Let's understand cycle time through a scenario, wherein we assume that you have a business that caters to customers with products online and offline. Your goods are to be delivered shortly, but your customers keep calling you to ask for the exact date of delivery. And then you start wondering whether you will be able to supply the ordered item on time.
To know this, you need to know how long it would take to manufacture the product ordered. That is essentially your cycle time. In this article, we have discussed cycle time definition, formula, and how to calculate to simplify these concerns and improve business efficiency.
What Is Cycle Time?
Cycle time is the amount of time required to manufacture or complete a single unit of production or process, from start to finish. Cycle time is very crucial in the manufacturing industry as it is directly related to the volume of production and impacts profitability.
For example, in a manufacturing unit, the cycle time is the time it takes from the procurement of raw materials to when the finished product is ready for shipment. So, it is the time taken from the beginning of the manufacturing process from the raw material stage to the finished product stage.
Taking another example, in a call center, the cycle time is the time it takes from receiving the customer's complaint to the time the issue is resolved.
It is all about the speed or quickness of time in which you can deliver your product to your customer based on the volume of their production.
By reducing cycle time, you can increase the output and enjoy cost savings, increased revenue, and improved customer satisfaction. It is important to remember that when trying to reduce cycle time, you must not skip important processes like quality control. To reduce cycle time, manufacturers must identify loopholes and improvement areas to get things done on time and accurately. It is important to know all the inefficiencies that are plaguing your unit to become efficient and more profitable. Therefore, cycle time also is a measure of your productivity.
Importance of Cycle Time
Now that you have understood cycle time, let's look at its importance in some more detail. In business, you cannot rely on rough estimates, if you want to succeed. You need to know the exact cycle time of your products to calculate productivity and fulfill orders. When quality products are delivered faster, it increases customer satisfaction.
When you measure cycle time, you can identify bottlenecks in a process. Next, think of ways to remove those as it will help to improve efficiency and reduce waste. By reducing cycle time, organizations can produce more products in less time leading to increased production and profitability.
Benefits of Calculating Cycle Time
Calculating your cycle time gives you numerous benefits.
Ascertains Timeliness
The biggest benefit that you can derive from this metric is your ability to deliver on time. If you can deliver on time then there is no displeasure from your customer's end, you gain their loyalty, and there is no confusion in your unit.
Streamlined Production
If you have a streamlined production process, the cycle time will go down automatically. So, both processes and cycle time are closely related. When workers have no confusion about their roles and responsibilities, everything goes as per plan.
High-Quality Products
When processes are well-defined, machinery is in order and workers are trained, it ensures faster and smoother production. You know where to install what machinery or where you need skilled personnel to ensure the best outcomes. The product is also perfect without any complaints.
Identify Changes
Cycle time also highlights the need for addition, alteration, and various rectifications that are required in your plant to roll out the best products in the industry. And once you have quality warranted to your customer there is no looking back for you in the longer run. However, for this, you need to ensure regular monitoring to identify any changes that have taken place in your unit.
Shortages and Glitches
When cycle time and production are closely monitored, you can identify problems without delay. For example, if there is a shortage of raw materials, manpower, or even a machinery breakdown, it is immediately brought to the notice of the concerned person. Timely solutions to problems will lead your business to profitability.
Remove Bottlenecks
If your cycle time is more than your competitors, it means something is lacking. You can identify those problem areas in your business, rectify them and reduce your cycle time. Removing production problems on time is very important to fulfilling orders on time.
Increased Profits
When you deliver the product to your customers on time by reducing the cycle time, it also results in a reduction of costs which ultimately increases your profitability. Reduced cycle time means less electricity consumption, fewer labor costs, and more such costs. These savings add to the return on investment (ROI).
Consistent Production
If you have thorough insights into your production flow and cycle time, you can customize various processes to remove bottlenecks and make your production consistent. This also eliminates underproduction and overproduction scenarios.
Highly Satisfied Clientele
Since streamlined cycle time also ensures customer satisfaction, this acts as an indicator that your business or service provider is on the right track. This will ensure that you grow in the industry.
