Question: In a production line at Tech Manufacturing, changeover from one product to another takes about 60 minutes. On average, it takes about 5 parts to be run and discarded before the line is ready to start making parts to specification. The labor cost for person is $25/hour and an operator the line makes about $12/hour. Five operators are involved in running the line. Current batch size 400. It takes about three to make a part and the material cost is $12.00 per unit.
A newly hired lean manufacturing engineer has able to reduce the changeover time. What should the time reduced to so that size of 50 can be justified for the same unit production cost? Assume the unit production cost includes material as well as the labor cost (both setup and line operators). The new changeover may be assumed to be taken care of by all the five operators. Also assume that the engineer has made the changeover so easy that the five operators setup the line by themselves and start making good parts without having to scarp any trial parts made.