Question

A process has inventory breakdown as follows (RM = 200 pieces, WIP = 80 pieces, FG = 400 pieces) with an average customer demand per day of 80 FG pieces (1 Piece of RM inventory is required to make 1 piece of WIP and 1 piece of WIP piece is required to make 1 piece of FG). The total Value-Added Time for the process is 970 seconds. Calculate the Process Cycle Efficiency (PCE).

The above question contains 20 Marks. As per University guidelines, the answer should be a min of 500 words. So please I am requesting you please prepare as per guidelines.

Answer 1

The Process Cycle Efficiency, is also known as “Value Added Ratio,” It is a measurement of the amount of value-added time in a process. Here higher the number, then process will be more efficient.

In Manufacturing industry material flow go on from Warehouse (Store)- production line - Assembly line- Finished Good- Ready for dispatch. Here material flow many of time it spends 95% time in waiting. This is because time delay injected by fewer than 20% of workstations known as "Time traps". We can easily identify Time traps by value stream mapping & eliminate these. The proportion of value- added time is measured by Cycle Efficiency.

Calculation of Cycle Efficiency we have to identify those areas that do not contribute to the value of the product. This can be done by Value stream Map. Here we identify activity in process that accumulate resources, time, space.

1) Value -Added Activities- THose activities add values in product. Mean that add something in product to customer willing to pay for that.

2) Necessary - Those activity necessary to make product but not adding value in it. Consider our example material pick from warehouse & deliever to production line. Here this activity will not added value in product but it's necessary activity. Because w/o material availability at production line resource will not work on it to make product. Hence it's known as not adding value activity but its necessary for the same.

3) Non-Value Added Activities - These activities do not add anything of value to the final product. These activities are waste.

Calculation of Process Cycle Efficiency Formula-

* Process Cycle Efficiency = Value-Added Time / Cycle Time

Among that formula indicates PCE depeds on Avalue added time & cycle time. If cycle time less the PCE will be higher. If Cycle time more then PCE will be lower. Generally PCE ratio considers as 5-10% So there is required more improvement. There is lot of opportunities to increase PCE.

in Our example given Data

RM = 20 pcs; WIP= 80pcs; FG= 400pcs

Average Customer demand = 80 pcs/day ; 1FG = 1 WIP = 1 RM

Total Value added time = 970 seconds = 16.16 Minutes

PCE = Value added time / Cycle Time

Considering Customer demand 80 pcs per day. Hence we have to produce daily 80 parts considering 8 hours shift.

Here we haven't any data related to process time. Hence we consider 8 hours shift produce 80 parts.

So for making 1 part we need 6 minutes = 360 seconds which is Cycle time for us.

PCE = 970/360 = 2.69

Here PCE we always calculated in % hence our PCE is 26.9% which is good.

Conclusion- Here we conclude as PCE depends on Value added activities & Cycle time require to complete the process. If PCE low then we have to think about to minimise the cycle time.