Lead Time vs. Cycle Time vs. Takt Time: A Complete Guide

If you’re like most business owners or you work in a manufacturing environment, you’ve probably heard the terms lead time, cycle time, and Takt time before – but what do they actually mean? How are they related? How can you leverage them in your business?  

Let’s dive into the world of time metrics so that you can get a clear understanding of what each of these terms mean. I will also provide formulas so that you can calculate them yourself and examples for each. 

What’s the Difference Between Lead Time, Cycle Time, and Takt Time?

Lead Time

What is Lead Time?

You can leverage lead time in many areas of business and life, such as:

1. Manufacturing
2. Supply Chain
3. Project Management
4. Goal Setting

In this article, I will be focusing on lead time in manufacturing since this type is most closely related to cycle time and Takt time.

In manufacturing, lead time is the amount of time that passes between the point when a customer places an order until the product or service is delivered. 

Why are Long Lead Times Bad?

We are all consumers to some extent so everyone can relate to a dislike for long lead times.

For example, you have probably placed an order online at some point and had it either be delayed or just generally had it take a long time to get delivered to you. I’m guessing you didn’t enjoy this experience, right?

That’s why long lead times are bad.

If you are a business owner and have long lead times, you will probably have a lot of angry customers which may cause you to lose sales. 

Long lead times can also affect the supply chain as a whole which can cause major delays across all industries. 

This was seen on a major scale when a container ship blocked the Suez Canal for nearly a week in March of 2021. Approximately 12% of global trade moves through this waterway so this event had massive impacts on nearly all industries. Lead times for materials that were unable to pass through the canal became very long. These lead times then trickled down to affect not only the businesses that were directly receiving goods that pass through the canal, but also their customers and their customers’ customers and so on.

Lead Time Formula

You can calculate lead time using the following formula:

Lead times are typically reported in units of days because this is easier for people to understand. 

For example, 10 days is a whole lot easier to grasp than 240 hours, 14,400 minutes, or 864,000 seconds.

Lead Time Example

Suppose you are a cellphone manufacturer.

Your customer orders 1,000 cellphones on March 1st.

They receive this completed order from you on March 15th.

To calculate your lead time, first start with your formula:

Next, plug the known values into the formula:

Now let’s convert this to a “month : day : year” format so that we can accurately calculate the lead time:

Your customer receives the 1,000 cellphones 14 days after they ordered them.

Cycle Time

What is Cycle Time?

Cycle time is the amount of time it takes to produce one unit of product from start to finish. It is measured from the start of the first task in a process to the end of the last task.

Cycle time does NOT include: 

• The time between when an order is received and when production starts.
• The time between when production is finished and the final product is delivered to the customer.

Benefits of Cycle Time

Understanding the cycle time of your process is key for many aspects of a process. This includes:

• Assisting you with determining your overall equipment effectiveness (OEE). 
• Helping you to better schedule resources and raw material sourcing.
• Allowing you to accurately cost products.
• Helping you to identify areas for improvement in a process. For example, waiting times that you can reduce.

Cycle Time Formula

You can calculate cycle time using the following formula:

Although this formula is simple, there are a few watch outs you need to pay attention to.

❗ Watch Out #1: Do not confuse cycle time with process time

Process time looks at the time it takes to complete one step of production whereas cycle time looks at the time it takes to fully produce a finished product that is packaged and ready for delivery.

For example, if your manufacturing process contains three steps—mixing, casting, and packaging—a process time would be how long it takes to finish one of the individual steps, such as mixing. The cycle time would be how long it takes to finish all production from sending the first raw materials into the mixing step to when you have a fully packaged product.

This means cycle time also includes waiting time between processes!

One of the 8 wastes of Lean is waiting so you should always try to reduce waiting times between processes, but you must also be sure to accurately account for any existing waiting times when calculating cycle time.

❗ Watch Out #2: Do not consider cycle time to be a constant

Many people believe cycle time is a constant so they calculate it once and then expect it to always be the same. This is a mistake because unexpected issues can arise that can negatively impact your cycle time. This can include:

• Unexpected equipment issues
• Short staffing
• Quality issues that require troubleshooting
• Supply chain issues

You should always strive to reduce or eliminate these sources of variation in your process, but you must also be able to realize their impact on cycle time when they do arise.

