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Lead Time Management
The Goal of every Commodity manager
should be to have Zero Liability,maximum flexibility and lowest possiblecost Former VP IBM ,Gateway
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Importance of Time
Time is money. Specially in Logistics management.
Cost directly proportional to goods in the pipeline. Long lead time leads to Slow Responsive
ness.
Thus High Cost and Slow Response.
Example:
In 1994, Compack Computers lost between 500m$ to1bn$ in sales due out of stock laptops and computers.
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Definition:
Point Of View
Customer. Time Elapsed from Order to Delivery
Supplier. Time it takes an order to get converted into
cash.
.
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Order to Deliver Cycle [OCT ].
JIT environment leads toCompetitive advantage.
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Total Order Cycle
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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.
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Cumulative Lead time Build up
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Bottlenecks
High Inventory Holding Cost Reduction in Responsiveness.
All Activities add Cost but not all activities addValue.
Demand Changes.
Not Reliable Forecasting Tools. Traditional ways of doing things. Technology. Ex Safety Pins
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Race Against Time
Cost of Time.1. Shortening Life Cycles2. Customers drive for reduced inventories.3. Volatile Market making reliance on
forecasts dangerous.
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1. Shortening Life Cycles
Example:- Mechanical typewriter, Electro mechanical typewriter,
Electronic typewriter and Word Processor
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2. Reduced Inventories
Raw Materials Components Work in Progress Finished Products
J ust I n T ime
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Scrapping Old Model
Time Compression
Service Enhancement Cost Reduction
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3. Volatile Markets
Forecast Error Increases Lead TimeIncreases.
Demand Volatility.
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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
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Cost Vs Value Concept
Differentiate Between Valueand Non Value Parameters.
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Reducing Non Value adding
Variables or Value Engineering
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Lead Time Gap
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Improving Visibility Of Demand
Demand Penetration too far down thepipeline.
Where the real demand meets the planneddemand. Upstream Demand
Forecast Driven Downstream Demand
Response to customer demand The Real Demand is Hidden.
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Demand VisibilityExample:
Paints.Constant demand 100, 150 ,200 units with usage
pattern of 10 per day..