David Dodd
Well-known member
The ultimate objective of lean is the avoidance or elimination of waste in all business operations. Lean defines waste as any activity or condition that consumes resources but creates no value for customers. If you're using a traditional print job costing system, you're probably not measuring the time and dollars spent on most non-value-adding activities. So, it can be difficult to get an accurate picture of how much waste actually exists in your business. These non-value-adding activities and conditions are often referred to collectively as the "hidden factory," and the size of the hidden factory can be substantial.
Here's a simple (and fairly painless) way to get a rough idea of how much waste you're dealing with. Select a recent month with average job volume. Identify all of the jobs that were completed during the month. If you produce a large number of jobs each month, you may want to work with a random sample of jobs. Run job cost reports on the selected jobs and calculate the total processing time that each job required. For the strictest view, do not include the processing time that was used for makereadies and oher machine set-ups.
Now calculate the total time that each job spent in your company (from order receipt to shipment or delivery). This is called throughput time. Add up the processing times and throughput times for all of the selected jobs. Then divide the total processing time by the total throughput time. The resulting percentage is called manufacturing cycle effectiveness (MCE), and you may be surprised by how low the percentage is. It's common for MCE's to be far below 50%, and it's not that unusual to see MCE's in single digits.
The basic idea behind the MCE ratio is that all time other than processing time is waste or non-value-adding time. This time is wasted because the physical product is not being changed or otherwise enhanced to add form, function or value for the customer. And the delivery of the product to the customer is delayed, with no value added during the delay.
The MCE ratio doesn't put a dollar value on waste, and it won't tell you what's causing the waste to be there. But it will give you a feel for how much waste exists in your company and how much room for improvement you have. It's a first step toward making the hidden factory visible.
Here's a simple (and fairly painless) way to get a rough idea of how much waste you're dealing with. Select a recent month with average job volume. Identify all of the jobs that were completed during the month. If you produce a large number of jobs each month, you may want to work with a random sample of jobs. Run job cost reports on the selected jobs and calculate the total processing time that each job required. For the strictest view, do not include the processing time that was used for makereadies and oher machine set-ups.
Now calculate the total time that each job spent in your company (from order receipt to shipment or delivery). This is called throughput time. Add up the processing times and throughput times for all of the selected jobs. Then divide the total processing time by the total throughput time. The resulting percentage is called manufacturing cycle effectiveness (MCE), and you may be surprised by how low the percentage is. It's common for MCE's to be far below 50%, and it's not that unusual to see MCE's in single digits.
The basic idea behind the MCE ratio is that all time other than processing time is waste or non-value-adding time. This time is wasted because the physical product is not being changed or otherwise enhanced to add form, function or value for the customer. And the delivery of the product to the customer is delayed, with no value added during the delay.
The MCE ratio doesn't put a dollar value on waste, and it won't tell you what's causing the waste to be there. But it will give you a feel for how much waste exists in your company and how much room for improvement you have. It's a first step toward making the hidden factory visible.
