A key metric used by Lean practitioners is Process Cycle Efficiency (PCE). You may also hear it called Value Added Ratio.
When used in conjunction with a Value Stream Map, PCE is calculated as follows: Value Add Time / Production Lead Time. To see a definition of Production Lead Time please check this previous post out. The Value Add Time may be the “cycle time” of the processes you mapped.
Here is the sneaky thing about PCE. Many consultants will tell you what a “world class” PCE is. The problem is it all depends on which consultant you talk to. I won’t single any of them out but there is a popular book that states that good PCE’s are between 10% and 20% while others will tell you that world class PCE is 5% and above.
I have found through personal experience (not books) that for discrete manufacturing processes a PCE over 5% is outstanding. However, for front office VSM’s the PCE may be much higher. I once mapped a front office process (current state) that had a PCE of more than 12%. I have also mapped some manufacturing processes where my PCE was less than 1%!
Another interesting thing occurs when a team actually takes some waste out of the “value add” cycle times in addition to removing some of the “non value add” inventory or queue times. If the numerator (cycle time) was reduced more than the denominator (PLT) PCE will get worse! Dear me.
Why, you may ask, would anyone bother taking time out of a value add process? Well let’s say the team needs to take some time out of a machining process since it is over Takt Time. If they manage to remove some wasted motion from the way the machine cuts the parts and successfully reduce the cycle time their PCE may suffer until they eliminate more non-value added waste like inventory and queues.
Until next time, I wish you all the best on your journey towards continuous improvement.