a b c d e f g h i j k l m n o p q r s t u v w x y z

Value Added Time

Most manufacturers try to eliminate all unnecessary production costs and wasted time. This makes their production lines leaner and also makes customers happier. Companies can provide better products at a cheaper price if they run production operations smoothly and efficiently. One way managers measure the efficiency of the production line is by looking at the cycle time.

Cycle time measures the amount of time it takes to produce a product. Cycle time includes process time, inspection time, move time, and wait time. All of these processes are part of producing one product. Inspection time, move time, and wait time are considered to be non-value adding time processes. Inspecting a computer for flaws or moving it to the loading dock does not improve the computer. In other words, these processes don't add value to the product.

Value added time is made up of processes that improve products. The only value added time process in the cycle time example is the process time. This is the amount of time it takes to actually produce the product. Obviously, production time is a value added time because it creates a product from raw materials. The product is improved at the end of the process time.

Most of the time when a process is considered a value added time process it is only considered from the customer's point of view. What I mean by that is customers don't care if the company has to spend time packaging products or spend money storing them. Neither of these processes makes the product any better in the customer's eyes.

Search for more articles about Value Added Time:

Back to Accounting Terms