Case Study
Process: Excavation Equipment: Excavator

Item Day #1 Day #2
Planned working hours 10 10
Overtime hours 2 1
Planned downtime (PM), hours 0.75 0.75
Unplanned downtime (CM), hours 0.25 0.50
Used time, hours 10 9
Planned Performance Rate, m3/hr 30 30
Actual Quantity, m3 200 180
Defect Quantity, m3 20 10
Based on this information, discuss briefly the equipment time analysis:

1)Time Analysis Chart 2) OEE 3) How to improve the process?

OEE Total time (T0) = 12
A
PM
U CM N
Unplanned
Operating time (T3) = 10 t3=1
P U
Delay /
Uptime (T4) = (200/30)  6.67 t4=3.33 Waiting
Speed U N
Q
U
Productive time (T5) = (200-20)/30=6 t5=0.67
Defect
(Value Added Time) = 6 U
= 6/12= 50% Total time losses
U Unnecessary
(Non-value Added) = 6
A = Availability = (Total Time – Down Time) / Total Time = 11 / 12 = 91.0%
R = Reliability = Available Time / Planned Time = 11/11.25 = 97.8%
U = Utilization = Operating Time / Available Time = 10 / 11 = 91.0 %
P = Performance = Actual Production / Target Production = 6.67 / 10 = 66.7%
Q = Quality yield = Net Production / Total Production = 6 / 6.67 = 90.0%
OEE = Availability * Performance * Quality yield = 55%
OEE = Availability * Utilization * Performance * Quality yield = 50%
OEE Total time (T0) = 11
A
PM
U CM N
Unplanned
Operating time (T3) = 9 t3=0.75
P U
Delay /
Uptime (T4) = (180/30)  6.0 t4=3 Waiting
Speed U N
Q
U
Productive time (T5) t5=0.33
Defect
(Value Added Time) = 5.66 U
U Unnecessary Total time losses
(Non-value Added) = 5.34
A = Availability = (Total Time – Down Time) / Total Time = 9.75/11 = 88.6 %
R = Reliability = Available Time / Planned Time = 9.75/10.25 = 95.1 %
U = Utilization = Operating Time / Available Time = 9/9.75 = 92.0 %
P = Performance = Actual Production / Target Production = 6.0/9.0 = 66.7 %
Q = Quality yield = Net Production / Total Production = 5.66/6.0 = 94.3 %
OEE = Availability * Performance * Quality yield = 55.7 %
OEE = Availability * Utilization * Performance * Quality yield = 50 %
KPIs Report 100 94%
91% 91% 90% 92%
90
88%
80
A = Availability
U = Utilization 70 67% 67%
P = Performance
Q = Quality yield 60
OEE = Overall
Equipment 50% 50%
Effectiveness 50
40
30
20
10
A U P Q OEE A U P Q OEE
Day #1 Day #2
Conclusion: Recommendations:

Case Study
Process: Injection Line

Item Shift #1 Shift #2
Planned working hours 7 7
Overtime hours - -
Planned downtime (PM), hours 0.5 clean 0.25 clean
Unplanned downtime (CM), hours 0.25 0.35
Used time, hours 6.2 6.4
Planned Performance Rate, unit/hr 100 100
Actual Quantity, units 600 400
Defect Quantity, units 30 20
Based on this information, discuss briefly the equipment time analysis:

1)Time Analysis Chart 2) OEE 3) How to improve the process?

Operation Analysis
The operation information for a petrochemical industry is as follows:
Working Hours 24 hr/day

Working Days 365 days
Planned Downtime 72 Hours
Unplanned Downtime 24 Hours
Standard Rate 15 units/hr
Actual Operating Time 8000 Hours
Total Production Quantity 115,000 units
Reject/Scrap Quantity 5000 units
Based on this information; discuss the following:

• Process time analysis chart
• Availability & Reliability & OEE

Cost Analysis

Cost Breakdown Structure Product
Price
Factory
Cost Profit
Direct Cost Overhead

Factory
Cost
Technical Office
Materials Machine Labour Overhead Overhead
Cost Cost Cost
Critical Resources

Cost Breakdown Structure Project
Price
Construction
Project
Cost Profit

Costruction
Cost
Site Office
Materials Machine Labour Overhead Overhead
Cost Cost Cost
Critical Resources

Based on the cost breakdown structure:
• Cost Ratios
• Rough Cut Estimation
• Negotiation Policy
• Cost Control
• Motivation Program
• Cost Reduction Policy
• Value Engineering, … etc.