Identify Problem Areas
What better could it be when workers are efficient? If your cycle time is more, then you know that your team or assembly line either has problems. However, if you can deliver on time then you know that the cycle time is perfect. So, cycle time helps you monitor both your staff and your assembly line efficiency.
Challenges of Calculating Cycle Time
Now just as there are numerous benefits to cycle time, there are challenges also surrounding it. So here we go for the challenges:
- Sometimes workers work individually without any communication or collaboration. This can impede the workflow which is not what is desired.
- Sometimes the right tasks may not be prioritized which may lead to a lack of focus where required. This happens because all areas are worked upon at the same time.
- Certain weak areas need to be taken care of individually which may not happen with a shorter cycle time.
- Reducing cycle time without logical thought can make supply and distribution go haywire at times. Certain important steps may be skipped to reduce cycle time, which can be risky for certain projects or the production setting.
Cycle Time vs Takt Time vs Lead Time
There is a difference in the three mentioned terms. Takt time and lead time are the nearest counterparts of cycle time but with some differences that you should get right. The three terms are explained briefly as follows:
- Cycle time is the total amount of time taken to complete a certain task, production, or service, or refers to the entire cycle duration from start to finish.
- Takt time is measured in terms of the speed at which a task is to be completed to satisfy your customer. It is simply a measure of the speed of the completion of the task.
- Lead time is a bit different from the previous two terms. It is the total amount of time taken to go through the production cycle that begins from the stage where the customer places the order right through the stage where the final payment is made for the delivery.
Now let's understand each in detail.
Cycle Time
Cycle time as you know very well by now is the total amount of time taken by a production unit to manufacture the product right from the raw material stage to the final product stage. Basically, it is the amount of time taken to manufacture or produce a service or product. To get this done, you need to get all the tasks completed simultaneously.
Takt Time
Takt time is the measure of the speed at which you can complete the task to ensure that your client is satisfied. It is only a measure of speed and not time as in the latter. In this, the production speed is measured and accentuated.
If you want to compete in this competitive world then your cycle time should directly match up to your takt time. The more perfection you achieve in accomplishing a balance between cycle time and takt time, the longer the list of happy customers and the more booming your business will be. It means you have been able to match up to your client's demands.
So, if your cycle time is more than your takt time, it is an indicator that you will have dissatisfied customers. Hence, you need to find ways to increase the efficiency of your processes to reduce the cycle time. On the other hand, if your cycle time is less than your takt time, there may be room and scope for more improvisations which is also another way to flourish and prosper. You get time to work efficiently and warrant that the product's quality is unmatchable.
Read Also: Inventory Levels: Meaning and Different Levels of Inventory
Lead Time
This is a bit different from the previous two terms, although the difference is marginal. Here's how lead time is assessed. First, your customer places an order, and you promise a certain amount of time to deliver it. Finally, your product or service is ready and you deliver it to your customer and take the final payment from him or her. This is your lead time. It means it is the time beginning right from the placement of the order to delivering it to get the final payment.
All these three are different formulas that you can apply to your business or service separately. They will provide you with an in-depth understanding of your business with which you can make good decisions regarding the supply chain and production process to achieve success.
Below is a table comparison of Cycle Time vs Takt Time vs Lead Time.
| Term | Definition | Key Points |
|---|---|---|
| Cycle Time | The total time taken to complete a specific task, production, or service from start to finish. | - Measures the duration from the beginning to the end of a production process. - Focuses on production efficiency. |
| Takt Time | The speed at which a task must be completed to meet customer demand. | - A measure of production speed to satisfy customer needs. - Targets to align production with customer demand rate. |
| Lead Time | The total time from when a customer places an order to when they make the final payment for delivery. | - Includes the entire process from order placement to final payment. - Indicates overall responsiveness to customer orders. |
Read Also: Proforma Invoice in Excel, Word, and PDF
How to Calculate Cycle Time?