Cycle Time Example

Suppose you are able to produce 48 cellphones in an 8 hour shift.

To calculate your cycle time, first start with your formula:

Next, plug the known values into the formula:

Let’s convert this to minutes:

You are able to fully produce one cellphone every 10 minutes.

Lead Time vs. Cycle Time

The simplest way to think of the difference between lead time and cycle time is to consider what your customer cares about. 

Ultimately, the goal of every business should be to satisfy the customer.

At the end of the day, customers really only care about lead time because this tells them how long they should expect to wait between placing their order and receiving the product.

Overall though, lead time and cycle time are deeply intertwined. Cycle time is a part of lead time. For example, the formula I gave for lead time earlier in this article was:

Another way to look at this formula is:

In this case,

Pre-Manufacture Time is the time between when an order is received and when the production process begins,

and

Post-Manufacture Time is the time between when a product is fully produced and ready for delivery and when it reaches the customer.

Therefore, you cannot accurately determine your lead times without having a clear understanding of your cycle time. If your lead times are not accurate, you will have unhappy customers and potentially lose sales. This is why both of these metrics are so vital.

How Can You Measure Lead Time and Cycle Time?

Now you’re probably wondering how you can measure your lead time and cycle time. This can primarily be done using two methods:

1. Machine monitoring systems 
2. Manual time studies

Both of these methods have their own benefits and drawbacks.

METHOD	BENEFIT	DRAWBACK
Machine Monitoring System	You do not need to dedicate resource time to a manual process.	Some systems have poor collection processes and may provide inaccurate data.
Manual Time Study	You can ensure that what is happening in the process is fully captured.	It can be very time consuming.

How to Reduce Lead Time and Cycle Time

The goal of every business should be to satisfy customers. One way you can do this is by reducing your lead times and cycle times.

Since cycle time is a part of lead time, as discussed in the previous section, you should look for ways to reduce your pre-manufacture time, cycle time, and post-manufacture time in order to fully optimize your process.

How to Reduce Pre-Manufacture Time

1. Tighten Supply Chain Management

This can mean finding trusted domestic suppliers that can supply required raw materials faster, or optimizing your order frequency to ensure you always have the required raw materials on hand.

2. Automate your order entry process

This will reduce the time delay between receiving an order and having it entered into the system and will also eliminate any errors that can be made during manual entry.

3. Increase production capacity

This can include increasing staffing or production equipment so that you are able to begin working on new orders faster.

How to Reduce Cycle Time

1. Reduce Waste

The primary way to increase efficiency in any production process is to reduce waste. In Lean manufacturing, there are 8 waste categories that you should reduce or eliminate in any process in order to make it most efficient. These include:

• Defects
• Overproduction
• Waiting
• Non-Utilized Talent
• Transportation
• Inventory
• Motion
• Excess processing

🤿 DIVE DEEPER: For a full overview of each of these 8 wastes of Lean and how to reduce them, see my article here.

2. Continuous Improvement

One of the five principles of Lean manufacturing is continuous improvement. Continuous improvement is a way of thinking that can drive incremental improvements to a process in order to achieve massive long-term gains, such as reduced cycle time.

During continuous improvement, you must involve all employees from all workstreams to ensure that all perspectives are captured. One simple way to do this is by completing a Kaizen event.

🤿 DIVE DEEPER: My Complete Guide to Continuous Improvement can provide all the details you need to know to leverage this powerful mindset.

How to Reduce Post-Manufacture Time

1. Reduce Shipping Times

This can be achieved by either finding an ideal shipping company to partner with or determining the best shipping method for your customer. For example, you can look into air shipment versus standard ground shipping. 

If you are going to use expedited shipping methods though, you must remember that these typically come at a steep price. It is vital to balance your customer’s shipping needs with the costs they are willing to pay.

How Do You Know What Your Lead Time and Cycle Time Should Be?

After thinking about ways to reduce lead time and cycle time though, you may be wondering why this is important to do.

In theory, it makes sense to reduce your cycle time, but is it good if you can produce 1,000 products per day if your customers are only ordering 100 per day?

The answer is definitely NO. 

In fact, it is detrimental to your business to produce more than your customer demand.

