03 Cost Deplaoyment Yamashina

International Journal of Production Research
ISSN: 0020-7543 (Print) 1366-588X (Online) Journal homepage: http://www.tandfonline.com/loi/tprs20
Manufacturing cost deployment
H. Yamashina & T. Kubo
To cite this article: H. Yamashina & T. Kubo (2002) Manufacturing cost

deployment, International Journal of Production Research, 40:16, 4077-4091, DOI:
10.1080/00207540210157178
To link to this article: http://dx.doi.org/10.1080/00207540210157178
Published online: 14 Nov 2010.
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int. j. prod. res., 2002, vol. 40, no. 16, 4077±4091
Manufacturing cost deployment
H. YAMASHINAy* and T. KUBOz
Obviously, one of the major problems in manufacturing is to reduce cost. To do

so, various activities such as Total Productive Maintenance (TPM), Total Quality
Management (TQM), Industrial Engineering (IE) and Just-in-Time (JIT) are
often carried out. However, many companies recognize that these activities do
not necessarily guarantee cost reduction even if they have been implemented
Downloaded by [University of Nebraska, Lincoln] at 11:45 20 October 2015
successfully. In the worst case, manufacturing cost rises with the introduction
of such activities. This is an important issue in manufacturing, but strangely in
the academic literature there have been no studies that have been addressed
directly to the methodology of manufacturing cost reduction. The aim was to
develop a good method that establishes a cost-reduction programme scienti®cally
and systematically. This method, termed `manufacturing cost deployment’, is
a very powerful tool to identify production losses to reduce costs. A simple
algorithm to establish a cost-reduction programme is presented and one case
study is given.
1. Introduction
Each company must continue to make a reasonable pro®t to survive and prosper
in the global competition. Therefore, in manufacturing plants, cost reduction is
one of the major problems in the attainment of this business objective. Therefore,
activities that reduce or eliminate various production losses are promoted in many
companies. For example, TPM (Total Productive Maintenance) for maximizing the
overall equipment e ectiveness, TQM (Total Quality Management) for assuring the
quality of product, IE (Industrial Engineering) for maximizing the e ciency of
operating motion, and JIT (Just In Time) for averaging the production quantity
and reducing the inventory are often curried out in di erent departments (Huang
1991). However, these activities do not necessarily guarantee cost reduction even if
they have been implemented successfully because each activity is not necessarily
performed with the connection between its loss reduction and its possible cost reduc-
tion in mind. In the worst case, manufacturing cost rises with the introduction of
such activities.
There have been no papers that have addressed directly the methodology of
manufacturing cost reduction. Against this background, the purpose of the present
paper is to develop a good methodology that establishes scienti®cally and system-
atically a cost-reduction programme. The following issues will be solved here.
Revision received January 2002.

{ Department of Precision Engineering, Graduate School of Engineering, Kyoto
University, Yoshida-Honmachi, Sakyo-Ku, Kyoto-shi, Kyoto, 606-8317, Japan.
{ Production Engineering Department, Denso Corporation, 1-1, Showa-cho, Kariya-shi,
Aichi, 448-8661, Japan.
* To whom correspondence should be addressed. e-mail: yamashina@prec.kyoto-u.ac.jp
International Journal of Production Research ISSN 0020±7543 print/ISSN 1366±588X online # 2002 Taylor & Francis Ltd
http://www.tandf.co.uk/journals
DOI: 10.1080/00207540210157178
4078 H. Yamashina and T. Kubo
. Investigating various production losses and classifying them into causal losses
and resultant losses.
. Looking for the relationship among the losses, their processes-generatin g cost
and the cost factors. Finding the connection between various kinds of loss
reduction and their possible cost reduction is important.
. Clarifying if the know how on each loss reduction is available and if not
obtaining it if not available.
. Estimating the cost of reducing or eliminating each identi®ed loss and putting
priority to the loss items for the total cost reduction from the viewpoint of cost
and bene®t.
This method has been coined as manufacturing cost deployment because a pro-
cess leading to cost reduction is deployed based on the programme from the above
four points. In this paper, as the ®rst phase of this study, a manufacturing cost-
deployment approach is developed for a production system that consists of multiple
facilities. After the production system is de®ned, an algorithm to establish a cost-
reduction programme is presented and one case study is given at the end of the
paper.
2. Investigating various losses in a production system

