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Economic Assessment of Production Downtime – UA02-05

Sponsor:

Tyson Foods Inc.

Research Team:

Scott J. Mason, James Hazman, Heather L. Nachtmann

Universities Involved:

University of Arkansas

Start Date:

08/16/01

End Date:

08/31/02

Summary:

This research focuses on the total optimization of the logistics value chain. The objective of the project was to develop a methodology for determining the “true” cost of production downtime caused by incoming raw material quality, quantity, and delivery timing issues.
Large companies frequently operate a complex supply chain including many suppliers, production plants, customers, and products. These companies depend on on-time delivery and adequate quality of raw materials. The cost of late or poor quality raw goods can be great and have a major economic impact on the efficiency of the supply chain. In this project, the University of Arkansas will partner with Tyson Food Inc. to investigate the “real” cost associated with not receiving raw materials at the scheduled delivery date and/or time.
The direct project benefits for Tyson were:
* Exposure to the “hidden” costs associated with production downtime caused by incoming raw material issues
* Ability to determine accurate costs associated with production downtime
* Problem visibility for pertinent Tyson personnel
* Motivation for Tyson suppliers to improve raw material quality and delivery