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The activity ratio is a good gauge of how much time work is sitting idle in a value stream. As a result, it is a solid measure of flow. The higher the ratio, the better the flow.
The drawbacks to using the activity ratio as an indicator is that there is no measure of value—the process step may not be adding to the finished product. There also might be a lot of waste in the process.
Still, despite these drawbacks, work sitting idle is often an indicator of broader problems. The steps you’d take to speed up the flow of that work are often the same steps you would take to pull waste out of a process. For that reason, I recommend considering using the activity ratio as an improvement metric in processes with a lot of piles of work between steps.
Watch for your units—a common error is to mix seconds and minutes.
2:36 is not the same as 2.36. Dividing times can be tricky. You’ll need to divide 36/60 to get the proper fraction.
Don’t use 24 hours as a day. Your lead time should only consider the time that a factory is running. Activity ratio is an efficiency metric, not a delivery metric.
You’ll need to multiply the decimal result by 100 to get a percentage.
Cycle time will never be higher than lead time. Lead time includes both cycle time and the time the parts sit in piles. If a product is worked on continuously, the activity ratio will be 100%.
The term ‘activity ratio’ is also used in accounting to describe several financial ratios. Don’t let that duplicate use of the term confuse you.