2.1. Assumptions concerning a production system
Figure 1 shows the model of the production system that is de®ned under the
following assumptions here. The model consists of multiple facilities, the number of
which is J. Generally, the various losses to do with each facility are breakdown, set-
up, tool change, start up, short stoppage, speed down and defective losses (Oshima
and Morooka 1992). A bu er between neighbouring facilities can prevent forced
stoppages of a facility from stoppages for a few minutes of the other facilities. The
number of operators in this production system is p. Generally, the various losses to
do with each operator are management , operating motion, logistics, line organiza-
tion and measurement losses (Oshima and Morooka 1992). There are also losses to
do with materials, etc. that include yield, indirect material, die and jig, and energy
losses (Oshima and Morooka 1992). The loading time for each period is h (hours),
and the actual production quantity for the period is d in this production system. For
convenience when identifying each loss, when the production capacity is larger than
the planned quantity, the production quantity for the period is assumed to be equal
to the planned quantity.
Figure 1. Model of the production system.

Manufacturin g cost deployment 4079
Figure 2. Matrix.
2.2. Identifying production losses using A matrix

When ®rst analysing losses, it is important to investigate which loss occurs, what
extent and in which process it occurs in the production system. To do so, the use of A
matrix shown in ®gure 2 is proposed. This matrix places various losses as the vertical
axis and locations of their occurrence in the production system as the horizontal axis.
In this matrix, each loss is categorized into three kinds of mark, **
*
, * or ~, based
on its qualitative signi®cance in its frequency of occurrence. These marks mean the
priorities for loss reduction. The ®rst is *
*
*
, the second * and the third ~. No mark
means that loss reduction does not need. These marks are entered in the columns
under `Process’ in case the loss can be identi®ed at each process, and in the columns
under `System’ in case the loss can be identi®ed only as a whole of the production
system. By doing so, the various losses in the production system, the locations and
the frequency of their occurrence can be shown clearly to some extent and it is
possible to identify losses that must be reduced by improvement activities.
3. Clarifying cause-and-e ect relationships between losses

3.1. Causal losses and resultant losses
When a loss occurs in a process of the production system, other losses often
occur because of that loss. For example, as a result of a breakdown in one
process, various losses to do with forced stoppages and/or defectives occur in
other processes. Thus, there is a certain cause-and-e ect relationship between
losses that are thought to have been independent of each other. This paper
refers to a loss that occurs because of another loss as a `resultant loss’ and the
loss that is the cause of the resultant loss as a `causal loss’. No e ective solutions
for loss reduction can be found by focusing on a resultant loss. Only by focusing
on its causal loss can good solutions be found.
Figure 3. B matrix (matrix of causal losses and their resultant losses).
3.2. Clarifying cause-and-e ect relationships using B matrix

B matrix shown in ®gure 3 is used to clarify the cause and identify the relation-
ships between the various losses. This matrix places causal losses and the locations of
their occurrence as the vertical axis and the resultant losses and locations of their
occurrence as the horizontal axis. The mark * is entered to indicate which causal
loss is related to which resultant loss, and each location where each loss occurs in the
production system. As well as the A matrix, the mark is entered in the columns under
`Process’ in case the loss can be identi®ed at each process, and in the columns under
`System’ in case the loss can be identi®ed only as a whole of the production system.
By doing so, it is possible to clarify the relationship between a causal loss and its
resultant losses.
4. Converting losses into manufacturing cost

4.1. Components of manufacturin g cost
As shown in ®gure 4, manufacturing cost consists of the ®xed cost generated that
is irrelevant to the production quantity for the period and the variable cost generated
in proportion to the production quantity. The depreciation cost for facilities is the
®xed cost. The variable cost consists of the direct material cost for purchasing raw
materials and bought parts for products, the indirect material cost for machining
lubricant, etc., the direct labour cost for operators, the indirect labour cost for
maintenance workers, etc., the tool cost, the die and jig cost, and the energy cost,
all of which are required in machining, and the maintenance cost for spare parts of
facilities. Finally, the total cost consists of the manufacturing cost as described
above, the sales cost and the management cost (Ishimatsu 1987, Son 1991).
4.2. Analysing connections between losses and manufacturing cost

