Abstract
A major influence on the cost of a product is the time it takes to make this product. Traditional cost accounting can grasp part of this relation, but misses many critical aspects of having a faster time to the customer. Rajan Suri analyzed this relation empirically. Based on a data set with industrial data he determined an empirical mathematical relation between the turnaround time to the customer (or replenishment time) and the product cost for the entire value stream. This paper modifies the approach by Suri to be applied also to segments of the value stream, creating a relation between the cost within of a segment of a value stream and the time it takes for a part to pass through this segment of a value stream. This allows the estimation of the improvement in cost and the reduction in turnaround time also for sub-segments of the value stream, helping decision makers to better understand the impact of their decisions.
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Notes
- 1.
These numbers are different because the way percentages work. An increase of 100€ by 12% would get 112€. Decreasing 112€ by 12% would get 98.56€. Decreasing it by 10.7% would give 100€ again.
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Acknowledgements
We would like to thank Rajan Suri for his input.
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Roser, C., Langer, B., Deuse, J. (2020). The Power of Six: Relation Between Time and Money in Manufacturing for Segments of the Value Stream. In: Rossi, M., Rossini, M., Terzi, S. (eds) Proceedings of the 6th European Lean Educator Conference. ELEC 2019. Lecture Notes in Networks and Systems, vol 122. Springer, Cham. https://doi.org/10.1007/978-3-030-41429-0_3
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DOI: https://doi.org/10.1007/978-3-030-41429-0_3
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