Definition: Non-value added time is amount of the production cycle time that does not directly produce goods or services. In other words, this is the amount of time that goods are not actively being worked on.
What Does Non-Value Added Time Mean?
The non-value added time equation calculates the total time by adding move time, inspection time, and wait time. These are the three main times in the production cycle where goods are not being actively worked on.
Move time is the amount of time it takes one department to move goods in process to the next department or to another production area. Larger companies like Ford often have separate plants for production processes, so move time could include shipping work in process inventory across the street to the next factory.
Inspection time is exactly what it sounds like. Companies usually have setup an entire department for quality assurance. This is where employees do nothing but check the products for defects. No real production is done in this department.
Wait time is the amount of time a piece of inventory is sitting idle before it can go to the next stage of production. Assembly lines back up and machines break down. Sometimes inventory has to sit idle before it can be placed in the production process.
As you can see, all of these times don’t help turn raw materials into finished goods. There is no production value added during these processes. Managers monitor the non-value added time in the production cycle and try to minimize it as much as possible. This is known as improving the cycle efficiency. In other words, managers can increase production by reducing dead time in the production process.