Cycle time is all about the delivery speed of a product or service to the market or customer. To help you on your way, this article explains what cycle time is, the significance a shorter cycle time can have for businesses, and once you have got this down, we broaden your horizons on how to better manage cycle time to the benefit of your business and customers.
Cycle time tells us the effort spent on making an item of inventory stock. It includes the total time from the beginning to the end of this process, as defined by you and your customer. Cycle time includes process time, during which a unit of inventory stock is acted upon to bring it closer to a final output, and delay time, during which a unit of work is spent waiting to take the next action. This can be commonly expressed by the following equation:
Cycle time = Production time + Wait time for production
Like other time measurements, you can distinguish between the current cycle time you actually have, simply called cycle time, and the cycle time you want – the target cycle time.
In a nutshell, cycle time is the total time used to move inventory stock from the beginning to the end of a physical process. It is important to note that cycle time is not the same as lead time.
The significance of cycle time
The shorter the cycle time, the shorter is the lead time to market and therefore a business can then launch products to market much earlier and quicker.
Take for example the electronics smartphone market. The continuous enhancement of technology and features results in launching new models every other week. Here a reduced cycle time is of prime importance as this will directly reflect on the sales of the product before a newer model is then entered into the market.
Additionally, if the cycle time of a business is shorter than its competitors, then this can help result in a competitive advantage by reaching the market first. The spillover benefits of reduced cycle time may result in higher customer preferences for that business. In a similar way, customer satisfaction may also increase as products are in a position to be delivered before their expected delivery time — exceeding customer expectations.
Shorter cycle time can also signify higher efficiencies. The less cycle time an inventory stock has can reduce costs, so profitability and ROI increases. Similarly, this allows the opportunity for productivity to increase. Decreasing cycle time is achieved by reducing the time spent on less value-added activities, simplification and streamlining of processes directly reducing the cost of operations.
Tips to reduce cycle time
- Reduce wait time — create a work breakdown structure and define parallel tasks, tasks that can be performed at the same time.
- Process re-engineering — find the best way of performing the activity, where the outcome could be changing the sequence of tasks, automation and streamlining tasks.
- Time management and scheduling — predicting and identifying issues or bottlenecks in advance will reduce downtime. Revisiting scheduling helps to pinpoint improvements.
- Employee involvement — by initiating workshops, businesses are able to collect improvement opportunities from employees to reduce cycle time. Ideas generated by people working in core processes will yield valuable insights.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.