Cycle time is the elapsed time to complete an operation—for example, the elapsed time to assemble parts into a subassembly, like a gear box. Cycle time has two parts: value-add time, where an active operation is in process; and non-value-add time (waste), where no active operation is being performed—for example, wait time or delivery. The average non-value-add lead time in a typical manufacturing company is over 70 percent wasted time!
The essence of cycle time reduction is the entire end-to-end process, even if that spans different organizations, including customers and suppliers. Significant opportunities have been realized in both the buyers’ and suppliers’ organizations, though—a jointly coordinated approach to cycle time reductions.
Improvements in cycle time are not limited to the manufacturing and service enterprises, but they also include the administrative, systems, processes, and change management factors.
Reducing cycle time is one of the most significant impacts on the costs of assets, quality, and responsiveness. The results of reducing cycle time are:
- Lower asset costs, especially inventories and capacity.
- Lower process and administrative costs, especially personnel and systems processing.
- Increased quality, operational, and organizational productivity.
- Improved responsiveness and flexibility.
The basic lessons learned from just-in-time (JIT) and quality control initiatives are that a reduction in process cycle time exposes problems, improves resource management, and reduces overall costs. No other management function has the power of the supply management team to reduce cycle times. Supply management should initiate measurable programs in process time reductions, material delivery times, and acquisition cycle timeframes. If you can only accomplish one effort, forget technology; just reduce process cycle time. Innovative techniques for managing time have evolved as a powerful source of competitive advantage.
Companies that focus on reducing time-consuming functions in every aspect of their business often outperform their competitors. For example, one major purchasing organization examined 2,000 requisitions they had processed and discovered 97 percent went to the supplier requested by the requisitioner, for the exact part identified by the requisitioner, priced at +/- 5 percent of the estimated price. What did the purchasing organization add? They added two weeks of non-value processing time and over $160 of unnecessary administrative cost per requisition.
Optimizing cycle time is often a joint initiative of both the buyer and seller. For every one-directional movement of materials, there are over eight round-trips of information, often manual paper processing. Streamlining those communications between buyers and sellers is an effective approach to reducing cycle time.
Here is a suggested analysis for your summer intern.
Your controller has “standard times” for each operation, including many administrative functions. They are measured in seconds, hours, and days. Upon examination, you may discover the actual times to complete those operations take hours, days, and weeks. Suggest you develop a Fishbone analysis (see Fishbone example) of why those actual time variances against standard time variances occur. Then, complete a Pareto chart (see Pareto chart example) to chart the most frequent causes that negatively impacted cycle time. Focus on the top-five root causes for each variance. What are the initiatives you would recommend to solve/correct the root causes of these variances?
You may discover ample opportunities to reduce non-value add (waste) and significantly reduce cycle time to complete operations.