Process Cycle Efficiency is also known as the “Value Added Ratio”, which measures the process’s value-added time. The process will be more efficient if the number is higher.

Material spends 95 percent of its time waiting. This is because of time delays injected by less than 20% of the workstations, known as “time traps”. Value stream mapping can help us identify and remove time traps. Cycle Efficiency measures the value-added time. Lean processes are those where the value-added time is greater than 25% of the total lead times.

Calculating the efficiency of the process cycle

The first step in calculating the process cycle efficiency is to identify the areas that are not contributing to the product’s value. A value stream map is a tool that identifies the activities of a process that consume time, space, and resources. These activities can be placed in one of the following categories:

  1. Value-added activities These are activities that add value to the product. They add value, which means they offer something customers are willing to pay more for. The value should always be viewed from the perspective of the customer. If the customer isn’t willing to pay for an activity it is not value-adding.
  2. Essential but not valuable – These activities are essential for the production of the product but don’t add value that a customer would be willing to pay. I remember having lunch at a cafeteria at a tech company. Lunch is free and the menu features baked salmon and lobster tails. Although a customer might not want to pay for lobster tails for employees every Wednesday, you consider it necessary to keep your talented employees hired. These activities are considered necessary even though they may not be of any value to your company.
  3. Activities that do not add value These activities are waste.

Calculating Process Efficiency – Assigning Time

Next, determine how much time each activity takes on the Value Stream Map. This should equal the cycle length, which is the time it takes to process an order and deliver the product to the customer. The common method of calculating the cycle time is to divide the total paid man-hours per month by the number of finished products produced in that month. This calculates the time it takes to make one item. This time is then split among the activities in the value stream map.