In the last two decades, most manufacturers have been moving toward lean manufacturing processes like the just-in-time inventory system. These manufacturers depend on manufacturing efficiency and strive reduce the amount of time it takes to produce a product. Lean manufacturers use throughput time as a manufacturing metric to gauge their efficiency.
Throughput time or cycle time is the amount of time it takes for a manufacturer to make a product. The throughput time of a product is calculated by adding the four steps of the manufacturing process: process time, inspection time, move time, and wait time.
Process time is the amount of time it takes the company to actually produce the product. After the product is produced, it must be inspected. Since most companies don't ship products immediately after they are inspected, the product then has to be moved to a storage facility until it is ready to ship. After the product is ready for sale, it can be moved out of storage and shipped to the customer.
Notice the process in the throughput time calculation that is considered value-added time is the process time. This is the only step that actually produces a product. The rest of the time is administrative and logistical non-value-added time. Lean manufacturers use the throughput calculation to reduce the non-value-added time as much as possible because increased costs from non-value-added time reduce profit margins on otherwise profitable products. Reducing non-value-added time is most often called cycle efficiency.
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