Definitions and benefits of lead time vs cycle time

By Indeed Editorial Team

Published 16 June 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Manufacturing may include several processes, so reducing the amount of time spent on one process can help to boost productivity and overall efficiency. Productivity indicators, such as lead time and cycle time, help describe how fast a company's manufacturing process takes place. Despite the fact that they're both connected, they apply to distinct areas in production and perform different tasks. In this article, we define lead time and cycle time, compare the two ideas, discuss their significance in manufacturing, examine the elements that influence lead time and provide suggestions for improving cycle time.

Lead time vs cycle time

You can distinguish lead time vs cycle time from one another when it comes to manufacturing, but both remain vital since they influence your capacity to execute orders reliably and rapidly. Customer satisfaction is highly dependent on the length of time it takes to complete a project. Lead time and cycle time allow clients to restock their inventory. Managing your cycle time is one method to improve lead time. It also provides you with a competitive edge. If you create products more quickly without compromising on quality, you're likely to get more work orders in the long run.

Although lead time and cycle time are both used to quantify the amount of time spent in various phases of manufacturing, there remain several significant distinctions between the two, such as:

  • Lead time encompasses all phases of production, while cycle time refers primarily to the manufacturing component of production.

  • Lead time can help inform customers of when to expect an item, as it predicts the time it takes between placing an order and receiving it, while you use cycle time to quantify the pace at which a business produces its products.

  • Businesses utilise lead time to increase customer happiness, and they use cycle time to increase efficiency and production.

What is a lead time?

The amount of time that elapses between receiving an order and the shipping of a product is its lead time. The lead time starts when a customer places their order and ends when they obtain the item. It encompasses all of the steps included in the manufacturing process. For example, a customer places an order on May 11 and gets it on June 1. Despite the fact that manufacturing concluded earlier and the product left the plant a few days before being received, the total period is 21 days, which is what is called the lead time.

Related: What is takt time? (Plus formula, importance and examples)

What is cycle time?

Cycle time refers to a measure of how long it takes to finish one cycle or to generate one item in a manufacturing order on a production line. The cycle time is usually divided into two parts, the processing time and the delay time. The processing time refers to the period of time during which the production team is actively engaged in the completion of a unit, while delay time refers to the period of time during which the team waits for the completion of the next operation.

Similarities between lead times and cycle times

Lead time and cycle time are both measurements of how long it takes a product to get from one place to another. Those points vary for each, but they all reflect a time period that is measurable. Many teams achieve business continuity if such measures are consistent. If they aren't, they require changes to execute projects more effectively.

Both lead time and cycle time provide information on the efficiency of teams and processes. When correctly watched and analysed, these metrics studied concurrently offer an accurate picture of how a business utilises its time. Project managers and team leaders then establish reasonable benchmarks. They quickly make the required modifications, recalculating these variables and compare the results to determine whether there has been any improvement.

Related: 10 examples of project management principles for beginners

Factors that impact lead time

The lead time includes the cycle time, the time taken to start manufacturing and the time required to transport the product. If the lead time is longer than the cycle time, you're likely to have excess inventory. Many variables influence the length of time it takes to complete a project. This includes:

  • unavailability of raw resources

  • shipping delays

  • errors in the processing or manufacturing process

  • suppliers deliver orders with lengthy wait periods

  • additional steps in the manufacturing process

Benefits of a cycle time

The cycle time refers to how long it takes a developer or team to complete a project. It's the period of time between when a task is in progress and when it's done. Knowing the cycle time remains beneficial in a variety of situations. Advantages of the cycle time include:

  • Measure the efficiency of production: Use cycle time to measure how fast a team finishes the manufacturing of a single piece of equipment. It's more efficient for them to fulfil orders when the cycle time is smaller.

  • Measure overall productivity: The cycle time reveals how many total units a team is capable of manufacturing.

  • Identify production mistakes: Use high cycle times to identify production mistakes. This includes extended wait periods or inefficient process times.

  • Recognise areas of improvement: Cycle times reveal areas to improve a company's processes to boost sales and shorten the time it takes to create a product. Cycle times also assist in figuring out what's slowing down productivity.

How to calculate cycle time

To calculate cycle time, perform the following:

  1. Determine when the real work on an order starts and when it's completed. This refers to the total amount of net production time.

  2. Determine how many units you intend to manufacture.

  3. Calculate the average time it takes to create one unit by dividing the net production time by the number of units being manufactured.

For an example of this process, if an order contains 200 units and the team spends 60 hours manufacturing all of the goods, you divide 60 by 200 to get 0.3 hours per unit. This indicates it takes around 18 minutes to manufacture a single piece.

How to shorten the length of the cycle time

Keep track of the team's progress by studying both cycle time and lead time data. It's also possible to shorten cycle time while simultaneously reducing lead time. Both of these help increase productivity and boost customer satisfaction. Reduce the length of the cycle time by following the steps below:

1. Multi-task

Carry out some manufacturing tasks at the same time at different workstations in the same facility. Determine which tasks to complete at the same time and put in place a structure that allows for this to happen. To avoid delay times and reduce the total time spent in production, it's necessary to multi-task with all of the similar activities involved.

2. Remove any unnecessary actions

Some control stages that were formerly important in the manufacturing process are now unnecessary to the operation. For instance, a task may spend a long time in the waiting column before a colleague is available to begin working on it. This results in a larger gap between lead and cycle times, causing tasks to take longer to complete. Remove such stages or combine them with other stages to reduce the total cycle duration.

3. Invest in project management software

Calculating a project's lead time and cycle time is simple with the correct project management software, which assembles all of the data required to do these calculations. Using online scheduling software to develop a long-term plan and calendar baseline keeps the company on schedule to meet goals. It provides continuous insight into the progress of the project and areas where adjustments may be necessary.

Related: What is lead generation in business? A beginners guide

4. Automate processes

In today's business and commercial environment, automation doesn't always imply spending on robotics. There remain a lot of methods to automate activities that take longer than expected. To make automation work for a company, first, identify which tasks to automate for optimal efficiency and then comprehend the scope of that automation's impact in today's market.

Explore more articles