By using A and B matrices, it is possible to clarify how and where losses occur
and the cause-and-e ect relationships among them. To reduce manufacturing cost
scienti®cally and systematically, however, it is necessary to clarify further how each
loss increases manufacturing cost. As shown in ®gure 5, a relationship among a
causal loss, its resultant losses and cost factors needs to be prepared to do so. By
showing a causal loss and its resultant losses, together with the locations of their
occurrence in the production system, ®gure 5 clari®es which cost factor is increased
Figure 4. Factors of manufacturing cost.
Figure 5. Relationship among a causal loss, its resultant losses and cost factors.
by each loss. Then, to convert losses into manufacturing cost, they will be classi®ed
into two types: time-related loss type and physical loss type. The former can be
measured in terms of time such as machine stoppages; the latter can be measured
in terms of a quantity such as the number of defectives. An example of a breakdown
in a process will be described below.
In this case, both kinds of loss type can occur. As the time-related loss type, when
the production capacity is smaller than the planned quantity for the period, depre-
ciation cost will rise for lack of production quantity; when the capacity is larger than
the planned quantity, its cost will not rise since the planned quantity can be still
ensured, but direct labour cost and energy cost will rise due to the loading time
prolonged as a result of the breakdown loss. As the physical loss type, defectives
produced as a result of the breakdown will increase the direct material cost as well as
the indirect material cost, tool cost, die and jig cost, and energy cost which were
required for machining in the previous processes (Senju and Fushimi 1982). It is
important and essential that the manufacturing cost increased by resultant losses
must be understood as cost increased by their causal loss.
4.3. Proposal of equations to convert losses to manufacturin g cost

Losses in the production system can be measured using the indicators shown in
table 1. By using these indicators, losses can be converted into manufacturing cost as
shown in table 2. As an example, the method of converting breakdown loss into
manufacturing cost will be described below.
In a conventional calculation, when using a machine charge (Yen/h) calculated
from depreciation cost and so on, manufacturing cost (Yen) reduced by breakdown
loss reduction is calculated by multiplying its reduction time (h) by the machine
charge (Yen/h). This method may very often lead to erroneous conclusions. In
fact, the cost reduction when calculated based on this method will never be guaran-
teed. When the production capacity is larger than the planned quantity for the
period, in the worst case, manufacturing cost may rise because of the improvement
cost for reducing the breakdown loss. To obtain the correct results, it should be
calculated as described below.
As shown in ®gure 5, breakdown loss increases the various kinds of cost factor
associated with the time-related and physical loss types in addition to the indirect
labour cost for maintenance workers and the maintenance cost required for repairing
the facility. These cost factors can be calculated by using three indicators: break-
down rate ¶j …1=h†, repair rate ·j …1=h† and the quantity of defectives produced by
the breakdown qj (unit) of facility j. The breakdown loss increases each cost factor as
shown in table 2 depending on the production capacity. Case 1 is when it is below the
planned quantity; Case 2 is when it is above. Thus, improvement for breakdown loss
reduces manufacturing cost in di erent ways in Cases 1 and 2. Detailed descriptions
of the other losses are given in Okazaki (1996).
4.4. Clarifying connections between losses and manufacturin g cost using the C
matrix
The C matrix (®gure 6) is adopted to convert losses into manufacturing cost
based on their equations as given in table 2 and to analyse their results in detail.
This matrix places causal losses and locations of their occurrence as the vertical axis
and cost factors as the horizontal axis. The cost value Cljk is entered into each
component corresponding to the loss l, the process j orP the cost factor k. Also,
the followingP results
P are included in this matrix, the sum Pk P CljkP
of the cost factor
k, the sum l j Cljk of P the loss l and the process j, and l l k Cljk that is the
total of all components. P k CPljk shows how each loss increases the manufacturing
cost at each process, and l j Cljk shows how each factor of the manufacturing
cost is increased by losses in the production system. Thus, the C matrix allows the
quantitative analysis of connections among losses, and the locations of their occur-
rence and cost factors as opposed to the A matrix that focuses on qualitative analysis
of losses.
5. Consideration of improvement techniques for losses

