Efficiency is the name of the game when creating products that are to be delivered to customers. Overall, having an efficient process helps lower manufacturing costs, saves time, and results in a satisfied customer. These goals are reasonable and easily attainable if businesses use the right tools to determine what adds value and what does not add value to their products. The answer lies within calculating the Process Cycle Efficiency, or PCE.
What is Process Cycle Efficiency?
Process Cycle Efficiency, commonly used by those following Lean or Six Sigma principles, can also be referred to as Value Added Ratio. By employing PCE, the user is able to measure the time it takes to complete a multiple step process and then turn those results into a percentage that represents the facility’s level of efficiency. This efficiency measurement system is directly linked to all value-added activities, non-value-added activities, and the time it takes to complete each one.
Overall, PCE works well in production-based environments because the measurement system helps with finding inefficiencies in a wide range of industrial settings. Speaking of inefficiencies, these hide within processing activities as the following elements, also known as DOWNTIME:
- Defects
- Over-Production
- Waiting
- Non-Utilized Talent
- Transportation
- Inventory
- Motion
- Excess Processing
PCE can work to find the elements of the eight wastes of Lean mentioned above, which then prompts the user to come up with solutions that will work to eliminate them. This results in a further improvement of workplace efficiency. A perfect process where everything is a value-added activity would have a process cycle efficiency of 100%. This is quite rare to achieve in any type of production environment but getting as close to that level of perfection is always the goal.
How is Process Efficiency Calculated in Lean?
Calculating the Process Cycle Efficiency always begins with mapping out the process. Those that have been tasked with this job do this by first creating a value stream map. With a value stream map’s deep analysis of waste identification, the user is able to pinpoint what is needed and what can be removed within a manufacturing or distribution process.
Once the map has been drawn out, the user can then identify all value-added steps, non-value but necessary steps, and all non-value steps in the process. Next, those can be arranged on the sheet of paper or in software where they are clearly distinguished on either side of the value stream map.
The last step in this organization process is adding the times it takes to complete each step within the process, both value-adding and non-value-adding. Once these numbers have been gathered, add them together to create the total lead time and use the following formula to calculate the PCE percentage:
PCE = Value-Added Time/Total Lead Time
Now, the goal as mentioned before, is always 100%. But that is not often attainable, aim for at least 25% and go on with improvements from there.
Measuring Value-Added Time
When determining the Process Cycle Efficiency within a manufacturing process, it is important to be able to accurately determine what is value-added time and what is not. A simple explanation of value-added attributes is anything that customers are willing to pay more for.
Depending on the product in question, this can be more difficult to evaluate than it seems. A classic example is painting a product. On the surface, offering products in multiple colors seems like a good feature, and in many cases it is. However, if the actual customers don't care enough about color to pay for the costs of the painting process, it is not value-added time. The following are examples of value-added time:
- Automobiles – Customers demand color options in vehicles. As a process that is considered to be value-adding, manufacturing companies can factor all the expenses associated with the painting process into the price of the car. Based on the fact that this is a customer requirement for vehicles, it can be assumed that the customers will pay for these options.
- New Smart Phone Technology – This type of value-added time is especially prevalent nowadays with the emergence of new smart phone capabilities. These “updates” as many smart phone companies like Apple and Samsung label them as, come out with new cameras, screen displays, and security features. Customers snatch these new gadgets off the shelves because they meet criteria that they themselves value and in return will pay premiums for those options. Hence, all those new updates are considered to be value-adding.
- Kitchen Appliances – New attachments, new capabilities, and anything that makes cooking less time consuming! And, as many have come to know, something else to clog up counter space. All clutter related jokes aside, kitchen appliances are one of those consumer items that can be looked at on the same lines of production. But here it’s for efficiency in individual food consumption at home rather than efficient mass production for the consumers wanting that new device. Again, these meet criteria for customer wants and needs which makes them value-adding.
When maximizing the time spent adding value to product production, the producers must always keep the customers’ priorities in mind. Otherwise, the industry making those products will end up over producing on something that isn’t wanted by the public. Not only will the company lose precious time, but it will also not be able to earn back the money spent for producing that product.
Non-Value-Added Activities
Now to define non-value-added activities. There are two kinds. One is necessary and cannot be eliminated. Just because customers won't pay for something doesn’t mean it’s optional. For example, the time spent cleaning the paint machines in an auto manufacturing plant is not value-adding, but it is necessary. If it isn't done, the machines won't last as long, and the paint jobs won't be as clean. However, customers aren’t directly paying for that process, so it is not value-adding. There are also instances where government regulations require a procedure to be done such as testing or maintenance. This does not add value to a product, but it’s necessary to produce future products that have value.
The other non-value adding occurrence is linked to purely wasting resources, requiring its removal entirely. If a company is taking too much time to go from one stage to the next in a production process, or is performing a task that is unneeded, that action is considered to be non-value adding. Once these are found within the PCE calculation process, immediate solutions should be considered to get production moving more efficiently.
Calculating Process Cycle Time
Calculating the process cycle time is probably one of the most complicated steps in the whole PCE process. Cycle time is defined as the time it takes for one product to be finished from start to end. For example, imagine a manufacturing facility that takes 40 hours, the duration of one work week, to complete 200 products. That’s one product every twelve minutes, this is referred to as the throughput rate. The formula goes as follows:
Throughput rate = Units/Time
The above formula is for the overall time it takes to finish a product. In the context of PCE, each individual step in a process can usually be timed with a stopwatch and some observation. Overall, calculating the process cycle time is a crucial part of PCE because it helps determine how long each step in the process takes. If that time is too long, the company runs the risk of losing customers due to the fact that the company isn’t getting them what they need in a reasonable amount of time. Lean manufacturing techniques help with this problem only once it is known, which is why using PCE is so helpful.
The Benefits of Identifying Process Cycle Efficiency
Identifying the PCE can help companies make decisions in many ways. First, when working on process improvement, those involved can focus their efforts either on adding to the value-added time or reducing lead time. However, with the addition of value-added time, it must be with the intention of expanding value, not simply adding to the total time.
By improving the process cycle efficiency of any product, the profitability will go up and waste will go down. This can be applied to small process improvements or large changes to the way work is done. In the end the results will help ensure a product becomes as profitable as possible.
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