Find out what Lead Time is. Get to know the concept and learn how to optimize it to increase the efficiency of your business.
Most companies appropriate methodologies to stand out in an increasingly competitive market.
If you follow our content, you may have already read about some methods, such as lean manufacturing, kanban It is just in time, and you certainly already know the impact they can have on your company's performance.
In this article you will read about the Lead Time concept, what it is and how to calculate it.
With doubts? Don't worry, the answers are right below! Check out:
What is Leadtime?
Lead Time can be defined as a production cycle. It is the time that the product takes from raw material to prompt delivery.
It is the time spent by the production system for the raw material to become a finished item, passing through dispatch and delivery.
However, it is important to remember that Lead Time in the customer's view is different from Lead Time in the company's view.
For the customer, Lead Time is the time from ordering to product delivery.
For the company, Lead Time is the path and time of the raw material through all stages until delivery to the customer.
Therefore, achieving customer satisfaction does not mean having an optimized Lead Time.
Importance of Lead Time
Knowing and measuring Lead Time improves processes in your industry.
Therefore, to find out, the manager will need to carry out an assessment, in which it will be possible to identify whether the process phases are good or not, and if not, from it it will be clear in which areas the Lead Time will need to be optimized.
This way you can define strategies and steps to eliminate errors, with the aim of reducing procurement time and delivery time.
After all, to stay ahead of the competition, it is necessary to lower costs and have an agile delivery time. But to achieve this goal, it is necessary to have a good stock management.
Optimizing Lead Time increases your customer's satisfaction and reduces your company's costs.
>>Read also: Inventory Management: Why is it important?
How to calculate Lead Time?
To calculate Lead time you can follow this step by step:
First: list what is used in production
Make a list of all the items that were ordered and the inputs for manufacturing.
Include repairs or installations that are necessary to complete the product.
Second step: analyze the acquisition time of each item
Take into account the unforeseen and establish the time each item will take to arrive.
If the supplier only works with weekdays, you must exclude weekends from the time count.
Third step: identify the item with the longest lead time
Products with longer delivery times should be highlighted. If you have a start-up inventory, set a lead time of one day for these items to begin manufacturing.
Fourth step: define the actual production time
To define the time required for production and delivery of each product, try to understand everything behind production: average time, breaks, holidays, weekends.
It is also necessary to assess the health of the machines and check whether they need maintenance. If they do, the deadline will change.
Fifth step: Calculate the shipping and transportation time for the product to reach the customer.
This must take into account both the time it takes to collect the product from your warehouse and the time it takes to deliver it.
How to calculate Lead Time with stock:
The step-by-step calculation done above refers to the calculation of Lead Time under order.
The Lead Time made with stock can be calculated this way:
- Checking if the ordered products are available in stock;
- Calculating the time of product separation in stock;
- Adding contact time with the company for delivery;
Adding product shipping and delivery time
Benefits of Optimizing Lead Time
By optimizing Lead Time your company enjoys several benefits. These are some of them:
- Process improvements;
- Loss reduction;
- Increased production quality;
- Customer satisfaction;
- Standardization of processes;
- Productivity increase;
- Highlight in the market;
- Identification of production bottlenecks.
These are just some of the benefits you will achieve by optimizing Lead Time in your company.
Points that can influence Lead Time
Many factors can influence the total process time.
In general, these factors are divided into three stages: in the purchasing process, in production and during delivery.
The purchasing process is the time from the moment your company requested the raw material from the supplier until the moment it is delivered.
This period directly impacts the delivery time of orders for your customer.
Shopping process
Regarding the purchasing process, what can be done to optimize Lead Time at this stage is, in the first place, to maintain a stock of raw materials.
Always remembering that a large stock can generate costs, so it is good to keep in stock only what is necessary to fulfill immediate orders, to reduce inventory management costs.
In the background, what can also be done is to have at least two suppliers for each raw material.
Thus, in emergency cases, at least one of the suppliers will have immediate stock to meet the demands of your industry.
Production process
The production process is literally all the time it takes for the product to be made.
During this stage, to optimize Lead Time, a point that can help is having the product in stock. This way you will have the product ready for delivery. But to consider this point, it is necessary to remember the costs of keeping a stock, so evaluate whether keeping a reasonable amount of products in stock makes sense for your company.
Optimizing production is an obvious and very significant step. To do this, identify the production bottlenecks and the points to be improved. This will allow you to deliver faster without having to keep large inventories.
Another relevant point that can be considered at this stage is to outsource part of the production.
So you can have more control over the tasks and make them more agile and faster.
>> Read also: Third Party Management: what is it and what are the benefits?
during delivery
Delivery time and freight cost have significant weight as determining factors. So, do not neglect this aspect as it is of high value to your customers.
If this point is one of the third parties, it is necessary to have a good choice of partners, so that everything goes well, in the customer's view, it is the delivery person who represents the company.
Points to improve Lead Time
We've already seen the points that influence your company's Lead Time, now we'll show you some points you can invest in to improve your company's lead time. Are they:
Suppliers
Invest in good suppliers, look for those who can meet your orders with fast and reliable deadlines.
Bottlenecks
Identify the bottlenecks in your production process and work on them, put into practice the steps to reduce and eliminate them.
If you are in doubt about how to do this, read our article “production bottlenecks”, there you will find a step by step on how to deal with this problem.
Process improvement
To improve processes, bet on a system that enables controlled and automated industrial processes that reduce errors, increase the efficiency of the production line and allow for immediate and assertive decision-making, such as BMS Processos.
Quality
Ensure that your products are of quality and that there are no losses.
Maintenance
Invest in maintenance so that there are no sudden stops due to failures and machine breakdowns. So the service will flow continuously.
Technology
To optimize processes, the best way is to invest in technology. As we mentioned earlier, with a system focused on this area, you can acquire much more control and agility in your company's processes.
O BMS Manufacturing 360 is a platform that provides statistical control of preventive processes, controlled and automated processes and increased efficiency of the production line.
It also features an analytical dashboard, cross-platform access, and versioning control, in addition to reducing 95% from scrap!
count on BMS to optimize your Lead Time. Talk to one of our experts!