Therefore, you need to consider customer demand when determining what your ideal cycle and lead times are.

This is where Takt time comes in… 

Takt Time

What is Takt Time?

Takt time is the required time to complete one unit of product in order to meet the customer demand. 

Therefore, Takt time should be seen as a goal to comply with in order to be successful. It is essentially the pulse or heartbeat for your workflow. 

It has nothing to do with how the actual process works and everything to do with the customer demand. 

For example, if you work at a coffee shop and need to make 30 coffees per hour to meet the customer demand, your Takt time is 2 minutes. You have 2 minutes to complete each coffee in order to satisfy all customers. If you take 3 minutes per coffee, you will find yourself with some pretty unhappy customers.

You can also look at this in terms of a rate. In the example above, your Takt rate would be 2 minutes per coffee.

Benefits of Takt Time

There are several benefits of defining the Takt time for a process. These include:

1. Avoiding under-production
2. Limiting overproduction
3. Allowing you to implement a pull system which is one of the 5 main principles of Lean manufacturing. In a pull system, you produce material on a just-in-time basis to meet customer demand without producing excess inventory.

Takt Time Formula

You can calculate Takt time using the following formula:

Similar to cycle time, this formula is simple, but there are some watch outs you must be aware of in order to use it correctly.

❗ Watch Out #1: Define a clear time frame

When you are calculating your Takt time, you must define a clear time frame that makes sense for your business. This should be a relatively short amount of time such as a week or month. 

Therefore, you will have a clearer idea of if you are meeting your Takt time since you can evaluate how well you are achieving it on a regular basis.

For example, suppose you are a baker and know your customer demand is 100 muffins per week. You can define your Takt time based on this weekly customer demand. If at the end of the week, you only produced 90 muffins, you will know that you need to improve your process in order to meet your customer demand. 

❗ Watch Out #2: Only include active work time

You also need to make sure you are only including active working time in the total available production time that you use to calculate your Takt time. 

This means you should EXCLUDE time for:

• Breaks
• Meetings
• Equipment maintenance
• Planned/unplanned downtime

This ensures that you are only counting time that you can actively work towards adding value for your customer. 

The more accurate you are with these expected downtimes, the more accurate and useful your Takt time will be.

You should also EXCLUDE:

• The time between when an order is placed an when production begins 
• The time between when a product is complete and when it is delivered to the customer

This ensures that you can provide accurate lead times to your customer.

❗ Watch Out #3: Be careful if your production process includes multiple products with different customer demands

If your business produces multiple products each with different customer demands, you will need to divide your day to account for these different processes. You will also need to determine how these different processes affect each other. 

For example, if two products require the same resources (either staff or equipment), then you must ensure that you are accounting for this when calculating Takt time.

Takt Time Example

Suppose your customer wants 500 cellphones every week.

You run three 8-hour shifts five days a week.

After accounting for breaks, meetings, and other downtime, your total available production time per day is 20 hours.

Therefore, your total available production time per week is 100 hours.

To calculate your Takt time, first start with your formula:

Next, plug the known values into the formula:

Let’s convert this to minutes:

You must produce one cellphone every 12 minutes in order to meet your customer demand.

Cycle Time vs. Takt Time

Many people tend to use cycle time and Takt time interchangeably which is incorrect. 

As you now know, cycle time is the actual amount of time it takes to produce a product while Takt time is the time required to produce a product to meet customer demand.

Therefore, you can think of Takt time as the goal and cycle time as the actual achieved value.

Based on this, the relationship between Takt time and cycle time should become clear.

Although having your cycle time equal your Takt time is ideal, this is often not possible due to unexpected quality issues or downtime that may arise. Therefore, having a cycle time that is slightly less than the Takt time can work.

You don’t want your cycle time to be significantly less than your Takt time since this will cause you to buildup a lot of inventory, but building in a slight buffer time can support some flexibility in your process.

Conclusion

Now that you understand Takt time, cycle time, and lead time, you can use this information to improve your business processes! Keep in mind that these terms are relative – what might be a short Takt time for one business might be too long for another. By understanding the relationships between these three terms, you can fine-tune your production processes to ensure that you are always meeting customer demand.

Do you have any other questions on lead time, cycle time, and Takt time? Leave them in the comments below!