Lean Manufacturing Just In Time

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.

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 real problems.

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 the supplier.

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.

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 the compo-

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.

To be Continued

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