Elaborating actual lead time with both management and execution data

Many lean management initiatives are achieved worldwide. Most often the focus of these projects is to reduce lead time in order to improve enterprise responsiveness and financial health. Usually, lead time is estimated by drawing up a value stream map and by estimating inventories and flow times all along it. This current practice is not accurate, exhaustive and relevant enough to us when managing a real ongoing improvement project. We suggest in this paper a new way of elaborating lead time for each product, taking into account all its components and using genealogy and purchasing costs data.

1. Why is Lead Time Fundamental?

In this paper we will define lead time as the time elapsed between the moment when raw materials arrive in the manufacturer's warehouse and when finished goods made from them arrive into the customer's warehouse. Many Lean Manufacturing initiatives are achieved worldwide. Most of them are conducted with a cost reduction focus, others with the obsession of reducing lead time. Cost reduction and lead time reduction can be opposed depending on the way we calculate costs. On the other hand the cost of a product is much easier to elaborate than its lead time. This can explain why a greater importance is given to costs. However, lead time can be much more profitable for business and enterprise health: •

short lead time improves on-time and on-quality delivery

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short lead time improves responsiveness to market

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short lead time reduces the working capital needs (Fig. 1)

Fig. 1 Physical and financial lead time