Process time
Cycle time or lead time is the end-to-end delay in a business process. For supply chains, the business processes of interest are the supply chain process and the order-to-delivery process. Correspondingly, we need to consider two types of lead times: supply chain lead time and order-to-delivery lead time. The order-to-delivery lead time is the time elapsed between the placement of order by a customer and the delivery of products to the customer. If the items are in stock, then it would be equal to the distribution lead time and order management time. If the items are made to order, then this would be the sum of supplier lead time, manufacturing lead time, distribution lead time, and order management time. The supply chain process lead time is the time spent by the supply chain to convert the raw materials into final products plus the time needed to reach the products to the customer
Lead Time Break up
Lead Time A lead time is the period of time between the initiation of any process of production and the completion of that process. Thus the lead time for ordering a new car from a manufacturer may be anywhere from 2 weeks to 6 months. In industry, lead time reduction is an important part of lean manufacturing.

In many manufacturing plants, less than 10% of the total manufacturing lead time is spent actually manufacturing the product. And less than 5% of total customer lead time is spent in the production process. The cumulative cycle times of the processes in the value stream are the theoretical limit to how much we can reduce lead times, without investing in different equipment. Clearly, there is ample opportunity to reduce lead times in most organizations.

Reasons of high lead time are

  • Poor scheduling
  • Inflated inventories
  • Unacceptable quality
  • Inefficient work flows
  • Supplier difficulties
  • Various other logistical chain problems

      Lead Time = the average time it takes to complete the process - from start to finish - including time spent waiting around to be worked on.

      Calculation = Cycle Time x units of WIP x number of operations + time delays between processes

      Car Dealer 1Car Dealer 2
      Call+ make appt+ Take car in+ Write up order+ Wait for shuttle+ Call+ see if car is done+ Get ride back to dealer+ Check with service+ Pay cashier+ Look for your car+ Check oil+ Drive away Drive into lube area+ Write up order+ Pay cashier+ Wait+ Pick up car+ Drive off

    Value-Added Time (VAT): The time necessary to actively work (design, engineer, fabricate, etc.) on an item (such as a project design, a beam, a clip, etc.). The time spent to perform a conversion task. VAT does not include setup or wait time.

    • Any activity that is essential to deliver the service or product to the customer
    • Must be performed to meet customer needs
    • Adds form or feature to the product/service
    • Enhances quality, enables on time or more competitive delivery, or has a positive impact on cost (and therefore what the customer pays)
    • Customers would be willing to pay for this work if they knew it was being done

    Setup Time: Time it takes to change over and ready a machine or production unit to start the next task or operation.

    Queue Time/: Wait time. The time that an item is sitting around waiting in a queue.

    Batch Time: The time that an item is waiting for batch to move.

    Business NVA : Activities that are required by the business to execute the VA work but add no value in the eyes of the customer,EXAMPLES: Order entry/processing, product development/research, sales/marketing, IRS/OHSA/EPA reporting

    Usually includes work that:

    • Reduces financial risk
    • Supports financial reporting requirements
    • Aids in execution of VA work
    • Is required by law or regulation
    Non-Value Added or Waste NVA: Activities that add no value from the customer's perspective and are not required for financial, legal or other business reasons. There are endless examples of NVA. Here are a few:

    • Handling more than is minimally necessary to move the product/service along, i.e. unnecessary transportation, moving/sorting, paperwork, counting
    • Rework to reduce/fix errors
    • Duplicative work, supervision or monitoring
    • Waiting, idle time, delays
    • Overproduction
    • Over processing (too many steps), exceeding customer requirements
  • Process Cycle Efficiency
    Best measure of overall process health.Total Lead Time can either be measured by measuring the total time it takes “things in process” to transit the process.PCE tells how efficiently the process is converting work-in-process into exits/completions.Low PCE processes have large NVA work and costs and therefore great opportunities for improvement. Create a Value Stream Map to indicate these opportunities. PCE values of 10% or so are common pre-improvement.

    Percentage of VA time in the process: PCE = VA Time/Total Lead Time


    Typical Cycle Efficiency

    World-Class Cycle Efficiency










    Continuous Manufacturing



    Business Processes – Transactional



    Business Processes – Creative/Cognitive



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