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# How to Determine Cycle Time, Takt Time, Lead Time

Vaibhav, a reader of Gemba Academy’s blog, emailed us the following question.

1) Cycle Time
3) TAKT Time
4) Inventory Turns

Your help to clear the definitions & formulas for the above is highly appreciated.

Depending on who you talk to you may hear these terms defined differently.

For example, what some people call cycle time others call production lead time, etc.

The key is to understand the concepts of the terms… that way when someone describes a term you’ll know what they mean no matter what they call it.

In any event, here’s my take on these popular terms.  If you have a different twist you’d like to share give us a shout out in the comments section below.

### Cycle Time

Cycle time describes how long it takes to complete a specific task from start to finish. This task may be to assemble a widget or answer a customer service phone call.

Now, you can get fancy and segregate value added cycle time from non-value added cycle time if you’d like.

Cycle time can be measured with a stop watch.

I actually prefer to call this Production Lead Time or PLT for short.

The PLT represents the total time – value added and non value added – it takes a product to make it through an entire value stream.

This is often called the “call to cash” time since it helps us understand the time between taking the order and receiving payment for the delivered goods.

Value stream maps are excellent tools for determining the Production Lead Time.

### Takt Time

The word takt is German and literally means pace or rhythm. When we speak of takt time we’re attempting to understand the rate at which we need to produce our product in order to satisfy customer demand.

To calculate takt time think touchdown, or T/D, since we simply divide the net available time by the customer demand.

So, if our customer wants 240 toaster ovens and we have 480 minutes to produce these toaster ovens, our takt time is 2 minutes per toaster oven (480/240).

Takt time cannot be measured with a stop watch. It can only be calculated.

### Inventory Turns

Finally, inventory turns help us understand how frequently our inventory “turns over” or is used after it’s been purchased.

There are actually a few different ways to calculate inventory turns but the most common method is to divide the Cost of Goods Sold by the Average Inventory Level.

The key is to use the cost of goods sold, or COGS, meaning what we paid for the material, not what we sold the material for.

So, for example, if we have an annual cost of goods sold of \$50,000,000 and our average inventory during this same time frame is \$5,000,000 our inventory turns would be 10. In other words, our average inventory “turned over” 10 times.

If you’re interested in learning much more about lean thinking topics like this please be sure to explore Gemba Academy’s School of Lean where we now offer more than 700, highly engaging, training videos.

### Value Stream Mapping Overview

If you enjoy learning by video check out our Value Stream Mapping Overview video below.  This is the first video in our Transforming your Value Streams Course where we cover topics such as cycle time, takt time, and other lean thinking concepts in much more detail.

1. Anonymous says:

So, for example, if we have an annual cost of goods sold of \$50,000,000 and our average inventory during this same time frame is \$5,000,000 our inventory turns would be 10. In other words, our average inventory “turned over” 10 times.

Ron, Regarding this statement, it is correct to use annual cost of goods sold? What if you measured it month by month? In this case you can predict what is going on and take some action for the next month or another, but not to wait until a complete year. The final result could be obsolet parts.

Measuring month by month you could use the ideal turned over as a target or goal and compare the figures every month.

Regards

2. Wilson says:

So, for example, if we have an annual cost of goods sold of \$50,000,000 and our average inventory during this same time frame is \$5,000,000 our inventory turns would be 10. In other words, our average inventory “turned over” 10 times.

Ron, Regarding this statement, it is correct to use annual cost of goods sold? What if you measured it month by month? In this case you can predict what is going on and take some action for the next month or another, but not to wait until a complete year. The final result could be obsolet parts.

Measuring month by month you could use the ideal turned over as a target or goal and compare the figures every month.

Regards

3. Hi Wilson, you can definitely calculate turns on a monthly basis. In fact, most companies do.

There are also a plethora of ways to get to the “average” inventory number. A lot will depend on the industry and the company’s accounting policy.

4. shaunak says:

Thanks Ron for a wonderful article one again. I have a point to share about cycle times…
Another generalized definition of CT is the rate at which you are getting the output…This created some confusion in my team recently….This is how:
we went to a shop floor where a machine had 3 fixtures for 3 diff operations, and hene it processed three parts simultaneously…a piece has to go through all the three operations one by one…
In this cae, output rate is very different from CT…but since due to the generalized definition, my team mate got confused 😉
My take was that doesnt matter how many operations are performed in the machine, but CT for the machine will be total time a piece spends in the machine (sum of CT for all the operations + waiting time when loading unloading is happening)…..which is very different from output rate….whats you take on this?

5. M J says:

Thnaks Ron for useful information.

Somehow I got confused after reading your article, In the definition of Cycle time you state that you can remove the value added time from non value added and then again in the PLT you say that PLT consists of VA and NVA times. So then what is the difference in CT and PLT? Sorry if this is very basic.

• Hi MJ, for CT, what I meant was that you can segregate (or separate) VA and NVA time to get a better understanding of the total cycle time and help you better improve the process. But doing this doesn’t change the total cycle time… that is what it is. Make sense?

6. Avinash Patil says:

hello if i have an available time of 465 excluding lunch and tea time .
is it available time for me in Takat time ,or i will multiply it to efficiency of 90%

7. Cycle time & takt time are not the same.
Cycle time for a process is the time it takes for that process step to be completed.
Takt time is the average demand from the customer & therefore the rate at which products should be produced

8. areeba says:

T&D electric manufactures high-voltage switches and other equipment for electric utilities. One line that is staffed by three workers assembles a particular type of switch. Currently the threes workers have fixed assignments; each worker fastens a specific set of components on the switch and passes it downstream on a rolling conveyor. The conveyor has capacity to allow a queue to build up in front of each worker. The bottleneck is the middle station with a rate of 11 switches per hour. The raw processing time is 15 minutes. To improve efficiency of the line, management is considering cross-training the workers and implementing some form of flexible labor system.

a) What is the critical amount of WIP that is needed by this line?
b) If the current throughput is 10.5 switches per hour with an average WIP level of 7 jobs what is the average cycle time?
c) What is the practical worst case throughput of the line?
d) Is there any room for improvement on this line?

9. M J says: