If you have any knowledge of agile processes, then you likely are aware of lead time and cycle time, which are two metrics for monitoring time, are often mixed up.
Project managers / Transformation & Improvement professionals utilise these metrics to observe and boost the output and effectiveness of teams and activities. Although lead and cycle time are similar, you’ll soon realise that they signify varied things.
Let’s review how these metrics can aid in increasing team effectiveness. We’ll then compare lead time with cycle time in order to demonstrate their similarities and distinctions.
- What is the difference between lead time and cycle time?
- Similarities between the two
- How to determine the length of lead time and cycle time?
Understanding Lead Time: What is it?
Lead Time is the amount of time it takes for a task to move through the workflow and be completed. In more straightforward terms, it indicates how long it takes for an order to progress through the entire, end-to-end process and be completed.
So, let’s illustrate the difference between lead time and cycle time in a contact centre setting using an example of an order fulfillment process.
Lead time is the total time from the moment a customer places an order until the moment the order is fully completed and delivered.
Let’s say a customer calls the contact centre to place an order for a product. The agent records the order details and passes the information to the warehouse. The warehouse then picks the item, packs it, and dispatches it for delivery. The delivery team then delivers the order to the customer’s doorstep.
In this case, the lead time would be the entire duration from the moment the customer places the order (the call to the contact centre) until the moment the customer receives the order. If the customer calls at 10 AM on Monday and receives the order at 10 AM on Friday, the lead time is four days.
An Overview of Cycle Time
The amount of time taken for a team member to complete a task is referred to as cycle time. This begins once the task is marked as “In Progress” and continues until it is successfully accomplished and ready to be delivered.
In a contact centre / logistics setting, this could refer to various stages such as:
- The time it takes for the agent to take down the order details and enter them into the system.
- The time it takes for the warehouse to pick and pack the item.
- The time it takes for the delivery team to deliver the order to the customer.
Each of these is a separate cycle, and the time it takes to complete each cycle is the cycle time. For example,
- If the agent takes 10 minutes to handle the call and enter the order into the system, the cycle time for this phase is 10 minutes.
- If the warehouse takes 2 hours to pick, pack and dispatch the item, the cycle time for this phase is 2 hours.
- If the delivery team takes 3 days to deliver the order to the customer, the cycle time for this phase is 3 days.
Cycle time is crucial in identifying bottlenecks and improving efficiency in each phase of the process, while lead time gives an overall picture of the time it takes to fulfill an order from start to finish.
So, in summary, lead time is the total time from when the order was placed until it’s delivered, and cycle time is the time to complete each individual stage in that process.
Emphasis should be placed on calculating the duration of work in progress (WIP). This is achieved by measuring the amount of time taken to complete each unit.
It should be apparent that the cycle time is part of the lead time. That implies that the lead time will always be larger than the cycle time. As an analogy, one can refer to the Kaizen methodology with the cycle times mirrored to Kaizen Bursts
Examining the Similarities and Distinctions Between Lead Time and Cycle Time
There are many resemblances and distinctions between lead time and cycle time. This article outlines the main ones.
Points of Comparison
When looking at lead time and cycle time, the most apparent commonality is that they both measure the length of time it takes to complete a task. The duration could range from seconds, minutes, hours, days, weeks, etc.
Regardless of the beginning point, it is feasible to utilise them to denote a particular stretch of time. Therefore, why is this significant?
When values remain steady, it is possible to assess business continuity. On the other hand, should those values be variable, modifications might be necessary to increase productivity and efficiency in terms of delivery times.
Understanding lead time and cycle time allows you to assess the effectiveness of your people and processes. Examining the difference between your lead time and cycle time gives you a view of the efficiency of your business operations. For instance, it can show you how quickly your teams can begin tackling fresh requests.
Establishing a benchmark for your business can be achieved by leveraging lead and cycle time.
Monitoring the effectiveness of process optimisation is greatly improved by computing these two values. This gives you the informed power to make improvements and track their success.
For instance, to speed up the process from when a request is made to when it begins to be handled, you may bring in new tools and procedures. To find out if these changes are effective, you should document the duration of time from when a request is received, to when it is completed.
Lead and cycle times possess a relationship with effort and result that requires consideration. It’s essential to take into account that not every input will automatically result in the desired output. The lead and cycle times provide an exact illustration of the effort your teams put in and the outcomes you receive.
Whilst It is important to be busy, productivity is the superior way of evaluating effectiveness and success rather than effort alone.
Calculating Lead Time
So, let’s dive into how you can calculate lead time in an order fulfillment process using the above premise.
Lead time, as we’ve defined earlier, is the total time from the moment a customer places an order until the moment the order is fully completed and delivered. In order to calculate lead time, you need to track the time at each step of the process, from the moment the customer initiates the order until the order is delivered. In a contact centre setting, this would start from the time the customer makes the call and ends when the order is received by the customer.
