Before embarking on a Lean project, we should be clear with the various times that are used in Lean improvements. While Lean practitioners have various ways to define these times, I detail these as I use them successfully in my transformations. While the types of time used in Lean are large, the following is a partial listing of the ones that all Lean change agents (both leaders and project facilitators) beginning a Lean journey should know.

Lead Time—This is the time from when the customer gets in touch with the organization until he or she is served with the required product or service. This is also called customer-to-customer time.

Throughput Time—This is the time required to process a product or service within an organization. The time starts from the moment the organization begins working on a request until the product or service is shipped to the customer.

The difference between lead time and throughput time is explained in Figure 1. This is a figure of a liabilities account opening (savings account) process in a bank. The application form is received by the branch wherein there is initial scrutiny or acceptance, after which it is sent to the back office for full processing, and then the deliverables (such as an ATM card, check book, etc.) are sent to the customer through the mail. Here the lead time is from the time the customer enters the branch until he receives the deliverables, while the throughput time is the processing time within the branch and the back-office after the application form is received.

Just improving throughput time might be quite myopic. To make an impact on the customer, it is imperative that we make sure that the lead time of the process improves. (Click on diagram to enlarge.)

Cycle Time—This is the time taken to do the smallest unit of work (task) of a process before it is repeated again. This is explained in Figure 2 wherein a part of a process, which has activities such as data-entry, maker and checker, is shown. The time taken to complete one unit of each of these activities is the cycle time. The cycle time should be captured using a stop-watch. (Click on diagram to enlarge.)

Value-Added Time—The time spent in doing the value-added activities in a process or the activities that the customer is willing to pay for.

Non-Value Added Time—This is the time taken to do the activities in a process that the customer is not willing to pay for.

Business Value-Added Time—This is the time taken to do the activities in a process that the customer is not willing to pay for but is required for doing business (includes activities done for control, assurance, regulation).

Just remember, lead time is the summation of value added, non-value added and business value-added time.

Lead Time = Value Added Time + Non-Value Added Time + Business Value Added Time