Key Points

• Run rates are an indicator of how a process is performing over time.
• It acts as a counterpart to cycle time, indicating how many units are produced over time.
• Paying attention to run rates allows you to more effectively coordinate purchasing and improve overall efficiency.

Run rate is the bottom-line metric of process performance. It is the most significant indicator of the revenue-generating capacity of a business process. Of course, when optimizing a process, changes in other process parameters must be monitored as well, especially quality loss.

Overview: What Is the Run Rate?

The run rate is the average number of units produced by a process over a given period (#units per time). It is the inverse of cycle time, which describes the amount of time required for a process to produce one unit. Run rate is used as a metric of process performance. It is also an accounting tool to predict future potential by extrapolating the most recent data available.

2 Benefits of Run Rate

Run rate is a complex metric that assesses the people, machines, and time available to perform a process. It looks at how each is implemented to maximize the output of a process.

1. Actual Performance versus Ideal Performance

Ideal run rates describe the number of units that could be produced without any downtime, upsets, or breaks in the process. Actual run rates are a measure of the running number of units produced by a process over time. Comparing these two measures will provide an assessment of current productivity. Further, they can be used to identify performance losses as soon as they impact revenue.

2. Make Projections Based on the Most Recent Data

Run rates are used to extrapolate data from recent runs over longer periods, typically over a year. This is often preferred over the use of trailing data to estimate future performance benefits related to a process improvement project.

Shooting for the Gold

So, now that you’ve got a base-level understanding of run rates, it is important to consider the context in your production line. Typically, you’ll be looking at run rates throughout production. While you can certainly check it after the completion of a process, it is a measurement that helps to pay attention to while processes are running.

Why Are Run Rates Important to Understand?

The production rate of a process run is a vital metric in manufacturing and process improvement used for scheduling, purchasing, and cost analysis.

1. To Maximize Schedule Efficiency

Accurate run rates for each step in a process chain can be used to maximize schedule efficiency by synchronizing the start and end times of consecutive steps. By understanding the ideal versus actual production rate, you can gauge each step’s performance losses.

2. Coordinate Purchasing Across Multiple Domains

By accurately measuring run rates for each step and each process, purchasing sheets can be made that account for individual inputs across the entire company.

3. Account for Production Costs

Understanding the factors that affect run rates can provide perspective on the costs and inputs of a process. Knowing how efforts to cut process costs and inputs could affect actual production rates facilitates the identification of fruitful cost-cutting measures.

An Industry Example of Run Rates

Let’s say that Toyota has an order from the U.S. Forest Service to deliver 1,500 pickup trucks per month for 6 months (target run rate) from the Toyota Motor Manufacturing Indiana facility.

The peak manufacturing capacity of this facility with current employee numbers and machinery is 2,000 units per month (ideal-run rate). Although current manufacturing run rates are at target levels, the defect rate has reached 200 units per month due to more stringent side-collision standards.

With a defect rate of 200 units per month, the actual production rate of this facility is 1,300 units per month, indicating underlying issues in the manufacturing process.

3 Best Practices When Thinking About Run Rates

Run rates are a complex metric of the health of a process. 3 key practices should be adhered to when analyzing run rates.

1. Account for Necessary Downtime

When measuring run rates for a process, downtime such as the setup of equipment, changeover of staff, and scheduled maintenance are a necessary part of the process cycle. It is vital to look at the complete process when calculating run rates and avoid setting ideal run rates based solely on the maximum output of equipment.

2. Determine Accurate Ideal and Target Run Rates

Ideal run rates are key metrics that will inform you whether you have the production capacity to meet a target rate based on customer demand. Once you have determined that targeted run rates are feasible based on ideal run rates, use the target rate to assess actual rates and identify inefficiencies.

3. Understand the Conditions of Measured Run Rates

When extrapolating future performance from the most recent data, it is important to understand any conditions that may limit the accuracy of current data for predicting future performance.

Other Useful Tools and Concepts

Looking for some additional tools to aid your production? Understanding how Ppk factors into your production pipeline is a useful tool to have at your disposal. This measurement is a clear indicator of how exactly a process is performing.

Additionally, learning how to account for and compensate for pass-through characteristics is crucial for satisfying your customers. These elements aren’t readily seen and might pass through inspection. As such, it is crucial to learn how to recognize and compensate for them.

The image featured at the top of this post is ©Ground Picture/Shutterstock.com.