STRATEGIC LEAD-TIME MANAGEMENTINTERNATIONAL SUPPLY CHAIN MANAGEMENT

EDMUND SIAH-ARMAH CARINTHIA UNIVERSITY OF APPLIED SCIENCES

AGENDA

DEFINITION ,COMPONENTS, CONCEPTS AND CATEGORIES OF LEAD-TIME

CAUSES AND DEALING WITH LONG LEAD-TIMES

P:D RATIOS AND HOW TO MEASURE TIME IN A SUPPLY CHAIN PIPELINE

CURRENT STATE MAP IN A SAMPLE PIPELINE

CALCULATIONS, REDUCING LEAD TIME BY LINE BALANCING

PROPOSED FUTURE STATE MAP OF SAMPLE SC PIPELINE

SUMMARY

WHAT IS LEAD TIME?Lead Time/Throughput Time:- number of minutes, hours, or days that must be allowed for

the completion of an operation or process, or must elapse before a desired action takes place.

COMPONENTS OF LEAD-TIMEPROCUREMENT LEAD TIME

MANUFACTURING LEAD TIME

DISTRIBUTION LEAD TIME

LOGISTICS LEAD TIME

SETUP TIMES

WAITING TIMES

DECISION-MAKING TIMES

SYNCHRONIZATION TIMES

CONCEPT AND CATEGORIES OF LEAD-TIMESSCP Lead-Time:- clock time spent by the supply chain to convert raw materials into final products and

to place them in the hands of distributors or customers

ODP Lead-Time:- time elapsed from when customer places an order till the instant he is delivered the product

Value-added lead time:-the time required to actually manufacture a unit of a product.

Non-value-added lead time:- the time that a unit of product sits in inventories or moves unnecessarily.

CAUSES OF LONG LEAD-TIMESLong setup times (the effort required to prepare an operation for a new production run)

Move timeQueue time/Work-in-precessWaiting timeProcessing time

Viswanadham, N. (2000): Analysis of Manufacturing Enterprises: An Approach to Leveraging Value Delivery Processes to Competitive Advantage. Massachussets: Kluwer Academic Publishers.p. 242ff.

Product-Oriented Layout / Product Cells:- Organizing work around the productsProcess-Oriented Layout:- organizing work around processesEmployee involvement:- The use of teams organized in product cells, rather than just

efforts of isolated individualsPull Manufacturing / Kanban:- Producing items only as they are needed by the

customerZero Defects:- Poor quality results in increased need for inspection, more production

interruptions, an increased need for rework

DEALING WITH LONG LEAD TIMES

Time Elasticity of Price:- the price that customers are prepared to pay is often related to the delivery speed.

P-Time (Production time):- the time it takes for a product or service to go through a SC pipeline

D-Time (Demand time):- the time for which a customer is willing to wait to have their demand fulfilled

P:D RATIOS

Stalk, G/Hout, T. (1990):Time management; Delivery of goods; Competition, International; Comparative advantage (International trade). New York:Free Press

P-Time = customer makes order deliver product to customer

WHEN P-TIME IS GREATER THAN D-TIME

Source Make Delivery

Customer’s order cycle

Order fulfillment: D-time

Logistics lead time: P-time

P-time － D-time

Assembly and Test

Harrison, A/Van Hoek, R. (2008):Logistics management and strategy: competing through the supply chain. 3rd ed., England: Pearson Education Ltd. p.150ff

WHEN P-TIME IS GREATER THAN D-TIME

Harrison, A/Van Hoek, R. (2008):Logistics management and strategy: competing through the supply chain. 3ed., England: Pearson Education Ltd. p.150ff

Short Term•Make-to-order•Make-to-stock

Strategy When P-Time > D-Time

Long Term•Marketing•Product development•Process improvement

•Control

•Simplify

•Compress

•Integrate

•Coordinate

•Automate

Optimizing throughput and improving process capability

Untangling process flows and reducing product complexity

straightening process flows and reducing batch sizes

Improving communications and implementing teams

Adding customer-specific parts as late as possible

Using robots and IT systems

1. Create a task force2. Select the section of the SC pipeline to map3. Observe and collect data from the current state map4. Visualize/flow chart the process5. Identify value-adding and non-value-adding processes6. Construct a time based process map7. Generate a solutions for a future state map

HOW TO MEASURE TIME IN A SUPPLY CHAIN PIPELINE

CURRENT STATE MAP OF A SAMPLE SC PIPELINE

How can we shorten our lead-time?

A Customer

places order

0.3

B Customers

credit is checked

0.4

C Verified

Orders are entered into a computer

system

0.2

D Processing

center picks up order for processing

and forwards to warehouse

0.1

G Test and Quality Control

F Supplier orders parts from their

suppliers0.6

E Warehouse

contacts supplier

H Manufacturing at Factory

1

.1

0.1

0.8

0.5

0.1

D1

D2

G1

G2

TOTAL TIME 4.2 HRS/UNIT

G3

OPERATING TIME= 8 HRS/DAY OUTPUT = 5 UNITS/DAY

HOW MANY SECTIONS DO WE NEED IN THE PIPELINE?

TOTAL TIME = 4.2 HRSCYCLE TIME = 1.6 HRS/UNIT/PIPELINE SECTION

CALCULATIONS: REDUCING LEADTIME BY LINE BALANCING

1.6 HRS/UNIT/PIPELINE SECTION CYCLE TIME

2.6 PIPELINES Nmin (theoretical minimum) 3 PIPELINES (rounded)

RULE OF THUMB: Longest task to the work station first

PIPELINE #1 1.6

HRS

PIPELINE #2 1.6

HRS

PIPELINE #3 1.6

HRSPROCES

STIME

SPENTTIME LEFT

PROCESS

TIME SPENT

TIME LEFT PROCESS

TIME SPENT

TIME LEFT

A 0.3 1.3 E 1.1 0.5 G2 0.5 1.1

F 0.6 0.7 D1 0.1 0.4 G3 0.8 0.3

B 0.4 0.2 D2 0.1 0.3      

C 0.2 0 G1 0.1 0.2      IDLE TIME of 0.5

PROPOSED FUTURE STATE MAP OF SAMPLE SC PIPELINE

SUM OF ALL TASK TIMES ACTUAL NUMBER OF PIPELINES

4.2 HRS 11 PIPELINE SECTIONS

EFFICIENCY, E CYCLE TIME

CURRENT EFFICIENCY Ec 1.6 61.10%

100%

FUTURE EFFICIENCY, Ef 4.2 HRS3 PIPELINE SECTIONS 1.6 224%

BA F

D2E

D1

G2G

3

C

G1

A

C

B

CUSTOMER

SUMMARY (1)High quality and low cost is not enoughFirst and fast in getting products and services to customersSuccessor tasks should begin simultaneously or before conclusion of a predecessor task

(strategic lead time management)

Reducing cycle time increases capacity/production volume/salesTo increase capacity/production volume/sales, reduce the cycle time by reducing the

bottle neckCutting lead time does not always increase capacity/production volume/salesTo reduce lead time, cut order processing times, work in process, inventoryReduces queuing/waiting time of customers Increases customer satisfaction

SUMMARY (2)

The longer the pipeline form the source of materials to the final user the less responsive to changes in demand the system will be

Delivering products and services on timeReceiving payments on timeDealing with customer queries and complaints on timeLead-time is directly proportional to inventory

A Competitive Manufacturing Enterprise