Each Indicator: • Planned Cost
• Value ($) • Actual Cost
• Ratio (%) • Variance Analysis
• Factor
Cost Analysis
Profit Value Margin Markup Breakeven

Ratio Added Factor Factor Point
Main Indicators:
- Profit = Price - Cost  Total Productivity
- Value Added Factor = Price / Mat. Cost  Material Productivity
- Margin Factor = Price / Direct Cost  Direct Resource Productivity
- Markup Factor = Price / Factory Cost  Factory Productivity
- Breakeven Point = F / (p-v)  Margin of Safety

Cost Analysis
External
Resource Direct Factory Variable
TC Cost Cost
Cost Cost
Total Or
Cost
Site Cost
Price Value Margin Contribution

Added Factor Margin
1.5 to 2.5 1.3 to 1.7 1.4 to 1.6
 2.0 Markup
Factor
 1.5 1.2 to 1.3  1.5
Profit
 1.25

Price Structure Analysis: (Cost KPIs - Objectives)
Contract Price
Total Cost = Direct Cost + Overhead Profit
or rough cut estimation by using the value added For same scope of work
Outsource Cost Value Added = Price - Outsource
or rough cut estimation by using the margin factor For different scope of work
Direct Cost Margin = Price - Direct
or rough cut estimation by using the markup factor For Cost Plus Contract
Factory Cost = Direct + Tech. O/h Markup (Cost Plus)
Mat. Labor Equip Subs Jobsite OH = Office O/h + Profit

Case Study: Factory
The production cost information is as follows: Actual Cost
(2018)
• Product: xxxx
• Planned Capacity: 100,000 units /year (2016)
• Unit Price: 300 $/unit (Market Price)
Total Cost
Cost Elements 1,000,000 $ Inflation Rate
15% Annually
Raw Materials 10
Direct Technical labors 5
Costs
Equipment & Tools 10
Technical Overhead 2 Cost

Overheads Estimation
Office Overhead 1
(2019 , 2020)
Total 1,000,000 $ 28
Based on this information, discuss briefly the Cost Breakdown Structure
Cost Breakdown Structure Planned Capacity
= 100,000
Total Price units/year
Annual Level 30 M$
Total Cost Total Profit

28 (100%) Base 2 (7.1 %)

Technical
25 (89.2%) Factory Cost 3 (10.7%)
27 (96.4%)
Materials Machine Labour Technical Office

Cost Cost Cost Overhead Overhead
10 (35.7 %) 5 (17.8 %) 10 (35.7%) 2 (7.1 %) 1 (3.5%)
Critical
Resources
= 100,000
Unit Price units/year
Unit Level 300 $/unit
Unit Cost Unit Profit

280 (100%) Base 20 (7.1 %)

Technical
250 (89.2%) Factory Cost 30 (10.7%)
270 (96.4%)

100 (35.7 %) 50 (17.8 %) 100 (35.7%) 20 (7.1 %) 10 (3.5%)
Price Policy:
Critical Target Price = 300 $/unit
Resources Worst Price = 270 $/unit
Case Study: Construction Project
The project cost information is as follows: Actual Cost

(2018)
• Project : Office Building 10 Floors
• Bill of Quantity (BOQ): 6000 m2
• Unit Price: 7,000 LE/m2
Total Cost
Cost Elements 1,000,000 LE Inflation Rate
15% Annually
Raw Materials 18
Direct Technical labors 6
Costs
Equipment & Tools 6
Site Overhead 3 Cost

Overheads Estimation
Office Overhead 1.5
(2019 , 2020)
Total Cost 1,000,000 LE 34.5
Based on this information, discuss briefly the Cost Breakdown Structure
Cost Breakdown Structure Actual Cost
(2018)
Total Price
Project Level 42 M.LE

34.5 (100%) Base 7.5 (21.7%)

Technical
30 (86.9%) Site Cost 4.5 (13.0%)
33 (95.6%)
Materials Machine Labour Site Office

18 (52.2 %) 6 (17.4 %) 6 (17.4%) 3 (8.6%) 1.5 (4.3%)
Critical
Resources
Cost Breakdown Structure Actual Cost
(2018)
Unit Price
Unit Level 7000 LE/unit

5750 (100%) Base 1250 (21.7%)

Technical
5000 (86.9%) Site Cost 750 (13.0%)
5500 (95.6%)
Materials Cost Machine Cost Labour Cost Site Office

