Process Cycle Efficiency and Little’s Law

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The best measure of overall process health is Process Cycle Efficiency or short PCE, the percentage of value added time. 

NOTE: Value added time is work that customer wants to pay and is desired by customer. 

PCE = Value-add Time / Process Lead Time

You can either measure process lead time directly by measuring time it takes “things in the process” to transit through the process or you can use Little’s Law to figure out average. 

Little’s Law can be used to calculate average Process lead time with the following equation:

Process Lead Time = Number of things in process / Average Completion Rate

This way  you will get lead time in relations to things in process (TIP) and the completion rate of the process. 

  • PCE indicates how efficiently the process is converting work  in process into completions
  • Any process with low PCE will have huge non value added cost and this is where you should focus your efforts for cost reductions. 
  • Only way to improve PCE is to remove non value added work from the process. 
  • To improve Process Lead Time, either increase capacity and/or reduce TIP

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