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Process Cycle Efficiency

Process cycle efficiency is a metric used in Lean Six Sigma that compares the time spent on value-added activities to the total time spent on a process. It is calculated by dividing the value-added time by the total lead time. This provides a percentage that indicates how much of the process adds value for the customer. A higher percentage suggests greater efficiency while a lower percentage means more non-value added activities that could be improved. Calculating process cycle efficiency helps identify inefficiencies and waste in processes.

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172 views3 pages

Process Cycle Efficiency

Process cycle efficiency is a metric used in Lean Six Sigma that compares the time spent on value-added activities to the total time spent on a process. It is calculated by dividing the value-added time by the total lead time. This provides a percentage that indicates how much of the process adds value for the customer. A higher percentage suggests greater efficiency while a lower percentage means more non-value added activities that could be improved. Calculating process cycle efficiency helps identify inefficiencies and waste in processes.

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Process cycle efficiency

Process cycle efficiency is a metric Lean Six Sigma methodology uses that compares the
time spent on a value-added activity with the total time spent on the process. It measures the
process efficiency and helps identify any waste involved.
Process cycle efficiency is a percentage that represents the ratio of time spent on different
categories of activities. A higher percentage shows a greater level of efficiency in your
processes. A lower ratio suggests that some spend too much time on activities that don't add
value to the product. Therefore, this metric can help organizations identify inefficiencies in their
processes that could create slowdowns
Process cycle efficiency = value-added time/lead time

Process Lead Time


PLT=WIP/ER

In other words, the Process Lead Time, PLT is equal to the WIP, or work in process
(average number of items in the queue or line) divided by the ER, or exit rate (average number of
items that exit the process per a specified unit of time).

Unfortunately, the work being done on the item will be made up of customer value-added (CVA)
tasks as well as non-value-added (NVA) tasks. We can define a CVA task as one that:
1. Changes the fit, form, or function of the item
2. The customer feels it is important and is willing to pay you for it
3. Is done right the first time with no rework
A non-value-added task is one that:
1. If the customer knew you were doing this, would they request that you eliminate the
activity so you could lower your prices?
2. Is not a customer value-added activity
3. You should try to eliminate or reduce

Steps to calculate the process cycle efficiency


1. Determine the lead time
The lead time includes both value-added activities and non-value-added activities. To
determine your lead time, identify all the steps involved in fulfilling an order, from procurement
to shipment. For example, if procurement takes seven days, all the steps in manufacturing
including movement, waiting, and delays take 21 days and shipment of the finished goods takes
five days, your lead time would be 33 days.

LEAD TIME ( 33 days )


M/F , movement, shipment of the
Procurement take finished goods
waiting, and delays
7 DAYS
take 21 days 5 Days

2. Determine the value-added time


The value-added time refers to the total time spent only on activities that add value to the
product. This makes up only a portion of the total lead time. To determine your value-added
time, identify all the waste activities in your process and subtract the total number of days from
the lead time.
In the above example, imagine that the time spent on movement, waiting, and delays
comprised 14 days. Add that to the seven days of procurement and five of shipment for 26 days
of waste time. The remaining eight days are the value-added time.

Lead time ( 33 days)


Non Value added time ( 26 days)
Balance time Value-added time
(Waiting, and delays( 14 days)+ ( 8 days)
Procurement take (7 days) +
shipment ( 5 days) )

3. Divide the value-added time by the lead time


The last step is determining how much of the process makes up value-added and non-
value-added activities. You can do this by dividing the value-added time by the lead time. The
formula for this would be:
To conclude the above example, you'd perform the following operation using the formula:
8 / 33 = 0.24
Converted to a percentage, the process cycle efficiency ratio would be 24%. This means that
24% of the entire process comprises value-added activities.

Another example of Process Cycle Efficiency


WKT,

In this example, this process PCE is equal to 13.5%. This means of the total time that a unit is in
the process, only 13.5% of that time is spent on things that the customer feels is important and is
willing to pay for. The rest of the time is spent doing things that are not important to the
customer, and they are not willing to pay for it.
To give you an idea as to what PCE benchmarks might be considered good or not good, let’s
look at a chart that was put together by the George Group based on calculations derived from
100 of their clients.
Since the process in our example would be classified as a fabrication application, the 13.5% PCE
would put this process toward the low end of Process Cycle Efficiency.

3 Benefits of Process Cycle Efficiency (PCE)


It’s important to have a baseline understanding of how your process is performing before you
can even attempt any efforts to try and improve it. 
1. Simple calculations
The calculations for PCE are simple and easy to do. It’s just one number divided by another. 
2. Quantifiable value for waste 
If the percent PCE is the proportion of CVA in the process, then (1-PCE) is a measure of waste
and non-value added. 
3. You can back into the required PLT 

Why is Process Cycle Efficiency (PCE) important to understand? 


The more you understand your process and can quantify its performance, the more you will
understand what needs to be done to deliver the product or service faster to your customer.
1. Understanding PCE lets you understand your process PLT, WIP, ER, NVA, and CVA
The relationship between these variables allows for mathematical gymnastics to understand most
of your process performance metrics.
2. Appreciation of the existence of waste 
Knowing how much waste exists in your process will help lead you to the various sources so
they can be eliminated or mitigated. 
3. Improve customer satisfaction 
Most customers want their product or service done as quickly as possible. By increasing the
PCE, your PLT may go down, and you will be able to deliver your product or service quicker to
your customer.

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