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Lead Time Management

“The Goal of every Commodity manager


should be to have Zero Liability,
maximum flexibility and lowest possible
cost” Former VP IBM ,Gateway
Importance of Time
• Time is money.
• Specially in Logistics management.
• Cost directly proportional to goods in the pipe
line.
• Long lead time leads to Slow Responsive
ness.
• Thus High Cost and Slow Response.

Example:
In 1994, Compack Computers lost between 500m$ to
1bn$ in sales due out of stock laptops and computers.
Definition:
• Point Of View

– Customer.
• “Time Elapsed from Order to Delivery”

– Supplier.
• “ Time it takes an order to get converted into
cash”.
.
Order to Deliver Cycle [OCT].
JIT environment leads to
Competitive advantage.
Total Order Cycle
Cash To Cash Cycle:- Inventories
• Raw Material
• Work in progress.
• Goods in Transit
• Time taken in processing.
• Issue Replenishment orders.
• Time In Manufacturing
• Time in Queues.
• Bottlenecks.
Cumulative Lead time Build up
Bottlenecks
• High Inventory Holding Cost
• Reduction in Responsiveness.
• All Activities add Cost but not all activities add
Value.
• Demand Changes.
• Not Reliable Forecasting Tools.
• Traditional ways of doing things.
• Technology. Ex Safety Pins
Race Against Time
• Cost of Time.
1. Shortening Life Cycles
2. Customer’s drive for reduced inventories.
3. Volatile Market making reliance on
forecasts dangerous.
1. Shortening Life Cycles

Example:-
– Mechanical typewriter, Electro mechanical typewriter,
Electronic typewriter and Word Processor
2. Reduced Inventories
• Raw Materials
• Components
• Work in Progress
• Finished Products

Just In Time
Scrapping Old Model

Time Compression

Service Enhancement Cost Reduction


3. Volatile Markets
• Forecast Error Increases Lead Time
Increases.
• Demand Volatility.
Why to Manage Lead Time ?
Pipe Line Management
• Lower Cost.
• Higher Quality.
• More Flexibility.
• Faster Response Time.
• Cost Versus Value Concept.
– Salability
– Performance
– Functionality
– Perceived Value
– Quality
Cost Vs Value Concept
Differentiate Between Value
and Non Value Parameters.
Reducing Non Value adding
Variables or Value Engineering
Lead Time Gap
Improving Visibility Of Demand
• Demand Penetration too far down the
pipeline.
– Where the real demand meets the planned
demand.
• Upstream Demand
– Forecast Driven
• Downstream Demand
– Response to customer demand
• The Real Demand is Hidden.
Demand Visibility
Example:
 Paints.
 Constant demand 100, 150 ,200 units with usage
pattern of 10 per day..

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