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Lead Time Concepts

Scope
1.

Definitions

2.

Scenario

3.

Productivity Tools

4.

Real life example JIT-II

5.

Synopsis

Definitions
o

A lead time is elapsed time between


the initiation and execution of a
process. For example, the lead time for
ordering
a
new
car
from
a
manufacturer may be anywhere from 2
weeks to 6 months.

Supply chain management


o

A more conventional definition of lead


time in the supply chain management
realm is the time from the moment the
customer places an order (the moment
you learn of the requirement) to the
moment it is received by the customer.

Manufacturing
o

In the manufacturing environment, lead


time has the same definition as that of
Supply Chain Management, but it
includes the time required to ship the
parts from the supplier, to know when
the parts will be available for
Processing plus processing days.

Scenario
o

All organizations, whatever their


products, face the same daily practical
problem - that customers want products
to be available in a shorter time than it
takes to make them. This means that
some level of planning is required."
To meet customer demands it is highly
important to meet customer demand at
right time in right quantity at right
price i.e, reduce lead time days.

Productivity techniques

KANBAN
o

Kanban is not an inventory control


system. Rather, it is a scheduling
system that tells you what to
produce, when to produce it, and
how much to produce.
The Kanban card is, in effect, a
message that signals depletion of
product, parts or inventory that when
received
will
trigger
the
replenishment of that product

JUST IN TIME
o

Just-in-Time (JIT) is a production strategy


that strives to improve a business'
return on investment by reducing in-process
inventory and associated carrying costs.
Just In Time production method is also
called the Toyota Production System.
JIT eliminates inventory that does not
compensate for manufacturing process
issues, constantly improves those processes
to require less inventory.

Philosophy of JIT is simple: inventory is


waste.
Inventory is seen as incurring costs, or
waste, instead of adding and storing
value, contrary to traditional accounting
In short, the Just-in-Time inventory
system focus is having the right
material, at the right time, at the right
place, and in the exact amount-

JIT II
o

The new basis of competition in many


industries is time-based. This means that the
focus is on reducing lead time by speeding up
the design of new products or responding
more quickly to customer demand for
existing products
JIT II, a customer-supplier partnership
concept pioneered at Bose Corporation can
aid in cutting both design and response lead
time. This is done through system integration

JIT II
o

System integration seeks ways to


improve coordination between various
departments or functional areas. The
practice of JIT II links engineering,
planning, and purchasing departments
and bridges the inter-organization gap
between customer and supplier.

JIT II : Gammon India


o

o
o

o
o

At major sites Raw material supplier


acts as store person.
Supplier raises online bills (RTGS)
Travel booking vendor & stationery
vendor sits in-house
Software Vendor deploys onsite support
Web services for Document Retrievals

Advantages JIT II
o

Reduces the paperwork associated with


placing orders, eliminates the need to
hire their own additional employees to
order the goods, and eliminates the
cost of holding the inventory because
the vendor bears the cost.
Good customer service and less stock
out situation

Disadvantage JIT II
o

One JIT benefit is actually sacrificed


under this arrangement: the goods are
stored at the customer's site, increasing
the need for storage space. However, in
our example at gammon we found that
that the increase in the need for storage
space is more than offset by the reduction
in lead time or opportunity cost of stock
out.

Synopsis

Organizations

have discovered that


low inventories can make it difficult to
respond quickly to customer demand,
and they are willing to bear the cost of
additional inventory to speed up lead
times. JIT II partnerships are helping
companies meet customer demand and
still control cost and inventory levels

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