Essential Cycle Time Analysis: Costs of Manufacturing Lost Time

When manufacturers try to reconcile their costs of idle and lost time in production, it can often be an extremely frustrating endeavour. The questions about whether to address the lost time, as well as the costs of the lost time, always seem to be up for discussion. What these companies lack is a clearly defined process to putting a dollar value figure on lost and idle time in manufacturing. The company must be able to clearly identify its productivity rate in a given workstation, and be able to immediately quantify the dollar value of any delays. These numbers are then out in the open and cannot possibly be refuted. Once the company has the ability to quantify these delays, they can then set clearly defined goals on how to reduce those costs and improve production throughput. So, what are the necessary steps to applying $$ to lost and idle time in manufacturing?

1. Assess Workstation Productivity Rate

 I've already written an entire post about how to calculate a company’s productivity rate in a given work cell. Here is the link: Do You Know How to Determine Your Manufacturing Productivity Rate?  The approach is rather simple. Determine actual work time, lost or idle time in a given work cell and then use a simple and straightforward calculation to determine the productivity rate. The essential aspect of the post is that even though a company pays an employee for 8 hours, they don’t work a full 8 hours. Take away lunch and break time and you’re often left with 6.5 hours. This is the amount of time available to work, but nobody is 100% efficient. Therefore, to determine the productivity rate, you must find out how much time they work from this 6.5 hours of production. Here’s a quick summary of the post if you want to avoid reading it.   

• 1 hour = 60 minutes, so 6 & ½ hours = 390 minutes
• Lost time during analysis: 135 minutes (this time is captured throughout the day)
• Available work time in minutes: 390 – 135 = 255 minutes
• Productivity rate% = 255 minutes divided by 390 minutes is 65% 

2.   Determine Individual Cycle Times:

While calculation above shows how to determine the productivity rate, it doesn’t show how to manage and lower cycle times. Its purpose is simply to document total lost time. However, it doesn’t necessarily involve calculating individual cycle times within the production cell. So, this is where the company will determine its cycle times and identify how lost time affects its cycle times.

Remember, nobody is capable of being 100% efficient. People need to go to the bathroom, take a breather, say hello to co-workers, get a drink etc. Once you’ve determined your productivity rate in a given work cell, and have properly documented lost time, be sure to summarize the time employees needed for those miscellaneous periods – the bathroom break, taking a breather etc. Be sure to come up with a realistic number for these periods.  

Let’s assume that from the 6 & ½ hours (390 minutes) of available work time, those miscellaneous breaks amounted to 45 minutes during the day. On average, you notice that about 45 minutes is the norm each day. Therefore, you’ll base your cycle time analysis on the assumption that from the 390 minutes, an employee can work for 345 minutes, if uninterrupted. 

3.   Analyzing Cycle Times 

A company doesn’t only analyze its cycle times once. It takes several cracks at it before a median cycle time can be established. Just like you have to determine that acceptable miscellaneous time, you must also determine the median cycle time. This might involve analyzing a given work station once, or doing it on multiple occasions. For the sake of simplicity, let’s assume once is enough. 

Cycle Count	Cycle Times
1	22.50
2	23.50
3	23.20
4	21.45
5	23.33
6	23.40
7	23.25
8	22.25
9	22.15
10	22.35
11	24.00
12	24.15
13	23.50
14	23.15
15	22.15
Average cycle time:	22.96

• From the above table, the median cycle time is 22.96 or 23 minutes
• The blue highlighted areas are where the cycle times were below the median.
• Why was the cycle time lower in these instances, or better yet, what caused the cycle times to be higher in the other instances?   

These are two questions that provide the same answer. You could concentrate on only the cycle times above the 23 median and document why they were longer, or concentrate on the ones below and specify why they were faster. Either way, you should be able to determine the root causes of the cycle times. Perhaps these times are nowhere near what you expect. Why is that? What can be done to lower the cycle times and increase production throughput? Is there maintenance that needs to be done? Was the operator unable to do his job because of a bad bill of materials or poor instructions?

  

4.   Assessing The $$ Cost of Lost Time in Manufacturing    

This is where the company needs to put a dollar value figure on lost time. To make this as simple and straightforward as possible, and to shorten this post (sorry if it’s long), let’s assume that the gross profit of the product is $23.00. You could base the costs of lost time on the employee’s salary, but we’ll give this example some more relevance. Therefore, for every ½ minute to 1 full minute of lost time costs the company $0.50 to $1.00 in gross profit. In the case of the cycle time that went to 24.15, the additional cost is $1.15 in gross profit. How often during the week does the company have instances where the cycle times are higher because of lost time?  

To summarize, it’s all about understanding the costs of lost time in manufacturing. Whether you apply the lost time in terms of employee salaries or gross profit lost, it’s still a cost to the company. These costs must be understood to reduce their impact and the company’s cost structure. North American & European manufacturers can compete if they control costs. If you want to read a post about how dangerous overseas suppliers can be, then read the following: overseas manufacturers don't always win.