5.1. Clarifying improvement policy using the D matrix
Reduction or elimination of each loss at each process in the production system
requires di erent improvement techniques appropriate for the loss. In general, there
are two approaches to reduce losses. One type is the individual approach that clari-
Causal loss Indicator Causal loss Indicator
Breakdown Breakdown rate of facility j …1=h†: ¶j Speed down loss Theoretical cycle time of facility j …s†: ¬*j
loss Repair rate of facility j …1=h†: ·j Actual cycle time of facility j(s): ¬ ‡ j
Number of defectives produced by the breakdown (unit): qj Defective loss Defective rate of facility j (1/unit): ®j
Set-up loss Number of set-ups in a period: Ns Management loss Man power of the production system (Men): f1
Set-up time of facility j (min): ¸j Operating motion loss Man power of the production system (Men): f2
Number of defectives produced during the adjustment Logistics loss Man power of the production system (Men): f3
(unit): nj
Tool change Number of units produced between the two tool changes of Line organization loss Man power of the production system (Men): f4
loss facility j (unit): ½j Measurement loss Measurement rate of facility j (1/unit): kj
Tool changing time of facility j (min): j Measurement time of facility j (min): Áj
Number of defectives produced during the adjustment Yield loss Yield ratio: r
(unit): nj
Start up Number of start-ups in a period: Np Indirect material loss Theoretical and actual cost of facility j (Yen/unit)
loss Start-up time of facility j (min): sj Die and jig losses The number of units produced between the two
Number of defectives produced during the adjustment die and jig changes of facility j (unit): ²j
Manufacturin g cost deployment
(unit): nj
Short stop- Short stop rate of facility j (1/unit): ± j Energy loss Theoretical and actual cost of facility j (Yen/unit)
page loss Repair time of facility j (min): tj
Table 1. Indicators of causal losses for calculating cost.

4083
Loss Case Factor Parameter Formula (Yen/unit) Loss Case Factor Parameter Formula (Yen/unit)
4084
Breakdown 1 DC CF C F »j =d Start-up 1 DC CF CF Np …sj =60†…hd †

loss 1 DLC »j ˆ ¶j =·j CL pCL »j h=d loss 1 DLC Np ; sj CL pCL np …sj =60†=d
2 EC CE C E »j h=d 2 EC CE CE Np …sj =60†d
DMC CM M qj ¶j h=d DMC CM M N ¡ pnj =d
IMC Csj … csi †qj ¶j h=d IMC Csj … Csj †Np nj =d
TC ¶j ; qj CTj TC Np ; nj CTj
CP CP
f …CTj =½j †gqj ¶j h=d f …CTj =½j †gNp nj =d

DJC Cpj DJC Cpj
P P
f …Cpj =²j †gqj ¶j h=d f …Cpj =²j †gNp nj =d

EC Cvj EC Cvj
P P
… CVj †qj ¶j h=d … Cvj †Np nj =d

ILC »j CI C I »j h=d DLC Np ; sj CL CL Np …sj =60†=d
P P
MC ¶j Cpja C pja ¶j h=d Short 1 DC CF CF ±b …tb =60†h

Set-up 1 DC CF C F NS …¸j =60†=…hd † stoppage 1 DLC ±b ; tb CL pCL ±b tb =60
loss 1 DLC Ns ; ¸j CL pCL NS …¸j =60†=d loss 2 EC CE CE ±b tb =60
2 EC CE C E NS …¸j =60†=d DLC ±j ; tj CL CL ±j tj =60
DMC CM M NS nj =d Speed 1 DC CF CF …¬b ¡ ¬* b †=…3600h†
IMC CSj … CSi †NS nj =d down 1 DLC ¬b ¡ ¬*b CL pCL …¬b ¡ ¬* b †=3600
TC NS ; nj CTj loss 2 EC CE
CP
f …CTi =½i †gNS nj =d CE …¬b ¡ ¬* b †=3600

DJC Cpj Defective DMC CM M ®j
P
f …Cpi =²i †gNS nj =d

EC CVj loss IMC CSj
P
… CVj †NS nj =d
DLC NS ; ¸j CL C L NS …¸j =60†=d TC ®j CTj
P CP
Tool 1 DC CF C F … j =60†=…h½j † DJC Cpj

… P CSi †®j
change 1 DLC ½j ; j CL pCL … j =60†=½j EC CVj f CVi †®j

fP…CTj =½i †g®j
loss 2 EC CE C E … j =60†=½j Management loss DLC f1 CL CL f1 h=d

fP…Cpj =²i †g®j
DMC CM M …nj =½ j † Operating motion loss DLC f2 CL CL f2 h=d

IMC CSj … CSj †nj =½j Logistics loss DLC f3 CL CL f3 h=d
H. Yamashina and T. Kubo
TC ½j ; nj CTj Line organization loss DLC f4 CL CL f4 h=d

