Page 37 - MetalForming March 2014

To answer that question, we first must gather information about “value- added time”—the time required to fin- ish the product, and “total lead time”— the elapsed time between order and payment.
Process cycle efficiency = Value-Added Time Total Lead Time
To be considered worldclass, the generally accepted ratio of value-added time to total lead time is at least 25 percent. With this calculation, we can determine process cycle efficiency and gauge performance measures such as cost reduction, process velocity and improved cash flow.
As an example, consider a experi- ence at Company X, which:
• Manufactures all of the parts need- ed for assembly one week ahead of use; • Fabricates approximately 100 parts
per assembly;
• Requires an average cycle time to
manufacture each part of 1 min.-45 sec.; and
• Requires 15 min. to assemble the parts, start to finish.
This example gives us the follow- ing result:
Value-Added Time for Operations = 100 parts x 1 min.-45 sec. = 2.9 hr.
Value-Added Time for Assembly = 1 assem- bly x 15 min. = 0.25 hr.
Total Value-Added Time = 3.15 hr.
Total Lead Time = 7 days x 24 hr. = 168 hr. Process Cycle = 3.15 = 1.9 percent
Efficiency 168
In this example, it takes 168 hr. to stick 3.15 hr. of value into the prod- uct. That means the material sits idle for 165 hr., adding nothing but cost to the seller and consumer. Someone must absorb the cost accumulated by the 165 hr. of nonproductive time. If a company can increase process cycle efficiency from 5 percent to 25 per- cent, it will reduce manufacturing over- head and cost of quality by 20 per- cent—that’s huge.
A Kanban Story
The key to lowering the overall cost of manufacturing is to let market demand pull production through the factory,
just in time. This proven approach frees up capital for a fabricator to use more productively, rather than having it tied up in unnecessary WIP and raw mate- rial. The case history that follows will detail how one company achieved dra- matic increases in productivity and cash flow by installing a kanban system to organize production throughout the shop.
Kanban is a simple, efficient and
highly visible way to authorize move- ment and production of purchased and manufactured material through a man- ufacturing process—without the use of hard-copy purchase orders and shop orders. Literally translated, kanban means card or signal. A lean, just-in-time shop uses the kanban card as a visual cue to authorize each step in the man- ufacturing process, by sending a signal to the upstream operation indicating
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