Supply chain lead time

Supply chain lead time is the total time required for the supply chain to carry out all activated from the beginning to the end.

Supply chain lead time is also known as cumulative lead time. It is the critical path leadtime required to purchase material and create a product to offer to the market.

Cumulative lead time includes the value-added production time where component are made and assembled into finished goods, the waiting time within the process where these components must wait for resources to work on them, and the transportation and storage time between company owned and external locations within the supply chain.

For many products, the transportation time can actually be the most significant component of cumulative lead time.

Lead time in supply chain is dominated by the interface delays due to the interfaces between suppliers and manufacturing plants, between plants and warehouses, between distributors and retailer, etc.
Supply chain lead time

Customer lead time

The term ‘lead time’ is often used as a synonym for throughput time, cycle time, flow time, and customer lead time.

Customer lead time is the time form customer order placement to receipt of goods. It is the sum of product development/design lead time, order processing lead time, manufacturing lead time, and shipping distribution time.

The goal should always be to reduce customer lead time first, since this can affect sales directly. In turn, reducing customer lead time may require shortening the manufacturing lead time, but it also often involves reducing administrative lead time.

Manufacturing synthesis requires significant reduction of customer lead-times. This depends on the historical approach to lead time and the amount of product customization.

Short customer lead times make it possible to plan and control priorities; thus, reducing customer lead times will create lower inventories quicken customer response, improve employee satisfaction, improve quality and reduce manufacturing costs.
Customer lead time

Manufacturing lead times

Manufacturing lead times are very important to all production and inventory control systems. This is the time for order to start to order completion inside the factory. They influenced nearly every aspect of the planning and execution activities that take place within production and inventory control the system.

It could be asserted that lead times are one of the most important measures of manufacturing performance, since many costs can be related directly to them.

Manufacturing lead times can be defined as the time that elapses between the release of the order to the shop floor and the completion of all operations on the order and its receipt into stock.

Traditionally, manufacturing lead time is comprised of five components or activities:
*Queue: Time waiting for work to begin
*Setup: Time required to set up equipment
*Run: Time required to work on the part
*Wait: Time waiting for the part to be moved to the next operation
*Move: Time taken to move the part to the next operation

Reducing the cumulative lead time or the sum of lead times for purchasing materials, manufacturing operations and product assembly allows a company to reduce the planning horizon for production.

Reducing the planning horizon allows a company to increase the accuracy of its demand predictions.
Manufacturing lead time

Assemble-to-order system (ATO)

The assemble-to-order planning framework incorporates some of the features of make-to-stock into the make-to-order panning methodology to create a hybrid version.

In assemble-to-order, manufacturing lead time is conserved by pre-assembling intermediate portions of the finished product.

Assemble to order system consisting of push and a pull parts. In the push part, undifferentiated components and subassemblies are manufactured to forecast whereas in the pull cart, end redacts are assembled according to customer specifications.

Assemble-to-order system trigger longer delivery times than traditional supply chains, in which products are directly picked out from the shelf.

Assemble-to-order can be useful when intermediate assemblies are common to more than one product. The intermediate assemblies are managed as if they were made-to-stock finished products, but the real finished product is till managed as make-to-order.

An assemble-to-order system is said to be performing well if it provides customers with the required variety, while searching costs’ efficiency and responsiveness.

The system performance is however, negatively affected by the complexity that is induced by variety.
Assemble-to-order system (ATO)