Lead Time

It expresses a time. In lean philosophy it is a widely used and extremely important term. Lead time is understood as the time interval between the start and the end of an activity. It is easily confused with cycle time, and sometimes, when the activity is simple, these times overlap. However, let us keep a distinction for lead time as such so that we can better understand and clarify the concepts.

For example, in Purchasing, the people involved in the processes must clearly know what the lead time is: the time interval to buy the materials needed for production, from the issuing of the order until the material is actually available for use. In production, the lead time is the time interval needed for the material to go through manufacturing – from the first to the last process – and be ready for the next stage. Or else the delivery lead time, the time interval from the moment the customer purchased the goods until they actually have them in their hands. And so on.

As can be seen, lead time is a component of planning and is a key piece of information in the process of serving the customer, and we are dealing with time, a physical quantity, one of the most democratic we know!!!

Let us reflect for a moment. Why is lead time so important in our day-to-day activities? Is it really a key factor in lean philosophy? Who should control it, and why control it?

Let us see:
Time is money!!! I have heard this expression thousands of times, especially from leaders, but do the people on the shop floor really have any idea of what it means?
Where you really feel that time costs is when you have to pay very high interest for overdue payments of invoices or bills, because the term in this case is measured in time, a time that does not stop and does not wait either..!!!

One more thing: money has velocity, and velocity is a quantity that lives and exists as a function of time. Just ask the bankers. They live off it!!!

Let us return to the world that interests us: lean philosophy. So why is lead time so important in what we are doing? It is obvious. Lean, above all, is seeking the maximum with the minimum in every respect. Maximum profitability through maximum cost reduction by the outright elimination of waste and, when that is not possible, by its minimization. But is that all? Yes, that is all!!! Simple, isn't it?!

In any activity involving humans there are several ways of performing tasks. I believe this because, by the principle of continuous improvement (kaizen), the best way is yet to be defined. And in performing tasks in different ways, removing the constraints regarding safety and quality, time is one of the most relevant ingredients, as it is one of the determining factors in building up cost.

In the competitive world we live in, being faster is what everyone seeks. And the world of manufacturing or services is no exception.

In the support we have given to companies that want to apply the concepts of lean philosophy, what has most caught our attention is the long lead time in their production systems.

The causes are many, but what comes up most immediately is the large inventory of materials. By inventory of materials we mean the raw material stock piled up to the warehouse ceiling, the work-in-process stock occupying most of the factory space - usually more than 50 % - and the finished goods stock in the shipping area. Excess inventory is a great waste. It occupies expensive and important factory space and adds no value either for the customer or for the entrepreneur; quite the opposite, it consumes resources to control it and, worse, it is idle money.

So the question is: how do we control this inventory?

This is where the importance of the lead time concept comes in. Production Planning and Control (PPC) is chiefly responsible for keeping inventories under control inside the factory. It is the pivot of lean philosophy, where all information is processed, and therefore it knows the needs of the customers, of the factory and also what the suppliers need to keep the system running stably in a continuous flow process. In processing this information, one of the relevant data points is lead time. It starts with the lead time of the sales area: knowing when the customer needs to be served; knowing the manufacturing lead time in order to accurately determine a delivery time that meets the customer's need; and the suppliers' supply lead time in order to practice systemic just in time. On the other hand, the managers of Sales, Production and Supply must be constantly connected so that, through kaizen, they shorten ever more the lead time under their responsibility, so that the company can respond faster to demand. As a consequence of this speed, the competitive advantage of lower inventory becomes a reality. And this can be the great differentiator for the business as a whole.

In the production area in particular, the most immediate way to shorten lead time is to eliminate excess work-in-process inventory. Next, relentlessly pursue process stability, level the cycle times (CT) of the operations as much as possible and introduce standardized work (SW). With these measures, and with an emphasis on kaizen to shorten lead time ever more, we will be on the most appropriate route of the lean journey in pursuit of excellence.