3000(52.2 %) 1000 (17.4 %) 1000 (17.4%)
Overhead Overhead
500 (8.6%) 250 (4.3%)
Critical Inflation Rate

Resources 15%
Price Structure Analysis: (Cost KPIs - Objectives) Actual Cost
(2018)
Contract Price = 7000 LE/m2
Profit
Total Cost = Direct Cost + Overhead = 5750
1250 LE
Outsource Cost
Value Added = 7000-3000 = 4000 LE
3000
Direct Cost = 5000 Margin = 7000-5000 = 2000 LE
Site Cost = Direct + Tech. O/h = 5500 Markup (Cost Plus)
Mat. Labor Equip Subs Jobsite OH =7000-5500= 1500 LE

Price Structure Analysis: (Cost KPIs - Objectives) Actual Cost
(2018)
Contract Price = 7000 LE/m2
Profit
Total Cost = Direct Cost + Overhead = 5750
21.7%
Outsource Cost Value Added Factor = 7000/3000= 2.33
3000 Material Productivity = (1 Material : 2.33 Income)
Direct Cost =5000 Margin Factor =7000/5000= 1.4

(1 Direct : 1.4 Income)
Site Cost = Direct + Tech. O/h = 5500 Markup Factor
=7000/5500= 1.27
Mat. Labor Equip Subs Jobsite OH (Cost Plus)

Cost Breakdown Structure Cost
Unit Price Estimation
(2019)
Unit Level 8050 LE/unit

6613 (100%) Base 1437 (21.7%)

Technical
5750 (86.9%) Site Cost 862 (13.0%)
6325 (95.6%)
Materials Cost Machine Cost Labour Cost Site Office

3450 (52.2 %) 1150 (17.4 %) 1150 (17.4%)
Overhead Overhead
575 (8.6%) 287 (4.3%)
Critical Inflation Rate

Resources 15%
Breakeven Quantity of Sales:
Total costs = fixed costs + variable costs
– Total fixed cost (TFC) is the cost of fixed inputs, inputs that do not
vary with output (e.g., rent)
– Total variable cost (TVC) is the cost of all inputs that vary with output
(e.g., wages, raw materials)
Total Fixed Costs

QBE =
Price  Var. Cost per unit

Breakeven - Margin of Safety

Example:
Planned Capacity 60 units Planned Capacity = 60 units
Unit variable cost = 360/60 = 6 $/unit
Annual Fixed Cost 300
Unit Price = 900/60 = 15
Annual Variable Cost 360 BEP = F / (p-v) = 300 / (15-6) = 33.3 = 34
Margin of safety = 60 – 34 = 26 units
Revenue $ 900

Example:
Demand (units) 500

Unit price ($) 50
Unit Variable cost ($) 15
Fixed Cost ($) 10,000
Based on this information, discuss the profit & breakeven analysis
Profit = Revenue – Total Cost

= 500*50 – (10000 + 500*15) =
BEP:
Q = F / (p-v) = 10000 / (50-15) = 285.7
Q % = 285.7 / 500 = 57.14 %
Safety Margin = 100 – 57.14 = 42.86% > 30% (Excellent)

Cost Analysis: (Information)
The cost classification matrix for a project (First year 2018) is as follows:
Product / Project: xxxxxxx
Unit Price= -- LE/unit Planned Capacity = --- units/year
Cost Classification Matrix

Variable
Cost Elements Fixed Cost
Cost
1) Materials
Direct 2) Technical labors
Costs 3) Equipment & Tools Cost
4) Sub-Contractor Account
5) Technical Overhead Costs
Overheads
6) Office Overhead Costs
Cost Analysis?
Based on Cost Classification Matrix;
Cost Analysis
....etc.
Cost
Breakdown
Structure
Direct &
Cost KPIs Overhead
Analysis Fixed & Breakeven
Variable Analysis
Sensitivity
Analysis

Case Study: Product Cost Analysis
Unit Price = 300 $/unit Planned Capacity = 100,000 units/year
$1,000,000 Cost Classification Matrix

Cost Elements Fixed Cost Variable Cost
Raw Materials 10
Direct Costs Technical labors 2 3
Equipment & Tools 6 4
Technical Overhead 1 1
Overheads
Office Overhead 1 -
Cost Analysis?
Unit Price = 300 $/unit Planned Capacity = 100,000 units/year
$1,000,000 Cost Classification Matrix

