Cycle Time vs Lead Time: Definitions, Differences, and FAQs

cycle-time-vs-lead-time

Cycle time and lead time are two key time management measures. Cycle time indicates the time taken to complete a task whereas lead time is the time taken between order placement and fulfillment.

These two time management concepts are quite similar and are often confused (naturally!) due to their analogous nature. 

In this article, we are tackling the long-standing debate between cycle time and lead time (with a bonus topic).

Without wasting time, let’s get productive!

The Definition Game: Cycle Time, Lead Time, and Takt Time

Understanding these three very close and related terms can be very tricky. 

To have a crystal picture in our heads before we proceed to further explore them, we are going to interpret cycle time, lead time, and Takt time individually.

Cycle time

Cycle time is essentially the time taken to finish a process or a particular task from start to end.

One cycle of completion of a process (in the case of production and manufacturing) or a repetitive task is quantified as cycle time. 

Cycle time
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 It can alternatively be defined in the modern sense as the amount of time taken to make a product ready for the customer delivery stage. 

Say, for instance,  for a watch manufacturer is the time taken to produce a quality watch.

In contrast, for a food joint, cycle time is the time taken to prepare one full meal. 

Let us now take this one step further and understand how cycle time is actually measured.

Related article: 7 Awesome B2B Content Marketing Platforms

Measuring cycle time

The basic formula to calculate cycle time is known as Little law and is calculated as follows:

Cycle time= Total production time or Work in Progress/ The number of units produced (Within a stipulated time frame)

To further understand this, let us take an example of everyone’s favorite food, a pizzeria.

Pizza making
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Say the Pizzeria functions between 9 am and 5 pm, for eight hours a day. Each day let us assume they produce 100 (yummiest!) pizzas.

So here the result would be eight hours (Total production time) / 100 (units produced)

Cycle time is 0.08 or roughly 5 minutes to produce one pizza. 

Crystal? Great, on to the next.

Lead time

Lead time is generally a term used for the customer’s POV. 

In short, it can be defined as the time taken between receiving an order till final product delivery. 

While the concept of lead time is as the definition above, it can be interpreted in different ways depending upon your role or the nature of your company. 

For example, for a company involved in customer service-oriented or project-based services, the lead time is calculated based on the moment you receive the project or order till the completion of the specific task.

Customer Service
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In contrast, for companies involved in the manufacturing and production side of the industry, lead time is the time between the placement of an order and the supplies received.

In general, the lesser the lead time the better the prospect for you. 

To illustrate this with an example, let us say you want to purchase a car. 

You approach a car dealer and he gives you an approximate lead time for the car of 4-6 months. 

What this essentially means is the time taken for the manufacturer to produce the new car and for it to be delivered to your doorstep. 

Oprah Winfrey you get a car
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Measuring lead time

Calculation of lead time is pretty simple and straightforward once you have two important pieces of information in your hand – date/ time of delivery and date/time of receiving the order.

Lead time can be calculated based on the cumulative time to complete a task.

Cafe serve time -Lead time
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For instance, say a customer orders a coffee at a cafe at 5 pm and receives the order at 5:30. 

Here the lead time is exactly 30 minutes. 

Thus lead time can be interpreted as the time taken to complete to serve an order, in the food and beverage industry.

Bonus: Takt time

Takt time again revolves around the service provider’s perspective. Takt time is the time at which you need to complete a task in order to meet customer demands. 

Breaking down Takt and time – Takt is a german word for a pulse and can be compared with a precise analogy of the heart rate. Just as your heart rate speeds up and slows down and you match your actions, a company’s takt time can be low or high to meet the customer’s fleeting demands. 

Takt time is slightly different from lead time and cycle time in the sense that it is used to analyze your own company’s production power. With this unit of measure, you will be able to eliminate over or under-production, maintain quality standards and meet customer demands on time

Here are a few more benefits of using Takt time:

  • Takt time helps to keep the inventory in check by keeping only what is needed and to avoid shortages
  • Improves the efficiency of the whole system right from production to delivery
  • Workflow is much more smoother and seamless due to meeting customer demands and adjusting the output accordingly
  • Increase in customer satisfaction due to timely delivery and quality control.

Measuring Takt time

Takt time is calculated based on the total production time or net production time (NPT) and the number of units required according to current customer demands. 

To quantify the NPT your team has to track the production time, including the breaks, meetings, etc involved in the production of a product. 

So, on paper:

Takt time = Total production time( net production time)/ number of units required

This number would give you the optimal takt time per unit. 

