Best Practice Sign

How Important is Lead Time? 

For most, lead time is an extremely important factor when choosing a supplier for manufactured parts.

In any manufacturing shop, lead time discussions take place daily. Manufacturers are finding that they must step up their game to meet customer demand for quicker delivery.

It is a delicate dance that management must know the steps to, on any production floor.

Best Practices on all Fronts

Many factors are present when addressing lead time reductions to stay competitive in a fast-paced, need-it-now world.

From a customer who is ordering from a fabrication shop, importance is placed upon the receipt of rfq’s to enable shorter lead times.

  • Shop-ready drawings
  • Technical specifications
  • General arrangement drawing or engineering drawings
  • Plans and profiles
  • Loads (tensions, equipment cut sheets, environmental loads, etc.)
  • Site addresses and contacts
  • Delivery date

From a sales perspective, lead and flow time reduction can allow for shorter lead times.

  • Offering the ability to quote faster delivery to customers
  • Decreasing the impact of cancelled orders
  • Reducing the need to make forecasts about future demand

From the production side of things, shorter lead times help to:

  • Improve quality management by reducing the opportunity for work to be damaged, decreasing the time between manufacturer and defect detection
  • Reduce in-process inventories
  • Decrease disruptions of the production process due to engineering change orders
  • Enable shorter frozen zones in the Master Production Schedule, thereby reducing the dependence on distant forecasts
  • Allow easier overall management of the facility because there will be fewer jobs to keep track of and fewer special cases (e.g., expedited jobs) to oversee

How can you reduce lead time?

Strategies for reducing lead time fall into five general categories.

  1. WIP (look for the work in process)
  2. Keep things moving
  3. Synchronize production
  4. Smooth the work flow
  5. Eliminate variability

Reducing lead time does not necessarily mean working faster. There are several key strategies that can help you achieve a reduction.

Working in parallel instead of a series is one of them. By working in parallel, there isn’t less work, but it is completed sooner. For example, when I help my husband with the yard work by bagging up piles of cut grass while he mows, the yard work is completed sooner.

Eliminating loops-i.e., rework. Working faster tends to fail because it inadvertently increases errors. Rework is the most common form of loops. The only exception is when the loops are designed for learning. If knowledge is the result of a process, loops aren’t rework, they are a value-added step toward the objective.

Eliminating handoffs, because every handoff is an opportunity for a delay or an error. When work stops, it must be transferred before it can begin again. Waiting in a queue for the next resource (if not immediately ready to begin work), is even worse. By eliminating handoffs, you can gain the most substantive improvements.

Eliminating unnecessary steps altogether not only reduces lead time by the time needed for those steps, but also likely eliminates two handoffs. By designing tools that empower managers to make decisions themselves, such as, verifying budget availability, you eliminate the finance department steps, saving fifteen minutes. The handoff to finance and back eliminates over a week of lead time.

Compressing the work and getting it done in less time, not by working faster, is often the hardest thing to do. Taking advantage of technology that is available can be a valuable solution in this area. Capacity frequently increases, although it was not the driving objective to begin with.

What are the advantages?

AdvantagesDelivering faster is a true competitive advantage. Lead time reduction can improve most of your process, by forcing you to eliminate other wastes in production.

The pursuit of lead time reduction can also lead to the elimination of other wastes in your production process.

No Pain – No Gain

Unfortunately, lead time reduction can be difficult to achieve.

Our Supply Chain VP, Jeff Sulsar, recently participated in a Lead Reduction Kaizen event that determined our average lead time from receipt of order to shipping out the door to our customers was sixteen days. A goal was set at this Kaizen event to cut that time in half, to eight days. To achieve the goal, Jeff expects that we may be forced to keep higher inventory levels simply based on logistics. All of our suppliers are at least a one-day drive or longer from us.

He noted that we are having to initiate more stocking agreements to have material available at the supplier’s warehouse that can be shipped at a moment’s notice. In our current lead time environment (around 12 days, as of today), we are already having suppliers come close to failing because they can’t get product to us in time to satisfy fast turnaround orders. Due to this issue, we may have to look at more consigned inventory so material is on our production floor, ready to use – but still owned by the supplier until we break the bands on it and start using it.

Time is MoneyWe give it importance because, “time is money”. It’s that simple. It costs our customers, and it costs us. 

The shorter the lead time, the higher the inventory we must keep on hand from our suppliers to meet our customer’s needs.

Having higher inventory triggers storage costs, and adds work to the management of the inventory (time is money).

All in all, lead time can have an impact on our customer’s satisfaction.

Lead Time = Preprocessing time + Processing time + Waiting time + Transportation time + Storage time + Inspection time

Reducing Non-Value added activities, simplifying parts, standardizing operations and communication are tools we implement to keep improving on our Lead Time reduction.

We aren’t there yet, however, we won’t quit trying to achieve our goal.