Cost Elements Fixed Cost Variable Cost Total Cost
Raw Materials - 10 10
Direct Technical labors 2 3 5
Costs
Equipment & Tools 6 4 10
Technical Overhead 1 1 2
Overheads
Office Overhead 1 - 1
Total 1,000,000 $ 10 18 28
Unit Cost = 28,000,000 / 100,000 = 280 $/unit

Unit Profit = 300 – 280 = 20 $/unit (7.14%) << 20% “Low Profit Ratio”

= 100,000
Total Price units/year
Annual Level 30 M$

28 (100%) Base 2 (7.1 %)

Technical
25 (89.2%) Factory Cost 3 (10.7%)
27 (96.4%)

10 (35.7 %) 5 (17.8 %) 10 (35.7%) 2 (7.1 %) 1 (3.5%)
Critical
Resources
= 100,000
Unit Price units/year
Unit Level 300 $/unit

280 (100%) Base 20 (7.1 %)

Technical
250 (89.2%) Factory Cost 30 (10.7%)
270 (96.4%)

100 (35.7 %) 50 (17.8 %) 100 (35.7%) 20 (7.1 %) 10 (3.5%)
Price Policy:
Critical Target Price = 300 $/unit
Resources Worst Price = 270 $/unit
Cost KPIs Analysis:
From cost breakdown structure
Main Indicators:
- Profit = Price – Cost = 300 – 280 = 20 $/unit
= 7.1 % cost
- Value Added Factor = Price / Mat. Cost = 300 / 100 = 3

(1 Material : 3 Price)  Material Productivity
- Margin Factor = Price / Direct Cost = 300 / 250 = 1.2

(1 Direct : 1.2 Price)
- Markup Factor = Price / Factory Cost= 300 / 270 = 1.11

(Office Overhead + Profit) = 11% Factory Cost

Sensitivity analysis for material cost and unit price change (±20%)
Profit Matrix ($/unit)
0%
Deviation -20% -10% 10% 20%
Base
Unit price -40 -10 20 50 80
Unit Material 40 30 20 10 0
Scenario Profit $/unit

Pessimistic 80
Most Likely 20
Optimistic -40

Breakeven %
Total Fixed Cost = 10,000,000 $ Unit Variable Cost = 180 $/unit Unit Price= 300 $/unit
BEP = Total Fixed Cost / (Unit Price - Unit Variable Cost)

= 10,000,000 / (300 – 180) = 83,333 unit
Planned Capacity = 100,000 units/year
BE % = 83,333 / 100,000 = 83.3%
Margin of Safety = 16.7% <<< 30 % (Very Low  High Risk)
For example; Corrective Action: Try to reduce fixed cost by 20%
Cost-Volume-Profit Chart
Total revenue line
Profit
Breakeven point
83,333 units Total cost line
Cost
Variable cost
Loss Fixed cost
Production Volume (units/period)

Case Study: Project Cost Analysis
Project: Steel Structure Project (Lamp sum 12,500,000)

Duration = 3 months * 25 day = 75 Working days
Planned Capacity = 10,000 m2 * 50Kg/m2 = 500,000 kg = 500 ton
 Average Unit Price = 1250 LE/m2 = 25 LE/kg

Materials (outsource) 12 LE/kg
Technical labors 3 LE/kg
Direct Costs
Equipment & Tools (Assets) 1000 LE/day 2000 LE/day
Sub-Contractor (outsource) 50,000
Technical Overhead Costs 5% DC 5% DC
Overheads
Office Overhead Costs 10% DC
Analysis?
Project: Steel Structure Project (Lamp sum 12,500,000)

Duration = 3 months * 25 day = 75 Working days
Planned Capacity = 10,000 m2 * 50Kg/m2 = 500,000 kg = 500 ton
 Average Unit Price = 1250 LE/m2 = 25 LE/kg
Annual Fixed Annual Variable
Cost Elements
Cost Cost Total
Materials (outsource) 6,000,000 6,000,000
Technical labors 1,500,000 1,500,000
Direct
Equipment & Tools (Assets) 75,000 150,000 225,000
Costs
Sub-Contractor (outsource) 50,000 50,000
Total Direct Cost 7,775,000
Technical Overhead Costs 388,750 388,750 777,500
Overheads Office Overhead Costs 777,500 777,500
Total Overhead 1,555,000
Total Cost 2,791,250 6,538,750 9,330,000
The cost classification matrix for a project is as follows:
Projoct: Building at New Cairo City

Planned Capacity = 6000 m2 Unit Price = 6000 LE/m2
LE 1,000,000 Cost Classification Matrix

