Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 1

Is Two Minutes and Twenty Seconds Enough for a Brake Part?

The improvement in plant productivity brought about by the bonus system and conveyor belt system at Westinghouse Air Brake Company was just what was needed to save the old Chicago plant. Without these improvements, the business would likely have gone overseas. However, the increased demand on workers’ attention and effort caused stress. Workers found themselves operating two or more machines, each of which could operate at a different speed. Workers were usually in constant motion. To decrease stress, the machines were located close together in U-shaped cells when the plant was renovated. This allowed the workers to operate the machines more efficiently, and reduced the time required to move parts around the plant.

An unfortunate side effect of the system is that workers often would set aside a half-dozen or more finished parts to have some to feed the conveyor belt if there was a distraction or disruption of any kind. The few extra finished parts each worker set aside added up to a substantial amount for the plant. Plant managers frowned upon this hidden inventory practice and were constantly on the lookout for it.

Source: Timothy Aeppel, “Factory Lifts Productivity, But Staff Finds It’s No Picnic,” The Wall Street Journal, May 18, 1999, p. A10.

Step 1 of 2

Productivity of a manufacturing plant is the number of products that could be produced in specific time period. Labor productivity is the number of products produced divided by number of labors.