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Lean Manufacturing Just In Time

 

PART III. 

 

We must first understand how the relationship of customer lead time to the logistics pipeline impacts our manufacturing policy. If we stay close to the ideal world, we have the situation shown in Figure 5. In this illustration, the customer lead time is overlayed on the cumulative lead time and delivery lead time. The customer (and competition) allow us plenty of time between order receipt and expected delivery to buy material, build, and deliver the product. We only need to carry minimal inventory, if any. The requirement for sophisticated material planning systems is mini­mized, and inventory consists primarily of work-in-process.

This view is typically used to characterize the Build-To-Order environment, where the product is non-standard; engineered and built to customer specifications. This usually implies a job shop, and associated long lead times.

Look at the time line in Figure 5. Does it represent days or weeks? Actually, it doesn't have to be either. It could be minutes, hours, or months! The important point in this illustration is the relative comparison of customer lead time to cumulative lead time and delivery lead time. Figure 5 does not have to represent the traditional build-to-order scenario. Imagine the time line repre­senting A0«r,y. In that case, we could build stow/an/ products after we received the customer order! Inventory would be needed for long lead time items, and safety stock could be kept at the lowest level based on end item forecasts.

However, constraints (and competition) may exist. Our time line may represent the situation shown in Figure 6. Here, customer lead time doesn't allow us time to build the product from scratch after receiving an order. We need to buy and manufacture certain materials and subassemblies based on a forecast of customer demand. We need better forecasting and planning systems, and we need to carry more inventory. We still don't have to stock the finished product, however. We have the luxury of offering product options to our customers. We can wait for an order, assemble the product based on customer selections, and meet the customer's expected delivery date.

We usually associate this scenario with product options, in a final-assemble-to-order environment, but it doesn't have to be. It can be applied to standard off-the-shelf products also. If customer lead time covers our final assembly and delivery time, we can eliminate the shelves and the inventory that would sit on them!

Again, today's reality may dictate a different scenario. Figure 1 illustrates the Make-To-Stock environment. Here, because our delivery lead time is equal to the customer lead time, we have to have the product available to ship when the customer order is received. What we're really doing is shipping from stock, and building to apian.

If the delivery lead time in Figure 1 is longer than the customer lead time, we face another challenge. We would need to shorten the delivery time, maybe by improving the process, using faster modes of transportation, or holding inventory closer to the customer in an expanded distribution network.

This simple illustration gives us quite a bit of insight into how we manage this product:

• We need to develop and monitor forecasts

• We need to buy and build in anticipation of demand

• We will need to carry lots of inventory (or at least more than we want to)

To be Continued


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