At some time, we all have said either: “The day is dragging by so slowly” or “Where did the time go!?” How can time be both slow and fast?
Time can be relative depending on who you ask and to what purpose it is being measured by. Bet you didn’t know there is more than one type of time!
It’s just Time; What’s the Difference?
People often measure the time it takes for an item to arrive, once it has been ordered. Set your clock to watch – time is ticking!
This type of time is called Lead Time; it calculates the time spent between the moment a request is made, to the time in which the final product is received. This is specifically known as Customer Lead Time and it’s what people place value on most.
Additionally, there are three other main types of lead times, depending on what type of process an order is a part of:
- Material Lead Time, which is the total time taken to place an order from a supplier and receive the shipment;
- Production Lead Time, which is the total time taken to produce and ship a product to its destination; and
- Cumulative Lead Time, which is the total time taken from the moment an order was confirmed to its shipment. It is the sum of both material and production lead times.
While Lead Time focuses on measuring the time it takes between receipt and fulfillment, Cycle Time measures the amount of time a team actually works on a product until it is ready for customer delivery.
Cycle Time is included within Lead Time, as part of the overall process of a request being completed. It could either refer to a production task or a repetitive activity such as answering customer calls.
It is important to note that Cycle Time also factors in wait time, during which an item is waiting for the next action to happen in order for the process to keep moving forward. In the manufacturing industry for example, there can be a waiting period between when the warehouse packages an item, to when it is picked up by the courier to be shipped.
Lead Time and Cycle Time in Agile
Both Lead Time and Cycle Time are widely used terms in the agile world, particularly in Kanban. For those not familiar with the term, Kanban is a “lean method to manage and improve work across systems.” Its purpose is to help teams manage work by balancing demands with available capacity, while finding ways of reducing procedural bottlenecks.
The Scrum Master/Agile Coach can introduce these concepts through such visual means as:
- Kanban Board/Sprint Backlog which is designed to help visualize work at various stages of the development process, by using cards or sticky notes to represent one day’s work, and columns to represent different stages of the development process (i.e. To Do, In Progress, and Complete). This board can be either physical (which helps everyone to commit to the task) or digital (which is helpful when working with remote groups).
- Cumulative Flow Diagram (CFD) which provides a concise illustration of the following three metrics of flow: Cycle time, Throughput, and Work in Progress. Its purpose is to help show how stable your flow is and where to focus on making your processes more predictable.
Why Should We Measure Both Lead Time and Cycle Time?
Both Lead Time and Cycle Time are good indicators of a team’s ability to deliver value to their customers; simply measuring one limits a person from seeing the full picture. Through continuous measurements over time, one can begin to notice whether a team is improving in its ability to deliver value to customers. Ultimately, the goal is to reduce the Lead Time.
The most basic formula for measuring Lead Time and Cycle Time are:
Lead Time (LT) = Order Delivery Date – Order Request Date
Cycle Time (CT) = Average time between completion of units. For example: consider a frontline worker produces 100 pairs of shoes per 40 hour work week. The average throughput rate is 1 unit per 0.4 hours (40 hours divided by 100 units), which is one unit every 24 minutes.
Ways of Improving Lead Time (and Cycle Time)
While quality and value remain important factors for consumers, responding quickly can oftentimes be the deciding factor in whether or not a consumer decides to go with your product/services over your competitors.
Reducing Lead Time is the key advantage. Some benefits include: reducing waste; automating and streamlining both operations and productivity; and improving customer satisfaction and referrals.
So how does one ensure Lead Times are being optimized? Here are three tactics to add to your toolbelt:
- Increase Order Frequency: Have you typically placed one large bulk order, thinking it saves you money? If it means longer lead times and increased cost in inventory management, then it may not be the case. Do a total cost analysis to determine if there truly are savings. If there isn’t, you may want to consider ordering smaller quantities more frequently to help reduce lead times and carrying cost.
- Automate Your Workflow and Processes: take a look at your current business processes – are there areas that can be improved or automated to speed up productivity? You might find that in some cases you have areas that are either overlapping or duplicating efforts.
- Streamline Operations from Order Entry to Production: Operational excellence is something all companies should strive to achieve. Look for areas that could be improved such as reducing or eliminating handoffs, compressing work by updating tools and resources, or even increasing capacity or resources in order to reduce bottlenecks from occurring.
Don’t lose time; now is the time to start looking at how your organization can reduce its Lead Time (and Cycle Time!) by finding ways of working smarter not harder – before time…runs out!