Time passes ... and so does opportunity. In the
war on competition, time is ammunition with a shelf life. Use it
to move forward; misuse it or lose it, and retreat! Time can be
used by a manufacturer as an excuse for poor performance, or as
a powerful weapon in achieving a competitive edge. Understanding
our lead times and managing their reduction is a key element in
the success of our just-in-time strategy. The objective of this
paper is to illustrate the relationship of lead times to
manufacturing and inventory policies, and to show how lead time
constraints can be removed or minimized on the journey to JIT.
So What Is Lead Time Anyway?
Understanding lead time requires that we
understand our products, processes, customers, and competition,
and that we recognize the elements of lead time from several
perspectives. With this knowledge, we can intelligently attack the
As a starter, think of lead time as the time
from when a demand is made on a supplier to the point when the
demand is satisfied. This is an accurate definition, but useless
by itself. We need to define lead times in relationship to their
use. For example, a warehouse inventory system detects the need to
reorder Product X. They create a purchase order that is sent to
the manufacturer. The delivery of Product X arrives at the
warehouse 10 days later. What's the lead time—10 days? From the
perspective of the warehouse system, yes; but what about the
manufacturer? The manufacturer ships Product X from stock, and
promises domestic delivery within 7 days. So what's the lead time—7
days? Yes—if viewed as delivery lead time by the
manufacturer! In this case, the manufacturer received the purchase
order from the customer 3 days after the customer's warehouse
system detected the need for Product X. Obviously, there was a 3
day order processing lead time on the part of the
warehouse. This could have been the time to create a requisition
and a P.O., mail the P.O., or some other activity. In any case,
the manufacturer shipped the product in time to arrive at the
warehouse 7 days after the receipt of the purchase order. From the
perspective of the manufacturer, the demand was created when they
received the P.O., and satisfied when the shipment reached the
customer's dock 7 days later.
Manufacturing has a different view, however.
The master scheduler says that it really only takes 3 days to
build Product X; assuming, of course, no material shortages and
sufficient capacity^. One of the buyers, though, informs us
that a key component of Product X has a lead time of 20 days from
So—what's the lead time? Actually, every
answer was correct! We need to redefine our term. Lead time should
be viewed as the time between any two events in the logistics
pipeline. Thus, lead times can cover both large and small
portions of the logistics pipeline, and can be used to describe
differing perspectives on the part of suppliers and customers.
Let's look at some of those views.
Manufacturing Lead Time
As manufacturers, we tend to think of lead time
in manufacturing terms; how long it takes to make something once a
demand is placed on our production facility. Figure 1 illustrates
nents of manufacturing lead time. The operation
time includes any setup time plus the run time to produce some
quantity. Typically, there will be inter-operation time incurred,
which can include queue time prior to an operation being
started, wait time at the completion of the operation, and move
time required to transport the material to its next point of
use, or to stock.
These elements of time, through all manufacturing steps
required to make a product, constitute manufacturing lead time (Figure
l.b). These elements may vary, may not exist, or may be overlapped
in different manufacturing environments. This lead time is usually
viewed as single level—the time to make an item if its direct
components are available. For planning and control purposes, there
may be additional elements of time added at the beginning of
manufacturing lead time to cover administrative activities such as
order or schedule review and release, shop packet creation,
material picking, etc. (Figure l.c).
To be Continued
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