What is Lead Time?

Lead time is the amount of time that it takes to get a product or service completed for a customer, from the time of ordering until completion of delivery. A lot of factors can figure into the amount of lead time. Some factors include supplier back-up, other orders that need fulfilling, availability of personnel, the amount of time it takes to actually work on the order, inspection, and the time it takes to deliver the order.

The Benefits of Lead Time

One benefit of lead time is that it allows your business to be able to give customers a set deadline by which a product will be received. Another benefit is that it allows for the spotting of inefficiencies upon the examination of lead time’s components. Specifically, this refers to the preprocessing, processing, and postprocessing stages.

How to Calculate Lead Time

The easiest way to calculate lead time is to take an order and subtract the date of the order request from its delivery date. For example, if an order placed on September 14th and it was delivered on September 28th, the lead time would be 14 days.

LT = Delivery Date – Order Request Date

Another way to figure out lead time is to look at the various factors involved when making a quote. In these situations, you will take into account all of the sourcing, preparation of materials, manufacturing, and delivery of your product in order to calculate lead time. A simpler way to express it mathematically would be:

LT = Preprocessing Time + Processing Time + Postprocessing Time

What is Takt Time?

Takt time is most simply defined as the amount of time a product needs to be manufactured in order to meet customer demand.

The Benefits of Takt Time

Working to be able to meet takt time has some clear benefits for your business. If you are striving to meet demand, you will likely be able to spot bottlenecks in your processes that could be slowing down production. It can also help in the elimination of waste and instead put the focus on value-added work. Striving to meet takt time cannot help but have workers try to find more efficient routines, as well.

How to Calculate Takt Time

Takt time is determined by taking the available working time per shift and then dividing it by the rate of customer demand per shift. It can be represented mathematically with this simple equation:

Takt Time = Available working time per shift / Rate of customer demand per shift

For example, if there are 8 working hours in a day, for the purpose of the equation, it is easier to express that in 480 minutes. If there is an order for 120 units that and the demand is completion in that working day, the takt time would be 4 minutes.

Lead Time vs Takt Time: What’s the Difference?

Lead time and takt time are definitely related to one another, but they can sometimes not be in harmony with each other. Lead time is the amount of time needed to fulfill an order, while takt time is the amount of time that a customer demands. These two times do not always align. For example, there are occasions where the takt time demanded by a customer is simply not capable of being met given the lead time. It is important to be very aware of your lead time so that you are not caught in a situation where an order is placed and your business is unaware of exactly the lead time necessary is. You run the danger, in these instances, of not being able to get an order completed by the necessary time and having an unhappy customer. Should a proposed takt time be too far out of alignment with what is known to be the lead time, it is best in these cases to not accept the order.

There are, of course, instances where a takt time that needs to be met can lead to adjustments in processes that shorten, thereby improving, the lead time. This is good for the interests of all parties as the customer gets their order in the needed time and your business improves processes in order to meet the challenge.

Lead Time vs Takt Time: Who would use Lead Time and/or Takt Time?

Takt time is generally going to reflect the needs of the customer, while lead time is generally going to reflect the needs of the manufacturer. Both sides having knowledge of the other is beneficial to both parties. For example, if several customers have been proposing a takt time that is shorter than a lead time, the manufacturer can offer this takt time as a hypothetical scenario to their team in order to find where adjustments can be made in order to meet that hypothetical takt time on future orders. Inversely, if the customer is aware of what the lead time of the manufacturer tends to be, they may be able to do what needs to, in order to have their takt time be more in-line with what the manufacturer is capable of.

Choosing Between Lead Time and Takt Time: Real World Scenarios

A customer comes to a manufacturer of baseball gloves in order to purchase the gloves for an entire little league for the upcoming baseball season. The customer has to have 300 gloves by the beginning of the next week. The manufacturer is low on materials, so they contact their supplier about putting in a rush order. Another factor is that the number of days to work on the order is less than typical as there is a three-day weekend coming up. After speaking to the supplier, it is clear that the manufacturer will not have the materials in time, nor would there be enough days to complete the order anyway. With this information, it is clear to the manufacturer that the takt time needed by the customer is too far out of alignment with the lead time of the company. The manufacturer, regretfully, has to turn down the order.

Summary/Conclusion

For your business, it is important to do your best to make sure that lead time and takt time are in agreement as much as possible. Sometimes, of course, this is simply not possible when a customer takt time is too unrealistic. There will be occasions, though, when the lead time will be close enough to the proposed takt time that improvements can be made to processes in order to shorten the lead time and rise to the occasion.