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Total cycle time (lead time)
- the time from the receipt to completion of an order for a product or service
- Total cycle time = VA time + NVA time
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Manufacturing cycle efficiency
MCE = VA time / total cycle time
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Cost driver
factors that have direct cause-and-effect relationships to cost.
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Activity-based management (ABM)
- a business process model that focus on controlling production or performance activities to improve customer value and enhance profit.
- 1. Activity analysis; 2. Cost driver analysis; 3. Activity-base costing; 4. Continuous improvement; 5. Operational control; 6. Quality management; 7. Business process improvement; 8. Performance measurement.
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Unit-level costs
- Incur once for each unit produced.
- direct material, direct labor, some machine costs (if traceable, eg. machine energy)
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batch-level costs
- incur once for each batch produce.
- purchase orders, setup, inspection, material handling, movement, scrap (if related to the batch
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Production/ Process-level costs
- Support a product type or a process.
- Engineering change order, equipment maintenance, product development, scrap (if related to product design)
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Organizational/facility-level costs
- Support the overall production or service process
- building depreciation, plant or division manager's salary, organizational advertisement.
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