Manufacturing Cycle Time

Manufacturing cycle time refers to the time required or spent to convert raw materials into finished goods. It is also known as throughput time.

Technically, manufacturing cycle time or throughput time is the length of time from the start of production to the delivery of the final products. It is composed of process time, move time, inspection time, and queue time.

Process time refers to the time used to actually work on the product. Move time refers to the time required to transfer the product from one workstation to another. Inspection time is the time spent to check if the product is free from any defect. Queue time is the idle time the product spends waiting to be moved, processed, inspected, and shipped.

Manufacturing Cycle Time Formula

Manufacturing cycle time = Process time + Move time + Inspection time + Queue time

It can also be computed using the delivery cycle time. The delivery cycle time includes all of the items above plus wait time. Wait time refers to the length of time from the receipt of customer order to the start of production.

Manufacturing cycle time = Delivery cycle time - Wait time

Example

XYZ Company recorded the length of time spent in various activities in its operations. The following information has been drawn from its records.

Wait time
2 days
Process time
10 days
Inspection time
2 days
Queue time
3 days
Move time
1 day

The manufacturing cycle time is 16 days. It means that at an average, the length of time from the start of production to the shipment or delivery of the product is 16 days.

Manufacturing cycle time = Process + Move + Inspection + Queue
  = 10 + 1 + 2 + 3 days
Manufacturing cycle time = 16 days

The delivery cycle time includes the wait time. In the above example, the delivery cycle time is 18 days. At an average, the company spends 18 days from the receipt of customer order to the delivery of the product.

The manufacturing cycle time and delivery cycle time is vital in making managerial decisions. The faster the production and delivery, the better the position of the company is. However, the quality of the products should not diminish. Companies achieve this by reducing or eliminating non-value adding activities and re-engineering its processes for improved efficiency.

Online resource for all things accounting. more
Search this Site
Featured in the Blog
Feedback
Questions, comments and suggestions?
Contact us here.
Copyright © 2016 Accountingverse.com - Your Online Resource For All Things Accounting
Terms of Use | Home | About | Contact