Reducing Lead Time in Manufacturing

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When a customer places and order, they will typically want to get what they purchased as soon as possible. The amount of time between the moment when the order is placed, and the moment when the order is shipped out to the customer, is called lead time. Finding ways to reduce lead time in manufacturing is very important as it will allow you to service your customers better. This reduction in lead time can also help to cut your costs and make your entire facility more efficient.

Learning more about lead time reduction efforts and what you can do will help in many ways. No matter what type of manufacturing your facility is responsible for, take some time to learn more about this important goal today.

Analyzing Your Lead Time

Before you attempt to reduce the lead time in your facility, you need to know exactly where you currently stand. Understanding how long it will take you to produce and ship all of the products you make will help ensure you are able to meet your obligations to your customers.

The last thing you want to do is promise the delivery of an order within one month, but then have it take an extra week because you did not fully understand your lead time. Knowing where you stand now, and after any improvements you make, will allow you to provide the best services possible.

Benefits of Reducing Lead Time

Cutting down on lead time is a goal of virtually every manufacturing facility. The obvious reason why companies want to reduce the time it takes them to produce their products is so that they can better meet the needs of their customers. There are, however, many other benefits that a company will enjoy when they reduce overall lead time. The following are some of the key benefits that can make it worth it to work on this goal:

  • Reduced Need for Inventory Storage – If you are able to produce your products quickly enough that you can have them made and shipped out when customers need them, there will be no need to keep completed items in a warehouse. Cutting down on inventory storage costs can be a big savings.
  • Eliminating Unwanted Features – When looking for ways to reduce lead time, many companies will find that they are wasting time on adding features or options that customers do not really need. Using value stream mapping it is often possible to cut costs and lead time without negatively impacting the customer.
  • More Competitive – The faster you are able to provide your products to your customers, the more competitive you will be. Rapid turn around times are a great benefit for many companies and will help you to retain existing customers, and attract new ones over time.
  • Reduced Expenses Per Order – If you are able to complete the manufacturing of an order more quickly, you will have fewer hard expenses associated with that order. For example, the costs associated with employee pay, electricity, and other similar things will go down since it is taking less time to complete each order.

There are, of course, many other benefits associated with reducing lead time in manufacturing. The specific advantages that are most important to a given company will vary greatly based on a variety of factors. No matter what type of manufacturing you do, however, it is always worth it to look for different ways to cut down on the length of time it takes to complete an order.

Elimination of Waste to Improve Turnaround Times

A great way to look for ways to reduce lead time in your facility is by finding different types of waste and eliminating it. There are many strategies that are used to find waste and get rid of it, the most popular of which is lean manufacturing. If you are not already using lean strategies in your facility, this can be a great way to get started.

There are quite a few different tools and concepts within lean that can help you to find different types of waste. While not all waste reduction or elimination will help you to speed up your lead time, much of it will. Even if a specific improvement to your facility does not directly improve lead time, it will still help to cut costs and operate more efficiently. This could help to open new possibilities for future lead time reductions as well.

Using Mass Production Strategies

For many facilities, mass production is a great strategy for cutting down on lead time. Manufacturing companies often spend a significant amount of time on retooling machines to produce specific parts or products. Once the retooling is done, creating each individual product does not take that much time at all.

If your facility operates like this, you can likely save a lot of time by making larger numbers of a specific product in each batch. This will reduce the frequency of having to retool your machines, and allow you to cut the average production time per product dramatically.

Of course, mass production strategies are not always the right solution for every situation. You do not want to create thousands of an item that you only sell a handful of each year, for example. When looking for ways to reduce lead time, mass production strategies should be considered, and only used when they make sense.

Is Storing Inventory a Smart Way to Reduce Lead Time?

Whether you are engaging in mass production or not, one of the biggest questions to answer when it comes to analyzing lead times in your facility is whether it is a good idea to store inventory. On the surface, keeping large quantities of inventory can seem like a good idea. If you have 10,000 of a particular product that you produce already in a warehouse, your lead time will be reduced to almost zero. All you have to do is pull the products off the shelves and ship them out.

In situations where you make only very specific products that do not change over time, and are expected to have a steady demand, this can be a great option for reducing lead time. It will allow you to maximize efficiency by using mass production and while there are costs associated with warehousing, the benefits should outweigh them.

For most companies, however, keeping inventory of specific products is not going to be a good way to cut down on lead time. There are many downsides to housing large quantities of inventory, including the following:

  • Warehousing Costs – If you want to store products while waiting for orders, it costs money. Warehouses are large buildings that need to be heated, cooled, secured, and maintained, all of which costs money.
  • Stuck Holding Inventory – While you can certainly plan out how many orders you expect to receive for a specific time period, that is not a guarantee. If a customer decides not to order their normal amount, you may be left holding a lot of inventory that you cannot easily sell. This may require you to reduce the price or even scrap the products if they are no longer going to sell. This, of course, is very costly.
  • Vulnerable to Price Swings – The costs of most products manufacture red today are not static. If you create a number of products and store them in your warehouse, your expenses are then fixed but the price customers will pay may swing, leaving you vulnerable. If the price goes up, you may be able to increase your margins, but if the price goes down, you may have to take a loss.
  • Products Cannot Be Customized – Once a products is completed it often cannot be customized any further. If you are selling products in multiple different colors or with different feature options, it can make warehousing a big challenge.

Taking the time to weigh out the pros and cons of warehousing your products is very important. While for some companies this will be a smart move, most will find that the costs outweigh the benefits. As with most things, however, it may also vary from product to product. Your company may find that it makes sense to store some products in a warehouse, and others will need to be produced as they are needed.

Looking at Your Facility’s Unique Situation

It is important to keep in mind that there is no single ideal way that all companies should operate in order to reduce lead time. There are many factors to consider including customer demand, costs of storing inventory, the number of different products being created, and much more. Taking the time to determine what you should do to reduce your overall lead time will take some work.

Balancing a reduction in lead time with any extra costs or other challenges that may be created will be important. While it will take effort to determine your idea operating schedule, it will be worth the effort. Of course, even after you have set up your manufacturing policies in a way that works, you should not stop looking for ways for further improvement. The constant focus on optimizing your operations will help you to remain competitive long into the future.

 

 

Additional Resources

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  2. Lean Manufacturing-Common Characteristics Companies Have
  3. Applying The Concept Of Lean Manufacturing
  4. Lean Eliminates Downtime
  5. 5th Lean Continuous Impovement Series for Manufacturers
  6. Five Steps to Lean Improvement
  7. Lean Concepts and the 8 Wastes
  8. What are 5S Red Tags?
  9. Understanding 5S in the Workplace