Everything You Need to Know About Lead Time vs. Cycle Time

In this article, we take a look at two important metrics commonly used in the Kanban method: Lead time and cycle time. Understanding both metrics can help you in understanding your team’s performance better, but also significantly affect the overall efficiency of your business process. 

What is Lead Time?

Lead time is a metric that defines the time it takes for a product or service to go through all the stages of the process or value stream, from the very initial stage up to the final stage of the process. Put simply, the lead time encompasses everything that is done right or wrong in a certain process, therefore, processes showing high lead times often are associated with a significant amount of waste.

Some aspects that show the importance of correctly understanding the lead time can be summarized as follows:

• Value-added time and non-value-added-time. The analysis of the lead time helps to identify the process activities or tasks that either add or do not add value in the process under investigation. The non-value-added-time should always be reduced to its minimum value as possible, whereas the value-added time must be maximized in order to enhance process flow efficiency.
• Productivity. Knowing the process lead time is important in order to increase business productivity, by reducing this metric when feasible over time.
• Previsibility. By having historical data regarding the process lead time, it is possible to be more assertive in predicting deliveries to the customers.
• Process improvement. Identifying process lead time is a good step towards improving the process, as it allows to perceive existing inefficiencies that may occur along the way.

How to Calculate Lead Time

In a basic view, the calculation of lead time is commonly carried out by subtracting the order delivered date from the order requested date, as shown in the equation below. An order, in this case, can be associated, for example, to a manufactured product, a project, or even a service required by the client.

What is Cycle Time?

In the context of manufacturing, cycle time refers to the total amount of time that is needed from the initial manufacturing of a part (or part batch) until the final part is finished. Cycle time takes into consideration the waiting time for raw materials, material loadings in the machines, setup time of machines and any disruptions during the production of a part or part batch. In other words, cycle time can be understood as the time required for completing a part or part batch in a specific process stage or in a value stream process.

This concept of cycle time in manufacturing can also be extrapolated to the context of Agile Kanban method. In this perspective, the metric cycle time indicates, for example, how long the project team has worked on a planned task.

By correctly using and understanding the metric cycle time, some aspects related to the relevance of this metric can be summarized as follows:

• Allows teams to control their overall delivery capability by evaluating the start and finish times related to project’s tasks;
• Define the time limit to delivering a process output for internal clients of the process;
• Enables to achieve the deliverable time of products or services based on the overall lead time;
• Affords the identification of possible process bottlenecks; and
• Helps to reduce costs and idle capacity of the process by providing helpful inputs.

How to Calculate Cycle Time

Cycle time calculation can be easily implemented by distinguishing two possible scenarios. In a first scenario, a single flow item (or task) progresses through the process. In this case, for a single flow item (SFI) the metric cycle time is calculated as shown in the following equation:

Where:

• Cycle Time_SFI is the cycle time for a single flow item (or task).
• Finish Time is the time the item has been finished.
• Start Time is the time in which work on the item has started.

Let’s say, for example, a project task starts at 3:00 p.m. and finishes at 6:00 p.m. Thus, for completing that task the cycle time is three hours in total.

In a second possible scenario, batches of items (or tasks) progress through the stages of the process. The cycle time of batches of items (BoI) flowing through the process can be inferred as shown in the equation below:

Where:

• Cycle Time_BoI is The cycle time for batches of items;
• (Finish Time – Start Time) is the total time duration for completing the items;
• Items Produced is the total amount of items produced during the respective total time duration.

Lead Time and Cycle Time with Kanban

The Kanban method can help you to infer both lead time and cycle time metrics associated with a specific process. This can be easily accomplished by means of a digital Kanban board.

To calculate cycle time, you can enter the date and time of a work item at the right moment it moves to the column “In Progress” up to the total extent of the Kanban board, until it reaches the “done” column.

On the other hand, the lead time metric will correspond to the time duration from the moment the work item is inserted to the “To Do” column until it achieves the column “Done”.

Measuring and understanding both lead and cycle time can positively impact businesses in terms of better process knowledge which in turn can pave the way for continuously improving your business process.