Raw Materials 18
Direct Costs Technical labors 3 3
Equipment & Tools 4 2
Technical Overhead 2 1
Overheads
Office Overhead 1 0.5
Cost Analysis?
Inventory Turnover
‫معدل دوران المخزون هو مؤشر لقياس كفاءة إدارة مخزون الشركة‬
)‫ويعكس مدي قدرة الشركة علي بيع منتجاتها )ميزة تنافسية‬
• Cost of Sales = Sales Quantity * Unit Cost

• Average Inventory Value = Raw Material + WIP + Products
• Inventory Turnover = Cost of Sales / Average Inventory Value
• Inventory Weeks of Supply = No. of weeks / Inventory Turnover
Average Inventory
Analysis of Inventory
Week 1 + Week 2 + ….. + Week (n=52)
Number of Weeks
or
Month 1 + Month 2 + ….. + Month (n=12)
Number of months
or
≈ (Open Inventory + End Inventory)/2
Inventory turnover measures the number of times on average the
inventory is sold during the period.
Cost of Sales
Inventory Turnover =
Average Inventory Value
Days in inventory measures the average number of days inventory is held.

Days in Year (365)
Days in Inventory =
Inventory Turnover
Motorola Inventory turnover = (11 to 12) turns / year

Example:
If the annual cost of goods sold is $24 million and the average inventory is $6
million:
a) What is the inventory turns ratio?
b) What is the inventory weeks of supply?
c) What would be the reduction in inventory if inventory turns were increased
to 6 turns per year.
Answer:

= 24/6 = 4 turns/year
• Inventory Weeks of supply = No. of weeks / Inventory Turnover
= 52/4 = 13 weeks
• Average Inventory Value = Cost of Sales / Inventory Turnover
= 24 / 6 = $ 4 million. (reduction from $6 to $4 million)

Example:
If the annual cost of goods sold is $30 million and the average inventory is $10
million:
a) What is the inventory turns ratio?
b) What is the inventory weeks of supply?
c) What would be the reduction in inventory if inventory turns were increased
to 6 turns per year.
Answer:

= 30/10 = 3 turns/year
• Inventory Weeks of supply = No. of weeks / Inventory Turnover
= 52/3 = 17.33 weeks
• Average Inventory Value = Cost of Sales / Inventory Turnover
= 30/ 6 = $ 5 million. (reduction from $10 to $5 million)

Case Study:
Given the following data, calculate the Inventory Turnover and Inventory
Weeks of supply.
Operation Information:
• Annual Production Quantity = 10,000 units (Cars)
• Annual Production Cost = 1,000,000,000 L.E.
Market Information:
• Annual Sales Quantity = 9,000 unit
Inventory Information:
• Average Inventory Value = 200,000,000 L.E.
Answer:
• Unit Cost = Annual Production Cost / Annual Production Quantity
= 1,000,000,000 / 10,000 = 100,000 LE/unit
• Cost of Sales = Unit Cost * Annual Sales Quantity = 100,000 * 9,000 = 900,000,000
• Average Inventory Value = Material + WIP + Products = 200,000,000 L.E.
• Inventory Turnover = Cost of Sales / Average Inventory Value = 4.5 turns/year
• Inventory Weeks of supply = No. of weeks / Inventory Turnover = 52/4.5 = 11.55 weeks

Case Study:
Given the following data, calculate the Inventory Turnover and Inventory
Weeks of supply.
Operation Information:
• Annual Production Quantity = 10,000 units (Cars)
• Annual Production Cost = 1,000,000,000 L.E.
Market Information:
• Annual Sales Quantity = 9,000 unit
Inventory Information:
• Average Material Inventory Value = 50,000,000 L.E.
• Average WIP Inventory Value = 70,000,000 L.E.
• Average Product Inventory Value = 80,000,000 L.E.
Answer:
• Unit Cost = Annual Production Cost / Annual Production Quantity
= 1,000,000,000 / 10,000 = 100,000 LE/unit
• Cost of Sales = Unit Cost * Annual Sales Quantity = 100,000 * 9,000 = 900,000,000
• Average Inventory Value = Material + WIP + Products = 200,000,000 L.E.

