Product Replenishment Lead Time Reduction

Effective supply chain management - improving product replenishment

The most effective way for businesses to reduce stock is by reducing the supply lead time. Lead time can be defined as the time it takes from when you first determine a need for a product until it arrives on your doorstep. If lead time was zero, inventory could be zero.

In a perfect world, imagine how simple business would be with a lead time of zero and orders being filled instantly. A customer could walk through the door of your business, place their order, and walk out happy with no delay. If business was this easy, you would require no warehouse space, no order follow-up, no inventory counting, no forecasting, no product damage, no obsolete inventory, fewer employees, less risk of theft, and less cost overall.

Of course the real world does not work like this, but the shorter the lead times, the less complex our inventory management will be. In general, you can expect the following reductions in inventory as lead times are reduced:

Note that lead time can be separated into three components:

• review time (could be reduced by better training for operators, employees)
• manufacture time (could be reduced by implementing new holders, equipments for bottleneck stations)
• transit time (could be reduced by layout design, equipment improvement)

Review time is the time it takes for your company to generate an order. Changing your order frequency from twice a month to once a week or even daily can cut total effective lead times substantially.

It should be clearly understood that lead time reliability is just as important as lead time itself. