In this chapter, we will discuss cycle time and lead time. Understanding and managing these metrics within organizations is critical for customer satisfaction, efficient processes, and competitiveness in the marketplace. It’s important to differentiate the difference between lead time for an overall process versus cycle time of the various steps within a process. In this example, we have the cycle times and lead time for the process of publishing a book. The cycle time for the task of meeting with the author is two days. But that’s part of the bigger picture of the end-to-end process cycle time of 14 days. Which is made up of all of the activities across the value stream. Each of these activities has its own cycle time. In order to evaluate a process, we can create a value stream map with headings for each of the activities in the process. In this example, it takes two days to meet with the author and three days to read and approve the manuscripts. Then we move onto the proofing stage, which takes five days and another two days for the final proofreading. In the final two day activity, we post our final publication. Perhaps an article, blog, or other announcement to market our products and services. There are many benefits of cycle time reduction. Taiichi Ohno, considered the father of the Toyota Production System, said that the essence of lean is to continually shorten the time it takes. From the time we get an order to the time we fulfill the order and get paid.
It’s important to reduce waste. But we can’t do that without removing unnecessary steps. That leads to significant cost reduction and the opportunity to increase productivity. Because we’re not wasting time and energy on things that don’t add value for our customers. Overall quality improvement is realized. Because in order to take time out of a process, we have to examine the process very carefully. We can learn a lot about what is slowing things down. It could be quality delays for inspection and rework, reviews, or other issues. By getting it right the first time, we can reduce the overall cycle time or lead time and also see big improvements in the quality. We can also decrease product time to the market and improve customer satisfaction. Other major benefits could include improved cash flow by reducing cash required to hold inventory or collecting cash for products that are delivered faster. We can also reduce the amount of working capital that the organization requires in the form of inventories and work in process that’s in the system. There are huge benefits to an organization when you experience a 30 to 70% reduction in cycle time.
For example, return on assets, increased revenues, less inventory, shorter delivery lead times. And faster speed to market are all things that can be dramatically improved by reducing overall cycle and lead time in the process. In addition to these direct benefits, the dollar value of acceleration in projects could mean billions of dollars for larger organizations. In addition, quality also improves when the cycle times are shortened. We need to think about project overload as one of the major causes for long lead time to get to market. And a longer lead time to market means lost revenue. Another benefit, of course, should be improving customer satisfaction. Now let’s explore the breakdown of some of the key elements that make up cycle time throughout the entire business cycle. We build in time for concept and feasibility studies. If we can do these quicker, we can move forward the beginning of the design and development cycle. And if we can accomplish that more quickly, it means we can get to market sooner. This means we get a bigger market share of the market and differentiate ourselves in the marketplace based on speed. Then when customers place orders to us, we can continue to collapse that time and reduce inventory and the cash to cash cycle. So think about this as a kind of cascading flow across the whole process around concept feasibility, design prototyping, piloting, production, and phase-out. Anything we can do to shorten this end-to-end flow in the overall cycle is a cycle of continuous improvement.