After collaborating with multiple manufacturing companies, we've come to recognize a significant gap in operations management. While we all acknowledge the importance of on-time delivery (OTD) as a key performance indicator (KPI), it is often too late when the numbers come out. However, achieving our on-time delivery target can be facilitated by proactive planning.
Certainly, numerous factors impact our ability to deliver products or services on time, including the supply chain, resource availability, product or service design, and first-time quality. In this blog post, we'll dive into the importance of planning, focusing specifically on takt time, cycle time, and Overall Equipment Effectiveness (OEE). Over the next few paragraphs, we'll explore these concepts and, more importantly, their interrelations.
What is Takt Time?
Takt time is a concept used in lean manufacturing and production management. Even though a lot of operations managers look at takt time as a tool in Low-Mix and High-Volume environment only, takt time can be and should be used in High Mix manufacturing as well. Please see our product family matrix blog post for more information on how to pick the areas to focus in High Mix manufacturing systems.
Takt time represents the maximum amount of time allowed to produce one unit of a product in order to meet customer demand while maintaining a steady production flow. Mathematically, takt time is calculated as the available production time divided by the customer demand.
For example, if a factory operates for 8 hours per day and the customer demand is 400 units per day, the takt time would be 8 hours / 400 units = 0.02 hours per unit, or 1.2 minutes per unit.
Takt time acts as a pacing mechanism for production, ensuring that work is completed at a rate aligned with customer demand, thereby preventing overproduction or underproduction. It helps in synchronizing production processes and optimizing workflow to achieve efficient production cycles.
What is Cycle Time?
Cycle time is the total time required to complete a specific task, activity, or process from start to finish. It measures the duration it takes to produce one unit of output or complete one cycle of operation within a system.
Unlike takt time, which is focused on meeting customer demand, cycle time focuses on the actual time it takes to perform a task or produce a product, regardless of demand. For example, in a manufacturing setting, cycle time can be the time it takes to assemble one product or the time it takes for a machine to complete one operation. In the service industry, cycle time can represent the time it takes to serve one customer or complete one service request.
Cycle time is an essential metric in process improvement efforts as it helps identify inefficiencies, bottlenecks, and areas for optimization within a workflow or production system. By reducing cycle time, organizations can improve productivity, increase throughput, and enhance overall efficiency.
What is OEE?
OEE stands for Overall Equipment Effectiveness. It is a key performance metric used in manufacturing and production management to measure the efficiency and productivity of equipment or machinery on the shop floor.
OEE provides a holistic assessment of equipment/ work center performance, and it is calculated by multiplying the three factors (Availability x Performance x Quality) together. The resulting value represents the percentage of ideal production capacity that is being achieved by the equipment. OEE is also used as a performance management tool to identify opportunities for improvement, optimize equipment utilization, reduce downtime, and enhance overall productivity in manufacturing operations. Please see our OEE blog post for more information.
How do Cycle Time and Takt Time Relate?
Takt time and cycle time are correlated in the sense that they both influence the pace of production. Ideally, takt time shows what the pace should be to meet the demand and the cycle time shows internal capabilities. In that sense, the cycle time should be equal to or less than the takt time to ensure that production can keep up with customer demand.
When cycle time is less than takt time, it means that production is exceeding the required pace to meet customer demand. Depending on the gap, this could result in over production and excessive inventory.
When cycle time exceeds takt time, it indicates that production is slower than necessary, and adjustments may be needed to improve efficiency and align production with customer demand, otherwise, the customer will experience delays in delivery.
How to Incorporate OEE in Manufacturing Cell Design?
At the first glance, the correlation between takt time or cycle time and OEE might not be evident, however, when you look closely to these metrics, it appears that when the OEE drops, the operations wouldn’t be as efficient as the best-case scenario, therefore we need to take the OEE into the account when we re-calculate the takt as the target.
Adjusted Takt Time = Takt Time ∗ OEE
As an example, if the takt time required to produce a product is 30 minutes but the overall OEE stands at 80%, it suggests a need to modify the takt time to 24 minutes (30*0.8). Consequently, adjustments must be made to the cycle time or appropriate resources must be added to ensure that customer demands are still met effectively.
Conclusion
In summary, takt time establishes the production pace according to customer demand, while cycle time quantifies the actual duration needed to manufacture one unit. Ensuring alignment between cycle time and takt time facilitates seamless and efficient production to fulfill customer needs. When the OEE falls short of 100% (keep in mind that the OEE for a world class manufacturing is around 85%), adjustments to both takt time and cycle time are necessary to meet customer demand and achieve the on-time delivery target.