Throughput time is the total amount of time that it takes to run a process in its entirety from start to finish. In business operations, it describes the amount of time taken to complete key processes, such as processing an order, manufacturing a product, or providing a service.
The term throughput time comes from the measure of throughput – or the business process flow rate. Throughput is the measure of inputs and outputs within a process and is an important aspect of business process management.
In manufacturing throughput time follows a basic formula:
Inventory = Throughput x Flow time
Here, inventory is the total number of units in a business process. Flow time is the time the unit spends in the business process from start to end. Throughput is the flow rate of how many units go through the process at a given time unit, eg. units/hour.
Why is throughput time important?
Throughput time serves as a crucial metric for analyzing processes and assessing the effectiveness of business operations in aligning with strategic goals. Throughput is important in operations management because it helps organizations understand their production cycle, identify areas for improvement, and manage resources more efficiently. Additionally, throughput time helps organizations understand their customer service levels and identify any potential bottlenecks and delays that may occur. By understanding the average throughput time, organizations can better plan their production and customer service processes.
Throughput time vs lead time
Lead time is the amount of time it takes to complete a process for a customer. The term “Lead time” originates from the Lean manufacturing management principles, where it is defined as the time elapses between a customer placing an order and receiving the product ordered. While throughput time and lead time measure performance in very similar ways, you can picture them as the two sides of the same coin. Lead time takes the customer’s perspective of process time while throughput time measures the business resource perspective.
Throughput time vs cycle time
Throughput time and cycle time are related yet distinct metrics of process performance. Cycle time measures the actual work time required to complete a task, excluding any downtime. Conversely, throughput time encompasses the total time a unit spends within a process, including delays such as queuing. Therefore, a key difference is that throughput time accounts for delays, whereas cycle time does not.
