Key takeaways
  • Cycle time is how long one unit takes at a process. Lead time is how long the customer waits. Throughput time is how long a unit spends inside your system.
  • Lead time is almost always dominated by waiting, not working. Cutting cycle time rarely moves it much.
  • Measure lead time from the customer's clock: order placed to order received, not first touch to last touch.
Why the distinction matters
Cutting cycle time by 20% may change lead time by nothing

If a unit spends 4 minutes being worked on and 3 days waiting between steps, halving the work does almost nothing for the customer. The queue is the lead time, and that is where the improvement is.

The definitions

  • Cycle time. Time to complete one unit at one process, from start to start of the next unit.
  • Throughput time. Total time a unit spends in the system, including all queues and moves. Sometimes called flow time.
  • Lead time. What the customer experiences: order placed to order delivered. Includes order processing, production, and despatch.
  • Value-added time. The portion of throughput time in which the product is actually being changed. Often under 5%.

How they relate

Throughput time contains cycle times plus all the waiting between them. Lead time contains throughput time plus everything before and after production. Improvements to cycle time only help lead time if the process you improved was the constraint.

Where the time actually goes

In most operations the ratio of value-added time to throughput time is startlingly low. Map one order end to end, recording when work happened and when the item sat idle, and the queues usually account for the large majority. That mapping is normally more valuable than any single improvement it leads to.

Measuring each correctly

  • Cycle time: measure at the station, repeatedly, and record the spread rather than a single figure.
  • Throughput time: timestamp each unit entering and leaving the system. Batch tracking will understate it.
  • Lead time: use the customer's dates. Internal start dates flatter you.

Which to improve first

Improve the one your customer feels, which is lead time, and attack it where the time actually sits, which is usually queues rather than work. Cycle time improvement matters most at the bottleneck, because only there does it change system output.