In logistics, time is critical. A company’s cycle time is a significant, yet complex process that runs from the time a vendor ships materials to you through the point when you ship the final product to the customer. Cycle time is a measurement of how many units of product are received, produced and shipped in a certain period of time, and it indicates the general efficiency of the supply chain. A company’s cycle time consists of several linked parts:
- production cycle time – total time producing a product
- order processing - time of processing an order
- cash-to-cash cycle time – time needed to regain financial investments
A long or extended cycle time tests a company’s ability to convert manufacturing costs to profits. A short cycle time maintains an efficient and agile supply chain. Productivity loss means wasted resources, extra costs, bad customer experiences and less success in the market.
Using cycle time as a performance metric can reveal insights into efficient and inefficient supply chain processes. Both internal and external factors contribute to the length of a cycle time. Some of the controllable factors for improving cycle time are: capacity constraints, labor, manufacturing congestion, inventory surplus, quality of product, and schedule flexibility and management.
Transportation management and processes effect the ability to reduce cycle time. By reducing the amount of time needed to transport an item from one link in the chain to another, a company will reduce the cycle time of the entire supply chain. The first step toward shortening cycle time is the measurement of present processes and identifying factors that add time to cycle.
With a systematic approach, the cycle time can be reduced and a business can improve competitiveness and sustainability. Identifying the inefficiencies in production is important so that a business can get products into a customer’s hand as soon as possible.
Practices that provide more visibility and better process management include:
- Simplifying inbound logistics. Collaborate with key suppliers to gain purchase order visibility on each step of the inbound process.
- Coordinating effective relationships. Both product and information should flow, and organizational dysfunctions should be eliminated.
- Integrating TMS software. Technology is a key to supply chain visibility and efficient collaboration between internal and external parties.
- Creating schedules and reducing uncertainty. To avoid dead spots in cycle time, everyone should be working with the same information and data.
Best practices and optimum productivity comes from evaluating the entire process in order to reduce the cycle time. Cycle time impacts the bottom line, so evaluating the process and finding consistency in best practices will help improve overall business operations.
Continue Reading: The Difference between Logistics Management and Supply Chain Management