Cycle Time: Measured or Calculated?

(initially published on Escape from Averageness® in April 2014;  updated and republished here)

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It is the most basic, most fundamental business premise for any homebuilding enterprise:  the reason the enterprise exists is to make money;  the way the enterprise makes that money is through the value – the benefit in excess of cost – that it delivers to homebuyers and other stakeholders;  that value is delivered by the work the enterprise performs, that work has to be performed in some manner of workflow, and the most common form of workflow is end-to-end sets of activities called processes.

The fact that the work performed in these processes is also what consumes an enterprises’ resources and occupies its capital, means that we need to pay attention to process workflow.  In particular, we need to pay attention to the duration of that workflow, what we term cycle time, because cycle time is one of the operating measures that informs us on improving productivity, on doing more without more, ideally, doing more with less.

In a homebuilding company, the core-critical process – the aorta of value creation – is the operational process known as Start-to-Completion, even though that process should really be managed as part of a portfolio of projects (we insistently make the point that the nature of the workflow in homebuilding, unlike manufacturing, is multi-project management with embedded, surrounding, and supporting processes).  And, regardless of the makeup of the workflow, we know that all of it has duration;  and, we all know that the cycle time of the Start-to-Completion process is the length of time required to build a house, expressed in days.

There are two distinct methods for determining cycle time;  duration can be measured, or it can be calculated.

When it is measured, cycle time reveals the average duration – the statistical mean – of a specified group (range) of houses that were built.  When cycle time is calculated, it expresses the relationship between two important operating measures – the rate of completions and the amount of work-in-process – over a specified time period.

And, while measured cycle time is simply forming an average duration, calculated cycle time falls into the universal category of production physics (Little’s Law).

The measured and calculated versions of cycle time provide important, but very different management perspectives used for very different purposes.  One is about uncovering the forensics of problems, in order to prevent the further recurrence of errors, rework, and waste;  the other is about managing homebuilding production as a system.  They mutually-beneficial, mutually-essential.

In your respective building companies, how do you treat cycle time?  Do you measure it?  Do you calculate it?

How do you use it?

 

Duration and cycle time is a topic exhaustively covered in The Pipeline: A Picture of Homebuilding Production, Second Edition®, as well as at every Pipeline workshop™.

More information:  saiconsulting.com