Calculation of cycle time can be done using the formula given below:
Cycle time = Net production time (per product)
OR
Cycle time = Net Production Time / Number of Units Produced
But to calculate the formula accurately, you must consider the following six steps which are very essential:
So first calculate the net production time and divide it by the total number of goods produced. Then permute value into time. Cycle time can be calculated in many different units like parts per minute, parts per hour, parts per second, minutes per part, hours per part, and seconds per part. You can make interpretations of the results by comparing them with the cycle time of competitors or previous cycle times.
- Cycle Time in Professional Services
Cycle time based on catering to the professional services industry can be clearly seen in a marketing agency. Let's assume you are an employee at an agency that is into internet marketing. Your focus is to draw traffic to your client's site using various sources. So as a leader of the team, you will focus on deploying various online and offline channels for the same.
You will experiment with various strategies and design alternatives fitting your business. So by applying the cycle time formula, you can deduce the number of advertisements that need to be run to match up to your promises.
Just take for example the following:
You need 30 ads per month. You have 4 designers on your team. Each will take 5 hours to make one ad. Your cycle time would be:
Cycle time = 5 hours / 1 ad
- Cycle Time in Delivery Services
It is calculated in the same manner in delivery services. Say you have a grocery delivery service at your command. The delivery service assigned to each delivery boy is the same every day of the week. They deliver in the same neighborhood working a 12-hour shift with the routine one-hour lunch break and the extra 30-minute break. After taking into consideration the break slots your delivery time or production time for 20 customers would be:
Cycle time = 10.5 hours / 20 customers This way you will get how much time each delivery boy takes to serve 20 customers with the groceries he is supposed to.
- Cycle Time in Production Settings
The cycle time in a production setting will help you to establish the price of every individual item. Let's assume you are one of those small-scale industry owners who manufacture hand-printed bedsheets. Since you are a new venture, you are not aware of how many bedsheets, you need to manufacture and what time it will take for each to be completed. So, you now need to calculate your cycle time to understand your profit after calculating the costs that are involved.
Your production team works a 6-hour shift each after deduction of all the allowed breaks to produce at least a minimum of 25 sheets. So, your cycle time would essentially be:
Cycle time = 6 hours / 25 bedsheets
With the revelation of this time taken you will get a clear insight into all the costs that are involved. If it is a new and small venture, you need to exercise extra caution in getting things worked out in your favor.
Who Calculates Cycle Time?
Cycle time is one important aspect of any business unit, industry, or even service provider. However, manufacturing units make good use of this metric. It is integral to the proper functioning of any manufacturing unit. It does not matter whether you are a product manager, production line head, manufacturer, process improvement head, or even supplier, you should be aware of it.
Businesses make use of cycle time to know the average time they take to produce goods. For manufacturing units, cycle time is a significant indicator of their performance. In other words, it is a key performance metric for calculating the time taken for the production of goods.
How to Optimize Production Flow With TranZact?
To optimize production workflow, you can use TranZact's expert cloud-based solutions. It will always help you to remain at the top of the industry you are in by meeting the customers' demands on time. So, take note of the following features to make the process simpler. Here you go:
- Implement smart data analysis using data visualizations. The diagrams will show you the important inputs required for cycle time calculation throughout the project or the production process. Input all your operational analytics and get the best insight into your productivity and all other activities relating to it.
- Make a comparison of the estimated time and the actual time with integrated functions. This comparison will help you to make useful evaluations.
- TranZact software will help you to integrate with your existing providers including Tally, BUSY, and AfterShip, leading to the fact that you need not do away with any one of them. It can collaborate with all of them to make a coherent whole.
- Since there often may be more than one cycle time scenario, you can rely on TranZact to make tracking production time simpler through all stages.
FAQs on Cycle Time
1. How does cycle time affect production?
The lower your cycle time the higher your unit's efficiency and the more satisfied the clients. Production capacity also increases with faster cycle time resulting in lower lead time, higher output, and revenue.
2. How to reduce cycle time?
To reduce cycle time, you need to streamline the production process by eliminating bottlenecks and implementing lean manufacturing principles to reduce waste, increase efficiency, and continuously improve processes.
