Lead Time
Understanding Lead Time in Manufacturing
In the world of manufacturing, lead time is a fundamental term that affects everything from inventory management to customer satisfaction. For small to mid-sized companies, understanding and managing lead time can make a big difference in how smoothly operations run and how quickly you can fulfill orders.
What Is Lead Time?
Lead time is the amount of time it takes to complete a specific process or bring a product from start to finish. It includes every step required—ordering parts, manufacturing, quality checks, and delivery. Simply put, it’s the period between initiating an action and its completion.
Types of Lead Time
Customer Lead Time: The total time taken from when a customer places an order until they receive the product. For example, if a customer orders a custom part today and gets it in two weeks, that’s your customer lead time.
Manufacturing Lead Time: The duration to produce a product once an order is received. This includes machining, assembly, and quality testing.
Procurement Lead Time: The time needed to order and receive raw materials or parts from suppliers. If it takes three weeks to get steel from your vendor, that’s your procurement lead time.
Why Lead Time Matters
Knowing your lead time helps in planning production schedules, managing inventory levels, and meeting customer expectations. Longer lead times might mean you need larger inventory buffers, which can tie up capital. Shorter lead times enable quicker responses to customer demands and reduce storage costs.
How to Calculate Lead Time
Define the specific process you want to measure (e.g., from order receipt to product shipment).
Use timestamps or logs to record when each step begins and ends.
Subtract the start time from the end time to find the total lead time.
For example, if your order is received at 8:00 AM and shipped at 5:00 PM, your lead time for that order is 9 hours.
Reducing Lead Time: Practical Steps
Streamline Processes: Map out your production steps to find and eliminate unnecessary delays.
Improve Supplier Relationships: Work with suppliers to shorten procurement lead times through better communication or faster shipping options.
Invest in Technology: Use production automation and real-time tracking to identify bottlenecks.
Plan Ahead: Schedule maintenance and prepare raw materials in advance to prevent delays.
Final Tips
Keep measuring your lead times regularly. As your business grows or changes, so may your lead times. Managing and reducing lead times can help you stay competitive, satisfy customers, and improve overall efficiency.