Lead Time

Lead Time

What is the delivery delay?

The turnaround time is the time that elapses between the start of a process and its conclusion. Companies review manufacturing, supply chain and project management lead times during the pre-processing, processing and post-processing stages. By comparing the results with established benchmarks, they can determine where inefficiencies exist.

Reducing delivery times can streamline operations and improve productivity, increasing production and revenues. On the other hand, longer lead times negatively affect the sales and manufacturing processes.

Key points to remember

  • The turnaround time measures the time it takes to complete a process from start to finish.
  • In manufacturing, the turnaround time often represents the time required to create a product and deliver it to a consumer.
  • The most efficient production schedules have the least possible time.

Understanding the delivery time

Both production processes and inventory management can affect delivery time. With regard to production, it may take longer to build all the components of a finished product on site than the completion of some items off site. Transportation problems can delay the delivery of necessary parts, interrupt or slow production, and reduce production and return on investment (ROI). Using locally sourced parts and labor can shorten lead times and speed up production, and off-site subassemblies can save time. The reduction in production time allows companies to increase their production during periods of high demand. Faster production can increase sales, customer satisfaction and business results.

Efficient inventory management is necessary to maintain production schedules and meet consumer demand. Out of stock occurs when inventory or stock is unavailable, which prevents the execution of a customer’s order or the assembly of the product. Production stops if an organization underestimates the amount of inventory required or does not place a replenishment order and suppliers cannot replenish the items immediately. This can be costly for the bottom line of a business. One solution is to use a supplier-managed inventory program (VMI), which allows automatic replenishment of stocks. These programs often come from an off-site supplier, using just-in-time inventory management (JIT) to order and deliver components based on usage.

Delivery times vary from source to supply chain, making it difficult to predict when items will be delivered and to coordinate production. Often the result is excess inventory, which puts a strain on a company’s budget. Scheduling allows for the receipt of the components necessary to arrive together, and reduces shipping and receiving costs. Certain delivery delays cannot be anticipated. Obstacles to shipping due to shortages of raw materials, natural disasters, human error and other uncontrollable issues will affect the delivery time. For critical parts, a company may employ a backup supplier to maintain production. Working with a supplier who keeps inventory on hand while continuously monitoring the use of a business helps to alleviate problems resulting from unforeseen events.

Storing the necessary parts can be prohibitive, but reducing the number of excess parts can also cap production costs. One solution is for companies to use kitting services to organize their inventory. With kitting services, the items in stock are grouped according to their specific use in the project. Workers save time by choosing from smaller batches of parts, which keeps production more organized and efficient.

Using off-site assembly in foreign markets instead of shipping finished goods can help save money on rates.

Example of delivery time

A major festival that takes place each year during the first week of August attracts 100,000 people on average and typically sells 15,000 festival T-shirts. The supplier who supplies the T-shirts needs one working day to complete the design of the shirt, one working day to test it and make the necessary corrections, one working day to print the shirts and two days working hours to print the articles. The lead time in this example would be five business days. In other words, the festival organizers must place their order with the t-shirt supplier at least five working days before the festival opens in order to get the shirts on time.

Of course, this period can be shortened in certain extreme situations if the buyer is ready to pay a premium. If sales of t-shirts on the first day of the festival exceed expectations, festival organizers may decide to order additional t-shirts on the second day in the hope that they can be delivered on the third day. Since the shirts have already been designed and approved, this means that three days of delay – one to print, two to ship – can be reduced to one. To meet this shortened deadline, the seller should print the additional shirts as soon as possible in order to ship them overnight for next morning delivery.

Additional factors may affect the turnaround time in this example. If the festival organizers want a certain percentage of T-shirts to be fuchsia and the seller does not regularly keep fuchsia T-shirts in stock, this can increase the delivery time because the seller will have to order shirts of this color .

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