Manufacturing cycle efficiency measures the proportion of production time spent on value-added activities. A business can use this information to pare away non value-added activities, thereby reducing costs and shortening the time required to manufacture a product. Both outcomes can be used as competitive advantages, since a business can then lower its prices while maintaining robust profits, while also offering faster turnaround times to its customers.
To calculate the measurement, divide value-added production time by total cycle time. Total cycle time is the aggregate amount of all process time, inspection time, queue time, and move time. A typical outcome of this analysis is to find that process (value-added) time comprises an inordinately small part of the total cycle time. All remaining parts of total cycle time are non value-added, and so should be examined to see if they can be compressed or eliminated.
For example, an analyst finds that a particular production process requires 8 hours of processing (value-added) time, as well as 1 hour of inspection time, 1 hour of move time, and 14 hours of queue time. The resulting manufacturing cycle efficiency calculation is:
8 Hours value-added time
24 Hours total cycle time
= 33% Manufacturing cycle efficiency