To effectively calculate lead time, you first need a clear understanding of your process and the steps involved. In our example, the steps were: order placement, order processing, and order delivery. You would begin tracking time at the moment the customer’s call comes in to place an order, this is the start of your lead time. Then, note the time when the order processing begins, which is when the agent enters the order into the system. Finally, record the time when the order is delivered to the customer. The total lead time is the time span from the order placement to the order delivery. For instance, if a customer places an order at 10 AM on Monday and the order is delivered at 10 AM on Friday, the lead time is four days. It’s important to track this data consistently to understand your average lead times and identify any opportunities for process improvement.
Accurately tracking lead time in an order fulfillment process can be surprisingly complex due to several common challenges:
- **Incomplete or Incorrect Data**: If data is not accurately recorded at each step of the process, it can lead to miscalculations of the lead time. This could be due to human error, software glitches, or lack of a systematic approach to data collection.
- **Complex Supply Chain**: In some businesses, the order fulfillment process involves multiple parties (suppliers, manufacturers, distributors, etc.) and geographic locations. Tracking time accurately across all these variables can be challenging.
- **Unexpected Delays**: Unforeseen circumstances like equipment breakdowns, human errors, supplier delays, or shipping disruptions can add to the lead time. These unpredictable factors can make it difficult to calculate an accurate average lead time.
- **Variability in Order Processing**: Variations in the type of orders, their priority, or their complexity can result in different lead times. This can make it hard to determine a standard lead time for all orders.
- **Lack of Real-time Tracking**: In some cases, businesses may not have real-time tracking systems in place. This can lead to delays in data collection and analysis, which may affect the accuracy of lead time calculations.
Addressing these challenges often requires a combination of robust data collection and analysis systems, process standardisation, and contingency planning for unexpected delays.
Calculating Cycle Time
To calculate cycle time, you have to define the start and end of a particular process or operation, then measure the time it takes to complete it.
For instance, in our example order fulfillment process, one cycle could be the time it takes for an agent to take down the order details and enter them into the system. If the agent starts taking the order at 1 PM and completes entering it into the system by 1:10 PM, the cycle time for this operation is 10 minutes. Similarly, if the order picking, packing, and dispatching process in the warehouse starts at 2 PM and ends at 4 PM, the cycle time for this part of the process is two hours. It’s important to consistently measure the cycle time for each operation to understand your process’s efficiency and identify potential bottlenecks. Consistent tracking of cycle times can help you determine average times for each operation, making it easier to spot anomalies and areas that need improvement.
Accurately tracking cycle time in an order fulfillment process can be challenging due to several factors:
- **High Variability of Tasks**: The time it takes to complete certain tasks can vary greatly. For instance, the time it takes an agent to process an order can depend on the complexity of the order, the proficiency of the agent, and the efficiency of the systems used. This variability can make it hard to establish a consistent benchmark for cycle times.
- **Manual Time Tracking**: If time tracking is done manually, it can lead to inaccuracies due to human error. Moreover, manual tracking can be time-consuming and may not always capture the start and end times accurately.
- **Lack of Process Standardisation**: If the steps in the process are not standardised, it can lead to inconsistencies in cycle times. For example, if different agents use different procedures to process orders, the cycle times can vary significantly.
- **Unplanned Interruptions**: Interruptions or unexpected events can extend the cycle time. These can include system downtimes, unexpected rework, or other unforeseen disruptions.
- **Multi-tasking**: In some cases, employees may be handling multiple tasks at once, making it difficult to accurately track the time spent on each individual task.
To overcome these challenges, businesses may need to implement standardised procedures, use automated time-tracking tools, and train employees to handle tasks consistently. Furthermore, recognising and planning for common disruptions can help in maintaining more consistent cycle times.
To Sum Up
At this point, it is likely that you comprehend lead and cycle times. To review: lead time is the typical period of time from when a customer orders to when the product is delivered. In contrast, cycle time is the amount of time that passes between when a colleague begins to add value to a product or request and when it is finalised. While it might seem intuitive to think that lead time is merely the sum of all cycle times in an order fulfillment process, this is not actually the case. Lead time encompasses not only the time it takes to complete each task (cycle times), but also the time between these tasks, which can include wait times, delays, and buffer times. For instance, an item could be waiting in a queue to be picked, a packed order might be waiting for a delivery slot, or there could be delays in transferring the order from one process to the next. These periods of inactivity are included in the lead time but are not part of any cycle time. Therefore, lead time is generally longer than the sum of the cycle times as it includes both the time to perform work (cycle times) and the time when work is not being performed (wait times and delays).
Don’t forget to watch our Short Video on this subject!
