Cycle Time Formula: How to Calculate Cycle Time
Although it's not a physical good, time is a valuable resource in business, production time, and life in general. Anyone involved in manufacturing understands how impactful time is to productivity and to a company's bottom line when managing costs and revenue.
Time is directly connected to several key performance indicators (KPIs) that measure a company's ability to produce, grow, meet customer demands, and maximize results. Cycle time is one metric that allows manufacturing leaders a chance to learn more about productivity.
In this post, learn what it represents, how to calculate it, and why there are a few different ways to leverage it.
Here’s What We’ll Cover:
What is Cycle Time?
Cycle time is the average time that a process takes from beginning to end. This is the simplest definition as it relates to a general concept of production.
To go a step further, cycle time usually represents the period of time from initial commencement to product release. The timer starts when the goods required to make a product are received and ready, and it continues until the finished product rolls out of production and is ready for sale.
Since cycle time represents the processing time of a specific product, it also includes any time lags or pauses that happen either intentionally or as a result of an error.
Why is It Important?
Average cycle time is important because it provides insight into the productivity of a manufacturing system. This is true for large corporations, midsize production teams, all the way down to solo entrepreneurs who manufacture products in the comfort of their own homes.
Without this metric, business leaders may not have a true understanding of how much time it takes to produce a single item for sale. This information is critical for a few reasons.
- It sheds light on any impediments in the manufacturing process.
- It provides insight into labor hours and comparable wages based on time and effort.
- Decision-makers can gain a complete picture of whether the item is priced reasonably given the time it takes to create it.
The Definition Debate
Unfortunately, not all manufacturers and business leaders define this metric in the same way. This is not to say that cycle time isn't valuable, but that each separate entity follows its own rules and definitions.
For example, one manufacturer might begin the calculation from the moment the raw goods arrive on the factory floor. A different manufacturer might choose to start the cycle only when those raw materials make it into the hands of the first technician.
Although each manufacturer could be correct, these discrepancies make it difficult to compare the delivery cycle time between companies and industries.
What is the Cycle Time Formula?
Although it is commonly confused with takt time, cycle time is simple to calculate and relatively easy to understand. In order to calculate this KPI, you'll need two critical pieces of information.
The total number of goods (x) produced
The total time required to produce that number (x) of goods
With these two data points in mind, the formula is:
Cycle Time = Total production time/number of goods (x) produced
Depending on the manufacturer, there may be a few different variations of this formula. The above example, however, is the simplest method for understanding average cycle time on a basic level.
Cycle Time Measurements
With each unique application comes different ways to calculate and express delivery cycle time. Don't be caught off guard if you spot various measurements in a standard formula. For instance, some businesses might choose from any of the following measurements.
- Parts per second
- Parts per minute
- Minutes per part
- Parts per hour
None of these variations is necessarily incorrect. They are simply different ways of looking at the delivery cycle time of a particular product from start to finish.
What Steps Follow the Cycle Time Calculation?
Once the result is known, companies and business leaders can use the final metric to reduce production time while keeping operations manageable and realistic. By evaluating the production process, it's more feasible to remove barriers and establish healthier workflows. This process might include:
- Getting raw materials delivered more quickly
- Hiring more qualified technicians to complete a particular step
- Removing excessive or unnecessary preparatory steps
- Maintaining quality control in a seamless and resourceful way
These steps should be taken in light of healthy and honest manufacturing expectations. Reducing cycle time at the expense of worker safety, health, or capacity is not an ideal response.
Who Uses the Cycle Time Formula?
The cycle time formula is mostly used by manufacturers and other professionals who rely on the cost and time of production. Since cycle time is a critical part of calculating Overall Equipment Effectiveness (OEE), it may also be used by anyone on staff who relies on the OEE metric.
Cycle time is also implemented by other types of manufacturing systems. This includes enterprise resource planning (ERP) and the manufacturing execution system (MES).
When cycle time is used by both the ERP and MES systems, it's often for the purposes of scheduling employee work time, purchasing raw goods or materials, and completing accurate costing calculations.
Cycle Time vs. Takt Time
Cycle time and takt time are often used interchangeably, but it's important to recognize the differences in these two metrics. Although the former represents the average time it takes to produce an item for sale, takt time is how quickly a company must produce an item in order to satisfy customer demands.
In this regard, takt time factors in an external pressure (customer demand) to meet an end goal. If a company can't satisfy the takt time calculation, it must take further steps to reach that goal. This can include hiring additional manpower, increasing resources, or speeding up the production process.
Confusing these two metrics is a common mistake, but it's important to differentiate them in order to compare accurately. Many experts advise that when cycle time and takt time are similar, there's harmony between the production capabilities and consumer needs. If the takt time is longer or shorter than the average cycle time, a business may need to rethink its production or marketing strategy.
Cycle Time Examples
Since cycle time is relevant to many industries, the possible examples are nearly endless. For this example, let's start small.
Imagine a home-based carpenter who produces hand-carved chairs to sell to local customers. In this example, cycle time does not include the time that the carpenter spends drawing designs, marketing each chair style, or making a product delivery. By understanding the time component more thoroughly, the carpenter can decide how many chairs he wants to produce and how he should price them.
Next, consider a large fashion company that manufactures thousands of articles of clothing to sell to customers around the world. An ideal cycle time is also important for this type of business since it needs to determine an appropriate batch size for each fashion season and geographic market. In this scenario, the company may need to determine the best unit of measure for its particular products and production needs in order to stay profitable.
Although the cycle time calculation is not one that the average consumer needs to grasp, it's an especially useful metric if you run a production line. Even small and home-based businesses can benefit from understanding how long it takes to produce a single item for sale.
With a clearer understanding of the setup time, production process, and final delivery time, businesses can better meet demands while providing customer satisfaction. This holds true no matter what you produce or what size business you run. The end goal should always be to provide the best experience possible while making the most of valuable resources.
More Resources on Production and Productivity
- Takt Time Vs Cycle Time Vs Lead Time
- 6 Ways to Manage Rapid Business Growth
- How Job Order Costing Boosts Profitability and Paves the Way for Business Growth