Lean Manufacturing Just In Time




Manufacturing lead time assumes components are available when needed in the manufacturing process. This includes any sub-assemblies, fabricated parts, purchased components and raw materials used directly in the item being manufactured. From this perspective, the time between the demand for material to be supplied by a vendor, and the availability of that material for use, is the purchase lead time. As in manufacturing lead time, there will be multiple elements of purchase lead time that will vary in each environment. These might include:

Requisition processing time Vendor negotiations Purchase order creation and approvals Transmission time to the supplier

• Supplier's order processing time

• Supplier's manufacturing lead time (or part of it)

• Packaging time

• Transit time

• Import and export processing

• Receiving and inspection

• Quarantine

From a manufacturing perspective, too often we view purchase lead times as a single entity, ignoring the individual elements. We need to focus on these specific areas in our efforts to compress lead times, both in our role as customer and as supplier in the logistics pipeline.

Another perspective of lead time exists with respect to a product and how it is manufactured. This critical path through all levels of the product structure is generally defined as the cumulative lead time for a product. It represents the span of time required to produce an item if no subassemblies, parts, or raw materials are available. In other words, the time to order and receive material from suppliers and build the item from the bottom up. This is best illustrated by taking the multi-level bill of material shown in Figure 2 and laying it horizontally, with manufacturing and purchase lead times displayed graphically, as in Figure 3. The flip-flop bill of material in Figure 3 is critical to understanding how we operate as a manufacturing company, and where we should direct our lead time reduction efforts. Manufacturing the product is not the end of the task, however. We still have to get the product to where the customer wants it.

Delivery Lead Time

This is the manufacturer's view of how long it takes to satisfy a customer order after the order is received and the item is available to be shipped. This includes the customer order processing time, picking and packaging time, transit time to the customer, and the time required for all activities that take place prior to the order reaching the customer's destination. This can be different than the lead time quoted to customers, which may include a portion or all of the cumulative lead time.

The time between our receipt of a customer order and the delivery of the product to the customer is the customer lead time. This lead time must be viewed from the customer's perspective'. If we control the market for a product, we can dictate this lead time to a customer. In engineer- or build-to-order environments, the Manufac

manufacturer generally defines this lead time as part of the

quote to a potential customer.

Whether we or our customers dictate the lead time for our products in terms of expected delivery, in reality it's our competitors who establish customer lead time. When vying for customers, we have to compete on cost, quality, and delivery. The relative importance of each of these is deter­mined by the customer, but it's the competition that sets the level of expectation for each.

Lead Time Relationships

The length of the logistics pipeline shown in Figure 4 might be 32 minutes or 32 months*. It's only important when compared to the time our customers allow us to satisfy demand. Many of our basic operating policies are determined by the relationship between the lead time imposed on us by customers and the competition, and the cumulative lead time and delivery time for our products.

Let's face it—as manufacturers, we would really like to buy material and parts, and build individual units, only after a customer order is received. While we pursue this ideal environ­ment, let's learn to manage the real world, a world of constraints and competition—a world characterized by dependent demands, finite capacity and finite resources.

To be Continued


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