CP
f …CTj =½i †gnj =½j

DJC Cpj Measurement loss DLC kj ; Áj CL CL kj Áj =60
P
f …Cpj =²j †gnj =½j

EC CVj Yield loss DMC r CM
P
… CVj †nj =½j CM …1 ¡ r†

DLC ½j ; j CL Indirect material loss IMC Sj
P
C L … j =60†=½j CSj ¡ C*Sj CSj ¡ C*

TC ½j ; nj CTj C Tj =½j Die and jig losses DJC ²j Cpj Cpj =²j
Energy loss EC CVj ¡ C*Vj CVj C*
¡ Vj
(1) Case 1: d > Capacity of the production system. Case 2: d < Capacity of the production system.
(2) Facility b: bottleneck in the production system
CM : direct material cost (Yen/unit); CL : direct labour cost (Yen/h); CI : indirect labour cost (Yen/h); C* V j , CVj : theoretical and actual energy costs of facility j (Yen/unit); CPja : repair cost of item of
facility j (Yen/unit). a: broken part.
(3) CF : depreciation cost of the production system (Yen/period); C* Sj . CSj : theoretical and actual indirect material costs of facility j (Yen/unit); CTj : tool cost of facility j (Yen); CDj : die and jig costs
of facility j (Yen); CE : energy costs of the production system (Yen/h).
Table 2. Calculation method for the impact of loss on cost.

Figure 6. C matrix (matrix of causal losses and cost factors).

Figure 7. D matrix (matrix of causal losses and their improvement techniques).
®es causes of each loss and eliminates it in the short-term. The other type is the
systematic approach such as operative maintenance and preventive maintenance,
which are continuous activities in the long-term. As shown in ®gure 7, the D
matrix is made to consider the e ective improvement techniques for each loss with
reference to signi®cant knowledge in the past. This matrix places causal losses and
locations of their occurrence as the vertical axis and improvement techniques as the
horizontal axis. The mark * indicates which improvement technique should be
adopted for each loss at each process. By using this matrix, it is possible to clarify
what improvement activities should be implemented for each loss at each process in
the production system as well as what kinds of knowledge are required to reduce
losses.
5.2. Improvement techniques for losses

Some improvement techniques for breakdown loss will be described below as
examples of activities for losses associated with facilities. In the ®rst step, operative
maintenance is implemented to prevent the forced deterioration of each facility

component. In the second step, individual approaches such as processing point
analysis and so on are adopted to eliminate causes of the breakdown. In the third
step, preventive maintenance is implemented to repair facility components regularly.
Finally, predictive maintenance is implemented using various kinds of diagnostic
technology in the forth step. In addition to these steps, breakdown and repair
rates are further reduced through improvement in skill of maintenance workers,
etc. There are several steps and approaches in the improvement of activities.
Therefore, the most appropriate technique corresponding to the condition of each
facility must be selected. Detailed descriptions of improvement techniques for the
other losses are given in K. Okazaki (1996).
In general, individual approaches are mainly adopted in improvement activities

for losses associated with operators. Losses of man-hours are reduced through, for
example, con®rmations in operating methods, improvements in plant layouts, auto-
mation with the introduction of robots, etc.
Individual approaches are mainly adopted in improvement activities for losses
associated with material, etc. In reducing yield loss, for example, activities such as
design changes increase the yield ratio. One example of improvement approaches in
indirect material loss is to reduce unit prices by decreasing the consumption of
machining lubricant and other indirect materials. In case of improvements about
die and jig losses, cost reduction is possible by, for example, extending their lives
through con®rming their speci®cations. Examples of improvement approaches in
energy loss are to increase energy e ciency by reducing the down time of facilities,
to decrease the unit price, etc.
6. Establishing a cost-reduction programme

