Hennessey Machining is a compression-molding plastics company that specializes in high priced jar covers for the cosmetics industry. Because appearance is so important, customers can reject covers even for minor blemishes that do not affect the cover's function. Therefore, preventing dust and contamination in the molding process is an ongoing problem for the company. Each order requires a machine setup that can be complex. The company recently implemented some major process improvements. The value-added analysis of the compression-molding process for placing good pieces in inventory appears below:
Before process improvements After improving or removing non-value-added activities
Elapsed time: Elapsed time:
Process Activity 1,000 jar cover order Process Activity 1,000 jar cover order
Setup machine 960 minutes Setup machine 120 minutes
Inspection of Inspection of
Defective units 120 minutes defective units 10 minutes
Place good pieces Place good pieces
in boxes 60 minutes in boxes 60 minutes
Log out completed Log out completed
Order 20 minutes Order 0.25 minutes
Move to warehouse 20 minutes Move to warehouse 1.5 minutes
Register order in Register order in
Inventory 20 minutes Inventory 0.25 minutes
Total elapsed time 1,200 minutes Total elapsed time 192 minutes
Setup mechanics earn $25 per hour. All other factory labor earns $10 per hour.
what is the savings for each 1,000 jar covers for setup labor after implementing the changes ?