Overview
This lecture explains throughput time in manufacturing, its components, related formulas, and its critical role in production planning, efficiency, and business decision-making.
What is Throughput Time?
- Throughput time is the total time required to make a product from raw material to finished goods ready to ship.
- It is a key performance indicator (KPI) in manufacturing for measuring production efficiency and delivery capability.
Components of Throughput Time
- Processing Time: Time spent transforming raw materials into finished goods using machines or manual labor.
- Inspection Time: Time spent checking quality at various stages, including automated and manual inspections.
- Move Time: Time spent moving materials between workstations or production areas.
- Queue Time: Time materials or products wait before processing, inspection, or moving (also called wait time).
- Throughput time is the sum of processing, inspection, move, and queue times.
Importance and Uses
- Accurate throughput time measurement helps in improving production processes and efficiency.
- It is crucial for supply chain planning, forecasting, capacity planning, and scheduling.
- Reducing move, inspection, and queue times can lower costs and boost efficiency through methodologies like Lean Manufacturing and Six Sigma.
- Helps identify when new equipment or additional resources are needed and informs investment decisions.
Related Formulas and Calculations
- Throughput = Revenue – Total Variable Expenses
- Net Profit = Throughput – Operating Expenses
- Value of Investment = Net Profit / Investment
- Inventory (I) = Rate (R) × Time (T), so Rate can be calculated as R = I / T
Benefits of Understanding Throughput Time
- Enables better demand meeting, supply chain management, and inventory planning.
- Supports accurate product costing, pricing, and ROI calculations.
- Encourages workflow improvements using continuous improvement and digital tools.
Key Terms & Definitions
- Throughput Time — Total time from raw materials to finished goods.
- Processing Time — Time materials are being worked on.
- Inspection Time — Time spent checking quality.
- Move Time — Time spent moving items during production.
- Queue Time — Waiting time before production steps.
- Throughput — Sales minus variable costs.
- Throughput Rate — Units produced per unit time.
- Lean Manufacturing — Method to minimize waste in production.
Action Items / Next Steps
- Review class notes on Lean Manufacturing and Six Sigma.
- Practice throughput time and rate calculations with sample problems.
- Read about the benefits of MRP systems for manufacturing businesses if assigned.