Case Study:
Product
Mat. #1
#1
Product
Mat. #2
#2
WIP1 WIP2 WIP3 WIP4 WIP5
Mat. Product
Process Process Process Process Process Process
#3
#3 #1 #2 #3 #4 #5 #6
Mat. Product
#4
#4
Mat. Product
#5 #5
0% Final Work In Process (WIP)

100% Final
Products Products
Relative Weight

Case Study:

• Cost of Sales = $ 10,000,000
• Average Inventory Value = Material + WIP + Products = $ 20,000,000
• Inventory Turnover = Cost of Sales / Average Inventory Value = 5 turns/year
• Inventory Weeks of supply = No. of weeks / Inventory Turnover = 52/5 = 10.4 weeks

Case Study:
Cost of goods sold last year = $3,410,000

Working conditions = 52 weeks per year.
Inventory Items = 7 item
(3 raw materials, 2 work-in-process items, and 2 finished goods)
Category Part Number Average Level Unit Value
Raw materials 1 15,000 $ 3.00

2 2,500 5.00
3 3,000 1.00
Work-in-process 4 5,000 14.00
5 4,000 18.00
Finished goods 6 2,000 48.00
7 1,000 62.00

Part Number Average Level Unit Value Total Value
$ 45,000
1 15,000  $ 3.00 = 12,500
2 2,500  5.00 = 3,000
3 3,000  1.00 = 70,000
4 5,000  14.00 = 72,000
5 4,000  18.00 = 96,000
6 2,000  48.00 = 62,000
7 1,000  62.00 = $360,500
Average aggregate inventory value = 360,500
• Cost of Sales = $3,410,000

• Average Inventory Value = Material + WIP + Products = $ 360,500

References……

References……

References……
References……
Where can I learn more about Lean Six Sigma ?
These 3 books are quick reads…
Leaning into Six Sigma

The Gold Mine
- by Freddy Ballé and Michael Ballé (paperback)
- The Gold Mine: a Novel of Lean by Barbara Wheat,

Turnaround deftly weaves together the technical Chuck Mills, Mike
and human pieces of implementing lean Carnell
manufacturing in an engaging story that readers
will find both compelling and instructive.
Made in Egypt - ‫صنع في مصر‬
‫ أحفظ مصر وأهل مصر من كل سوء – اللهم أمين‬- ‫اللهم يا حفيظ‬
Thank you for your attention! Useful Science For
the Sake of Allah
Suggestions Comments
‫اللهم تقبل هذا العلم‬
Questions
Copyrights of this file & More information:
Dr. Attia Gomaa

Industrial Engineering Professor & Consultant
Mechanical Eng. Department – Shoubra Faculty of Eng. - Benha University
& Engineering and Science Services - American University in Cairo
attiagomaa@yahoo.com or attiagomaa@aucegypt.edu
Tel: 01222738497

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‫وما توفيقي إال باهلل‬

Dr. Attia Gomaa

SCM Productivity Analysis & KPIs – Dr. Attia

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 2

This is an Open Discussion Course:

– Share Knowledge ‫– تبادل المعرفة‬

– Share Best Practices ‫– تبادل التجارب الجيدة‬

– Share Questions ‫– تبادل األسئلة‬

Remember … You can’t do it alone!

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 4

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 5

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 6

Inputs (I) Outputs (O)

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 7

Right In Right At Right At Right

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 9

• Total Productivity Measure:

• Partial Productivity Measure:

• Multifactor Productivity Measure:

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 11

Productivity = Output / Input

Effectiveness X Efficiency = Productivity

PI will occur if:

Based on this information, discuss the following:

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 15

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 16

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 17

Item Unit Jan. 2015 Feb. 2015

Sales Revenue M.LE 4.0 4.1

Labor Effort Man-hour 2700 2500

Sales Revenue M.LE 4.0 4.1 Unit Price

Labor Effort Man-hour 2700 2500 Labor Efficiency

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 20

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 21

- Effective capacity = Standard = Available

- Planned capacity = Target

- Actual output = Used capacity

Performance = Actual Capacity / Planned capacity 80 to 100%

Quality Rate = (Total units – Rejected) / Total units 90 to 100%

Efficiency = Actual output / Effective capacity 70 to 90%

Effectiveness = Effective Capacity / Design capacity 60 to 80 %

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 24

Based on this information, discuss the following:

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 25

60 min/2 = 60 min/4= 60 min/3 = 15

1) Bottleneck process (Slowest process in the system) = B

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 26

Lead Time = The total production time from start to finish

Process (A, 2 min)  Process (B, 4 min)  Process (C, 3 min)

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 27

Actual Cycle Time = 65 min

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 28

Weekly Customer Demand = 1300 units

Based on this information, discuss the following:

SCM Productivity Analysis & KPIs – Dr. Attia Gomaa – 2019 29

Weekly Customer Demand = 1300 units

Takt time = Working time available / Customer demand