Let us illustrate this topic with an example of a restaurant during the busy lunch hours. 

During this peak hour rush, the restaurant needs to allocate enough resources to match the demand.

Let’s say 50 customers are to be served in 2 hours 

In this case, the takt time would be = 2/50=0.04 hour. Roughly 2 minutes per customer. 

Rush hour Management
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Realistically this wouldn’t be possible if the necessary resources are not ready, but with a restaurant already anticipating this squeeze with the help of time, this would be an easy task to smoothly accomplish. 

Related article: What Is A Sales Dashboard And How To Create The Perfect One

Comparison Chart: Cycle Time vs Lead Time vs Takt Time

While takt time is used to quantify customer demand and match the production, cycle time is used to quantify the time used to produce a product or service. 

Lead time on the other hand is the time between the production of an order to delivery and is from the customer’s perspective. Cycle time starts when the work begins, lead time ends when the work is completed and takt time is used to carefully monitor the production using cycle time and sometimes lead time. 

The best practice is to balance out cycle time with Takt time and reduce the lead time as much as possible. 

To understand the three concepts more illustrated below are the differences and what makes them unique and beneficial to a company.

  Cycle time Lead time Takt time
Basic formula Total production time/Number of units produced Delivery time/date- Order received time/date Net production time/ Number of units required
Main objective To measure the rate of production  To measure the average wait time and adjust production time accordingly Provides an estimate for the rate required to meet customer demands
Elements to consider The production time is the main element The whole process is considered. Right from the moment the order is received till the delivery Focusses on the production process and how to make it more efficient to meet customer demands
How can companies utilize them? Cycle time should be kept as low as possible for the best utilization of resources For the best customer satisfaction and rating, lead time should be maintained low Efficient management of resources and timely delivery is possible by tracking takt time and ensuring production runs on this principle

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Need More Info? Here Are Some FAQs

While the concept of time is still baffling to humans, cycle time, lead time, and takt time are not, thanks to our blog post (self-pat)!

There are still some common questions and queries that might still leave you puzzled. We have fine-tuned and collected FAQs and presented them below for your clarity. 

Take a quick look and clear all your doubts.

#1. Is wait time included in the cycle time?

In short yes, cycle time does include the wait time required for the next course of action for a product. 

For instance, this could be waiting for the paint to dry in the case of a toy in a production unit and is taken into consideration in the cycle time calculation. 

Cycle time is the total time from start to end and everything in between.

#2. How can you lower your cycle time?

By reducing your cycle time, not ly are you improving your efficiency as a whole but there is a boost in customer satisfaction as well. 

Here are some quick tips to keep your cycle time in check:

  • Always remember to set and define your goals clearly from the beginning
  • Eliminate multitasking unless there is an absolute requirement
  • Automate tasks that require repetitive manual input or work to optimize the work process
  • Use project management software and tools to manage resources better and to time your progress.
  • Ensure your team members are self-sufficient, and resourceful and require minimal hand-holding.

#3. What are some factors affecting lead time?

As we have established, the lower the lead time the better it is for everyone. While a low lead time can be maintained mostly, there are a few factors that can drag down productivity and increase your lead time.

They are:

  • Inefficient resource management
  • A time-consuming and avoidable step in the production process
  • Unstable lead time between different supply chain managers
  • Unforeseeable circumstances such as resource unavailability or a stop in production

#4. What is the throughput rate?

Throughput in direct terms is the time taken for raw material to complete the process. This is strictly measured from the manufacturer or production point of view.

It gives an idea of how much time it would take for a specific unit of raw material to process and hence increases the efficacy of the process.

#5. What is value stream mapping and how does it help a production team?

Value stream mapping is a technique used to identify ‘value’ steps in the process that improve the overall quality of the product to be delivered.

The map is visualized with the help of a flowchart and key markers are pictured along with the end goal.

Read also: What Is a Sales Dashboard and How Does It Help Boost Revenue?

Key Takeaways

Time management is an important aspect of any process, irrespective of the industry you may be in. 

Time management- The road to productivity
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The time-related concepts discussed here today not only help you in efficiently managing your time but also makes your production process a lot faster and more efficient.

Understanding and measuring these metrics could be the difference between the success and failure of your company, especially if you are just starting out. 

Using the right tools is equally necessary. One tool recommended by GetApp for sales is EngageBay; check out the full list:

GetApp’s Top-Rated Sales and Retail Software Tools

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