6.1. Assumptions concerning improvement activities
To reduce or eliminate losses in the production system, the cost for improvement
activities is required. Therefore, these activities do not necessarily guarantee cost
reduction even if they have been implemented successfully. This is because each
activity is not necessarily promoted by ®nding its trade-o relationship between
the cost for its loss reduction and its possible cost reduction.
To formulate the problem of establishing a cost-reduction programme scienti®-
cally, this paper has the following assumptions concerning improvement activities.
. Cost for improvement activities in each period w (w ˆ 1; 2; . . . ; W ) is limited to
Zw .
. Kind of loss is indicated as ³ (³ ˆ 1; 2; . . . ; Y). For example, for breakdown
loss, ³ ˆ 1, for set-up loss, ³ ˆ 2, the other kinds of loss are indicated
according to the order de®ned here. The improvement activity for the loss ³
in the facility j is indicated as xj³ , and the period required for the activity as Yj³ .
The cost required in the yj³ …yj³ ˆ 1; 2; . . . ; Yj³ )th period after the initiation of
the activity xj³ is indicated as z…yj³ ).
. Once begun, each activity will be pursued to the end. During the activity
period, the loss will not reduce and the loss reduction e ect will appear only
after completion of the activity.
6.2. Formulating the problem

Here, conversion equations from losses into manufacturing cost have been pro-
posed. Since the period for improvement activity must be considered, to determine a
cost-reduction programme, simply minimizing the unit manufacturing cost is not
su cient as an objective function. Therefore, it is necessary to calculate the bene®t
value that can be obtained by multiplying the cost reduction by the production
quantity in each period and to maximize the cumulative bene®t value throughout
the whole period.
Under the above assumptions, the value of the cost reduction achieved through
the loss reduction of the activity xj³ in the period yj³ (the e ect will not appear when
yj³ < Yj³ ) is calculated, and the value obtained by multiplying the result by the
production quantity d is indicated as Ew …yj³ ). The bene®t value of the activity xj³
is obtained by further subtracting the cost for the activity from this value, shown as
Ew …yj³ † ¡ z…yj³ †.
Based on the foregoing, when the group of activities in each period is indicated as
Xw , the problem of establishing a cost-reduction programme that can maximize the
cumulative bene®t value throughout the whole period can be formulated as follows
when considering the cost and the period required for the activity xj³ :
X
W X
Y X
J
Objective function: max fEw …yj³ † ¡ z…yj³ †g!j³w
wˆ1 ³ˆ1 j ˆ1
Constraint: if !j³w¡1 ˆ 1 \ yj³ % Yj³

then !j³w ˆ 1…xj³ 2 Xw †
X
z…yj³ †% Zw
xj³ 2Xw
!j³w ˆ 0 or 1:
This problem is to determine the group of activities Xw in each period and
identify the group throughout the whole period (X1 ; X2 ; . . . ; XW ) such that the objec-
tive function can be maximized under some constraints above. This is an integer
programming problem to determine !j³w ˆ 0 or 1. It means that one determines
whether or not the activity xj³ should be implemented under some constraints.
The scale of this problem depends on the number of facilities J, all kinds of loss
Y and the subject period W. In general, this problem is NP-complete in an actual
production system.
6.3. Identifying bene®t values and establishing a cost-reduction programme using

the E matrix
For a problem that is NP-complete, the optimal solution can be obtained using
the branch-and-boun d technique or the back-track technique when the scale of the
problem is small. On the other hand, it is di cult to apply these techniques when the
scale of the problem is large, such as with an actual production system. Therefore, a
heuristic method is proposed that is su cient to solve the problem of establishing a
cost-reduction programme in an actual production system. This is a method in which
improvement activities are prioritized based on investment e ciency de®ned by the
equation below, and a solution is searched based on this priority:
Figure 8. E matrix (matrix of estimated cost to improve loss and expected cost reduction).
X
W
fEw …yj³ † ¡ z…yj³ †g
wˆ1
Investment efficiency in activity xj³ ˆ :
X
Yj³
z…yj³ †
yj³ ˆ1
To clarify investment e ciency in each improvement activity, the use of an E

matrix (®gure 8) is proposed. This matrix places causal losses and locations of their
occurrence as the vertical axis and improvement techniques as the horizontal axis.
Each component of this matrix is entered the expected cumulative bene®t G…l; j; m†
and the estimated cost E …l; j; m† that are quanti®ed for each of the loss l, the process j
and the improvement technique m. By using this matrix, the precise priority for each
improvement activity can be obtained.
Here, a cost-reduction programme is established as shown below, based on prio-
rities for improvement activities clari®ed using the E matrix.
. For each period, activities already in progress are incorporated in the pro-
gramme preferentially.
. The other activities are selected according to priorities based on their invest-
ment e ciency. The selection is repeated if the total estimated cost for them is
within the limit Zw .
7. Example of an application
The manufacturing cost-deploymen t approach proposed here was applied to a
case study to evaluate its viability. Improvement activities for breakdown, set-up,
tool change, start up, short stoppage, speed down and defective losses in each facility
of the production system shown in ®gure 9 are considered in this case study. Table 3
shows the values of indicators to do with losses. The conventional approach in TPM
(which promotes various activities for maximizing the overall equipment e ective-
ness) and the manufacturin g cost-deployment approach were applied respectively to
this case study to compare the results.
Figure 10 shows the results of cost reduction achieved by the conventional and
manufacturing cost-deployment approaches. The horizontal and vertical axes in
®gure 10 show the activity periods and rate compared with the manufacturing cost
Figure 9. Production system of the case study.

