Core Formulas

How to Calculate Lead Time, Takt, Capacity, and Inventory Turns Step by Step

A worked walkthrough of the five formulas that run a lean shop floor, each computed with real units and numbers so you can reproduce them on your own line.

Start with takt time, the heartbeat that sets your pace. Takt equals available production time divided by customer demand. If you run one shift of 8 hours, lose 30 minutes to breaks and 20 to planned maintenance, you have 450 usable minutes, or 27,000 seconds. Against demand of 600 units per shift, takt is 27,000 divided by 600, which equals 45 seconds per unit. Every station must finish inside that 45 seconds or you fall behind. Pull available time from the shift schedule minus planned downtime, and pull demand from firm orders, never from a forecast you have not committed to build.

Lead time is the total clock from order release to shipment, and it is not the same as cycle time. Compute it as process time plus queue time plus move time plus inspection and wait. On a line with 4 operations at 45 seconds each, process time is 180 seconds, but if a batch of 50 waits in queue before each station, queue time dominates. Use the Lead Time calculator to sum the segments: 180 seconds of touch time buried inside 6 hours of queue means your process cycle efficiency is only 180 divided by 21,600, or 0.83 percent. Time the queues with a stopwatch on real jobs, not from the router.

Capacity tells you whether the schedule is even feasible. Available capacity equals number of machines times hours per period times the utilization you can actually sustain. Three machines running 20 hours a day at 85 percent utilization give 3 times 20 times 0.85, or 51 productive machine hours per day. Divide required capacity, say 4,200 minutes of demanded work, by that figure to get a load percentage. The Capacity Planning calculator does this across resources so you spot the bottleneck. If one work center loads to 96 percent while others sit at 60, that work center caps your entire throughput regardless of the others.

Economic batch size balances setup against holding. The classic form is the square root of two times annual demand times setup cost, all divided by the annual holding cost per unit. With demand of 120,000 units, a setup cost of 300 dollars, and holding cost of 4 dollars per unit per year, you get the square root of 2 times 120,000 times 300 divided by 4, which is the square root of 18,000,000, or about 4,243 units per batch. The Batch Size calculator returns this directly. Pull setup cost from your changeover labor and lost machine time, and pull holding cost from storage, capital, and obsolescence.

Inventory turns measure how many times you cycle stock in a year. Turns equal cost of goods sold divided by average inventory value, both at cost, never one at cost and one at retail. If COGS is 9.6 million dollars and average inventory sits at 1.2 million, turns equal 8.0, meaning you replace inventory every 45.6 days (365 divided by 8). The Inventory Turns calculator handles the division and the days-on-hand conversion. Take COGS from the income statement and average inventory from the mean of monthly closing balances, not a single snapshot that hides seasonal swings.

Machine hour rate underpins any per-unit time cost you assign later. Compute it as total annual machine cost divided by productive machine hours. Sum depreciation, power, maintenance, and floor space, say 96,000 dollars, then divide by 3,000 productive hours to get 32 dollars per machine hour. The Machine Hour Rate calculator separates fixed from variable components. The trap is dividing by rated hours (8,760 in a year) instead of productive hours, which understates the rate by 60 percent or more. Always use the hours the machine actually cuts, spindle-on, not the hours it is merely powered.

Chain these together to schedule a real order. Takt sets pace, capacity confirms feasibility, batch size sets the run quantity, and lead time predicts the ship date. Suppose a 4,243-unit batch at 45-second takt: pure run time is 4,243 times 45, or 190,935 seconds, about 53 hours of single-piece flow. Add one 90-minute changeover and 8 hours of expected queue and you promise roughly 62.5 hours, or 2.6 days at 24-hour running. Recompute after every process change, because a takt drop from 45 to 40 seconds shifts the same batch by nearly 6 hours of run time.

A quick sanity pass catches most arithmetic errors before they reach the floor. Confirm every rate shares the same time base: mixing seconds per unit with units per hour flips a number by 3,600. Verify demand, capacity, and takt reconcile, so 600 units at 45-second takt should consume exactly 27,000 seconds, matching your available time. If inventory turns and days-on-hand disagree (turns of 8 must give 45.6 days), one input is wrong. Round only at the final step, since rounding batch size to 4,200 before the square root skews holding cost math. Store the inputs, not just the answers, so the next planner can audit them.

Published 2026-07-01.