Lead time

It doesn’t take long for a conversation on the shop floor of a manufacturing plant to mention lead time. There always seems to be something or other that will affect it, usually negatively. But what does lead time mean exactly?

Our need to predict the future, and then plan resources to fulfil the future demands, requires some estimation of the time taken to manufacture an item. The time that elapses from the receipt of an order, to the delivery of the product, is generally referred to as the lead time.

However, the daily conversation on the shop floor is more likely to be about an internal movement times; the time that a component takes to get from one process to another. The overall lead time, which is what the planners are concerned with, is something that emerges as a consequence of all the individual ‘process’ lead times being added together.

This is more of an issue for job shop manufacturing rather than flow-line production. Job shops use their plant in different ways depending on the make up of the order, which means that predictable (and short) lead times are of paramount importance. If we can’t estimate the lead time with any accuracy, either the delivery shall be late, or the overtime bill will increase.

The operations on the shop floor tend to be reactive, and the conditions can change at a moment’s notice. This makes planning extremely challenging, since any update to a plan can be quickly overshadowed by yet another change that has occurred in production.

Thus, we “put fat into the system”, allowing for potential variations and as a consequence, lengthening lead times. We don’t want to do this as planning for a longer lead time means that we shall have more materials (Work in Progress, WIP) in the system, which also means more cash that is committed.

In flow-line production, the batch size is effectively one. Each product is processed one at a time, before it is passed to the subsequent process centre. In a job shop we process batches that are often much greater than one “to achieve efficiencies”, which is usually an accounting-driven measure of machine utilisation. The shortest lead time is achieved with a batch size of one. As we increase the batch size, the lead time increases. Thus, if we want to increase the responsiveness of a job shop, we need to look at methods that can reduce the batch sizes.