Loss Parameter First value Loss Parameter First value
Breakdown ¶j (1/h) 1/25 ( j ˆ 1; . . . ; 5) Start-up ND 75

·j (1/h) 1/2 ( j ˆ 1; . . . ; 5) sj (min) 30 ( j ˆ 1; . . . ; 5)
qj (unit) 1 ( j ˆ 1; . . . ; 5) Short ±j 1/60 ( j ˆ 1; . . . ; 5)
Set-up NS 75 stoppage tj (min) 3 ( j ˆ 1; . . . ; 5)
¸j (min) 5 ( j ˆ 1; . . . ; 5) Speed ¬j ¡ ¬*j 2 ( j ˆ 1; . . . ; 5)
nj (unit) 100 ( j ˆ 1; . . . ; 5) down (S)
Tool change ½j (unit) 2000 ( j ˆ 1; . . . ; 5) Defective ®j 1/50 ( j ˆ 1; . . . 5)
j (min) 20 ( j ˆ 1; . . . ; 5)
Table 3. Parameters of facility losses of the case study.
Figure 10. Comparisons of the manufacturing cost among the approaches.
before promoting improvement activities. Figure 11 shows the results of cumulative

bene®t e ects obtained by these approaches. The horizontal and vertical axes indi-
cate the activity periods and the rate compared with the cumulative e ects achieved
by the conventional approach. From these results, it is clear that the cost-deploy-
ment approach can reduce manufacturing cost in a rational manner and achieve
great cumulative e ects throughout the whole period. This fact also shows that
Figure 11. Comparisons of the total economic e ect among the approaches.
the conventional approach has not necessarily led to an e cient cost reduction, and
by applying the manufacturing cost-deployment approach, a cost-reduction pro-
gramme that can ensure maximum bene®t with minimum cost for improvement
can be established.
8. Conclusion
Various activities in manufacturin g plants do not necessarily guarantee cost
reduction even if they have been implemented successfully, since each activity is
not necessarily promoted with ®nding a connection between its loss reduction and
possible cost reduction. Against this background, the manufacturing cost-deploy-
ment approach that can establish a cost-reduction programme scienti®cally and
systematically has been developed.
. A and B matrices that can be used to identify losses in a production system and
clarify cause-and-e ect relationships among them have been proposed.
. A concept and equations for converting losses into manufacturing cost have
been described, and the C matrix to give detailed analysis of the results has
been proposed.
. The D matrix to clarify improvement techniques for losses and the E matrix to
analyse investment e ciency in each activity has been proposed.
. A method to establish an improvement programme that will lead to an e cient
cost reduction has been described, and its viability has been veri®ed in the case
study.
The manufacturing cost-deployment approach makes it possible to clarify a
process leading to cost reduction by using these ®ve matrices. Therefore, it is possible
to establish a programme that can ensure maximum bene®t with minimum cost for
improvement activities. Thus, this approach is a very powerful tool in the promotion
of various activities to achieve business objectives.
Acknowledgements
The study was sponsored by research funds from the Ministry of Education and
Science of the Japanese Government.
References
Huang, P. Y ., 1991, World-class manufacturing in the 1990s. Integrating TQC, JIT, FA and
TPM with worker participation. Manufacturing Review, 4, 87±95.
Ishimatsu, Y ., 1987, Cost Management and Cost Improvement for Design and Manufacturing
Divisions (Tokyo: Nikkan Kogyo Shinbun).
Okazaki, K ., 1996, Study on manufacturing cost deployment. Master’s thesis, Department of
Precision Engineering, Graduate School of Engineering, Kyoto University, Japan.
Oshima, E. and Morooka, T., 1992, Introduction of Plant Engineering (Tokyo: Japanese
Standards Association).
Senju, S. and Fushimi, T ., 1982, Economics Engineering (Tokyo: Japan Management
Association).
Son, Y. K ., 1991, A cost estimation model of advanced manufacturing systems. International
Journal of Production Research, 28, 441±452.

