How to Calculate Manufacturing Efficiency
Manufacturing efficiency is concerned with the costs of manufacturing and is at its highest when the most product is produced at the lowest cost. Efficient use of resources is essential for the success of a company, so that it has more free resources to use for product development and to invest in new technologies.
- Calculate total production time. Total production time considers the time from the beginning of the manufacturing process until the product is delivered to the consumer. This includes the actual manufacturing of the product, inspection, packaging and shipping.
- Determine the value-added time of production. Value-added time is the time the product is physically being manufactured, and doesn't consider any other steps in the process. In a factory where many small parts are produced, it is easiest to calculate this by measuring the run time of a production cycle and dividing it by the number of parts produced in that cycle.
- Use total manufacturing time and value-added time to calculate manufacturing efficiency. Divide the total manufacturing time by value-added time to find the manufacturing efficiency of a product. This number must be periodically re-calculated to ensure the manufacturing process is running as efficiently as possible, meaning that the least amount of resources, specifically time, is wasted in the production process.
- Convert to a percentage. Efficiency of a product is commonly converted to a percentage to make it comparable to the efficiency of other products made by a company. The higher the percentage is, the higher efficiency is. If the percentage is low, changes may be needed to make the production process more efficient so the company can save money.