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Lead Time and Cycle Time are two important metrics in Lean and process improvement in general. However, many people do not seem to understand the difference and their relationship. In fact, many use them interchangeably. This can lead to confusion in understanding the true problems in a process, and worse, poor decisions in process improvement.
I often observe such confusion on internet discussions as well as in organizations I support in Lean Six Sigma training and deployment. Here is an example:
Another example on the iSixSigma forum:
Before I refer to a good source to help understand the definitions and application of these terms, lets consider a simple process doing laundry.
There are 3 steps: wash, dry, fold. If we assume the time to do each load is 30, 45 and 30 minutes, respectively, what are the Lead Time and Cycle Time of the process?
I encourage you to answer this question before going to the following link, which used this simple process to illustrate these terms exactly 10 years ago (04/18/2000).
You may notice that this link is not on Lean or Six Sigma but general business (operations) management. These terms and concepts are not developed by, or limited to, Lean or Six Sigma.
In summary, here are what I use to help understand the difference and their relationship.
1. Lead Time and Cycle Time dont have the same unit although their names are both “Time.” Lead Time is measured by elapsed time (minutes, hours, etc.), whereas Cycle Time is measured by the amount of time per unit (minutes/customer, hours/part, etc.). It does not make any sense to add one to, or subtract one from, another.
2. Cycle Time is actually a measure of Throughput (units per period of time), which is the reciprocal of Cycle Time. This relationship is analogous to Takt Time (amount of time per unit), which is the reciprocal of customer demand rate (units per period of time). Note that by definition, Cycle Time (or Takt Time) is an average value.
3. Lead Time and Cycle Time are related by Work-in-progress (WIP) in the entire process, in a relationship described by the Littles Law:
Lead Time = Cycle Time * WIP
Lead Time = WIP/Throughput
4. The Cycle Time above must be the process cycle time, which is determined by the bottleneck. Cycle Times of individual steps cannot be used alone to calculate the process Lead Time without knowing the WIP.