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International Journal of Production Research

ISSN: 0020-7543 (Print) 1366-588X (Online) Journal homepage: http://www.tandfonline.com/loi/tprs20

Manufacturing cost deployment

H. Yamashina & T. Kubo

To cite this article: H. Yamashina & T. Kubo (2002) Manufacturing cost

To link to this article: http://dx.doi.org/10.1080/00207540210157178

Published online: 14 Nov 2010.

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Manufacturing cost deployment

H. YAMASHINAy* and T. KUBOz

Obviously, one of the major problems in manufacturing is to reduce cost. To do

Revision received January 2002.

2. Investigating various losses in a production system

Figure 1. Model of the production system.

2.2. Identifying production losses using A matrix

3. Clarifying cause-and-e ect relationships between losses

Figure 3. B matrix (matrix of causal losses and their resultant losses).

3.2. Clarifying cause-and-e ect relationships using B matrix

4. Converting losses into manufacturing cost

4.2. Analysing connections between losses and manufacturing cost

Figure 4. Factors of manufacturing cost.

4.3. Proposal of equations to convert losses to manufacturin g cost

5. Consideration of improvement techniques for losses

Causal loss Indicator Causal loss Indicator

Table 1. Indicators of causal losses for calculating cost.

Breakdown 1 DC CF C F »j =d Start-up 1 DC CF CF Np …sj =60†…hd †

f …CTj =½j †gqj ¶j h=d f …CTj =½j †gNp nj =d

f …Cpj =²j †gqj ¶j h=d f …Cpj =²j †gNp nj =d

… CVj †qj ¶j h=d … Cvj †Np nj =d

MC ¶j Cpja C pja ¶j h=d Short 1 DC CF CF ±b …tb =60†h

f …CTi =½i †gNS nj =d CE …¬b ¡ ¬* b †=3600

f …Cpi =²i †gNS nj =d

Tool 1 DC CF C F …­ j =60†=…h½j † DJC Cpj

change 1 DLC ½j ; ­ j CL pCL …­ j =60†=½j EC CVj f CVi †®j

loss 2 EC CE C E …­ j =60†=½j Management loss DLC f1 CL CL f1 h=d

DMC CM M …nj =½ j † Operating motion loss DLC f2 CL CL f2 h=d

TC ½j ; nj CTj Line organization loss DLC f4 CL CL f4 h=d

f …CTj =½i †gnj =½j

f …Cpj =²j †gnj =½j

… CVj †nj =½j CM …1 ¡ r†

C L …­ j =60†=½j CSj ¡ C*Sj CSj ¡ C*

Table 2. Calculation method for the impact of loss on cost.

Figure 6. C matrix (matrix of causal losses and cost factors).

Figure 7. D matrix (matrix of causal losses and their improvement techniques).

5.2. Improvement techniques for losses

maintenance is implemented to prevent the forced deterioration of each facility

In general, individual approaches are mainly adopted in improvement activities

6. Establishing a cost-reduction programme

6.2. Formulating the problem

Constraint: if !j³w¡1 ˆ 1 \ yj³ % Yj³

6.3. Identifying bene®t values and establishing a cost-reduction programme using

To clarify investment e ciency in each improvement activity, the use of an E

Figure 9. Production system of the case study.

Loss Parameter First value Loss Parameter First value

Breakdown ¶j (1/h) 1/25 ( j ˆ 1; . . . ; 5) Start-up ND 75

Table 3. Parameters of facility losses of the case study.

Figure 10. Comparisons of the manufacturing cost among the approaches.

before promoting improvement activities. Figure 11 shows the results of cumulative

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3. Clarifying cause-and-e ect relationships between losses

3.2. Clarifying cause-and-e ect relationships using B matrix

Tool 1 DC CF C F … j =60†=…h½j † DJC Cpj

change 1 DLC ½j ; j CL pCL … j =60†=½j EC CVj f CVi †®j

loss 2 EC CE C E … j =60†=½j Management loss DLC f1 CL CL f1 h=d

C L … j =60†=½j CSj ¡ CSj CSj ¡ C

To clarify investment e ciency in each improvement activity, the use of an E