Often there is confusion about what are Lead Time and Cycle Time. Many of us are not aware of the differences between Lead Time and Cycle Time (Lead Time Vs Cycle Time). In this blog, let’s have a deep dive of what these measures are, why do we need them, and how we can use them to improve ourselves.

History of Lead Time & Cycle Time:

These metrics have come from the manufacturing industry. In the Car manufacturing industry, before these metrics were defined, the measurement of productivity was about how many cars were released by the end of a specific period, say a month. For example, 1000 cars were produced this month. However, the challenge was that all the cars were shipped to customers together, hence the first customer and the 1000^th customer both got the car at the same time.

The first customer got the care late compared to the 1000^th customer. This happened because the productivity measure was “Utilization of People”, which was a more internal measure.

Later, the productivity definition started changing to the customer perspective. From a customer perspective, the productivity measure was the shorter time to receive a car from the time of booking. Hence, the metric also changed to “How fast can we deliver ONE CAR to the customer?” instead of “How many cars can be delivered to customers by the end of a month?”

Hence, PRODUCTIVITY IS NOT UTILIZATION OF PEOPLE, BUT IT IS THE VALUE DELIVERY IN A SHORTEST SUSTAINABLE TIME.

This was the origin of Lead Time and Cycle Time measurement. Now, let’s look at the definition of what is Lead Time and Cycle Time.

What is the Lead Time?

Lead time is the metric used to measure the time from the moment a customer placed the order to the time that the order is delivered to the customer.

For example, let’s assume that the customer placed the order on 10^th September and the order is delivered to the customer on 20th September, the total lead time is 10 days. It’s the total time taken between the customer’s need and the value delivery to the customer.

In short, it is the latency between initiation and completion of the process. In the Car manufacturing example, Lead time includes order preparation time, setup time, manufacturing time, assembly time, inspection time, and transportation time till it reaches the customer.

What is the Cycle Time?

Cycle time is the subset of the total Lead Time. Cycle time is the amount of time taken to actually start working on the production of the item up until the product is ready to go for shipment. It starts when the work starts, and it is moved to the “In Progress” state and it is done when it is ready for release to the customer. The below picture depicts both well.

The cycle time will include the time needed to produce the item including the wait time as well.

Lead Time VS Cycle Time: Examples

Let’s take a few examples to understand where to focus.

Lead Time and Cycle time are almost the same

Lead Time is 50 days and cycle time is 45 days. This means, most of the lead time is in execution because cycle time is almost the same as Lead time. In such a case, focus on each process step of a cycle time and identify improvement areas. Improving cycle time will help improve the lead time.

Lead Time is way bigger than the cycle time

Look at the below picture. Lead Time is 50 days and cycle time is 10 days. This indicates that the Lead Time is much longer compared to the cycle time.

The improvement focus on reducing the Lead Time should be beyond the cycle time window. For example, look at the process elements that are before the cycle time start (before the “In Progress” state) and after the cycle time (post ready for the production release).

Look at another example. In this example, the lead time is 500 days and the cycle time is 250 days. Where do you focus on improvement here?

Since both are too long periods, it is important that we focus on process steps to identify and eliminate waste from both cycle time and beyond cycle time. Identifying the bottlenecks and removing the biggest bottleneck will be the ultimate goal of having these measurements.

How do we use Lead Time & Cycle time?

Let’s now look at what we get by measuring both Lead Time and Cycle time. Finding these will help us to understand the total time taken and will lead to the identification of bottlenecks and removal of the same. What if there are multiple bottlenecks in the entire flow? Focus on removing the biggest bottleneck.

Examples of Lead Time & Cycle time in Layman terms:

Let me try to explain these again in layman’s terms with some real-time examples.

Cycle time is the time to make the sandwich from the start of the preparation. Lead Time is the time taken to deliver the sandwich from the time the order is taken.
Cycle time is the time taken to manufacture a car and keep it ready to ship from the start time. Lead Time is the total time taken to hand over the finished car from the time the order is placed by the customer.

How do we use Lead Time & Cycle Time in Software?

In Software, Lead Time starts when the requirements are expressed by the customer and entered into the product management/backlog management system. Lead Time is considered till that specific backlog is released to the customer.

Cycle time measurement starts when the work is moved to “In Progress” by the engineering/development team. It is considered till it is moved to the “Done” state. Done doesn’t mean that it is released to customers, but it is done from engineering and ready for release.

What are the Differences Between Lead Time and Cycle Time?

Now that we are aware of what is cycle time and lead time, it is time for us to know their differences.

Difference 1: As I mentioned earlier, the cycle time officially starts when the item is moved to “In Progress” and it ends when the item’s status is changed to “Done”.

Lead time will be calculated as the time it takes for the single unit of product to be created (say a backlog item) and then added to the product/program backlog and till it is shipped to the customer.

Difference 2:

Cycle time is always measured from the perspective of the manufacturer, whereas Lead Time is from the perspective of the customer.

Difference 3:

Cycle Time helps measure the time and identify the bottlenecks only in engineering. Lead Time helps measure the total time and identify the bottlenecks across the system from request to release.

As they are very important in product development, you should understand them in depth with the best Kanban management professional certification courses that are available on various platforms. We will discuss this part in the end. So let us begin to get some useful information about these useful metrics.

One of the metrics to measure both Cycle time and Lead time is the “Cumulative Flow Diagram”.

Benefits of Calculating Cycle Time and Lead Time

Cycle time helps determine the overall efficiency of the production unit/engineering teams etc. Lead Time helps determine the total time taken to deliver value to customers from the order time. Both help measure the actual time taken.
Both help identifies the bottlenecks in the system flow that led to the longer cycle time and lead time. Most of the time, the bottlenecks are not in the execution, but they are the biggest wastes in the system. These metrics help identify wastes in the system.
Lead time plays a great role in estimating the demand. Alongside this, cycle time is also a key metric that helps in understanding the efficiency of the process and how much time it takes for the backlog to be delivered.

Both these factors can provide great insights to the team and make sure that they are putting efforts in the right direction and giving their best to reduce both these time metrics.

Tips for Reducing Cycle and Lead Time in the Project

Below are some of the tips that you can use in your project to reduce these time metrics and have perfect efficiency in the developmental processes.

Invest in good project management software

If you think that calculating the project cycle and lead time can be a daunting task, then you should try accessing the project management software that can help you measure Lead Time and Cycle Time. Calculating these metrics manually is a huge task that cannot be sustained.

Automate your process

The best way to reduce Lead Time / Cycle Time is to automate the processes that are creating bottlenecks. Here is an example of automation.

Process Automation: There are many IT-intensive business processes that are needed to own, administer and manage various process elements. Automating these business processes will eliminate unnecessary waiting waste and defect waste.

Final Takeaway

Knowing the difference between lead time and cycle time and both reducing and controlling these time metrics will help deliver value to customers much faster, which will lead to high customer satisfaction and engagement. The overall performance of the business will increase. If you are looking to learn more about them then Kanban training is going to be very helpful for you.

The best platform to go for your Kanban course is LeanWisdom where you are going to learn from the best professionals. They will ensure that you are ready for your journey ahead in this career.