How to Measure the Cost of Disruptions in Multistage Manufacturing Systems

• In Event: Management Accounting

Abstract

At the heart of modern manufacturing facilities, multistage manufacturing systems (MMSs) involve a complex network of interconnected stages of operations to fabricate a product. MMS inefficiency is primarily caused by disruptions that occur at various workstations in a system. Due to the interdependence among workstations, one disruption might disrupt other station(s) and even a system stoppage, and another disruption might be compensated by inventory buffers and generate no impact on the system output. Understanding the economic consequence of individual disruptions is critical for shop-floor planning and control purposes, including bottleneck identification, performance evaluation, and capital budgeting decisions. Motivated by real-world challenges faced by a large automobile manufacturer regarding how to optimize its system improvement activities, we propose an approach to measure the cost of disruptions by allocating the system-wide production-volume variance benchmarked against a disruption-free condition. We also conduct a simulated case study based on field data from an automobile assembly line to show that our approach is useful to identify system “cost bottlenecks” and to assist system improvement activities.

Author

• Ge Bai, Washington and Lee University