Lead Time

Classify value-added time and non-value added time. Recall that lead time can be classified as one of the following:

1. Value-added lead time, which is the time spent in converting raw materials into a finished unit of product

2. Non-value-added lead time, which is the time spent while the unit of product is waiting to enter the next production process or is moved from one process to another
In this problem:
Value-added time will include four activities. Determine the total.
Non-value-added time = Within-batch wait time for PC + Within-batch wait time for final assembly + Within-batch wait time for testing + Within-batch wait time for shipping + test setup + Move time
Add value-added lead time + non-value-added lead time to obtain total lead time.
Calculate Value-Added Ratio = Value-Added Lead Time ÷ Total Lead Time

2. Is the value-added ratio low? If so, consider changing the layout from a process orientation to a product orientation.

Learning Objective 1.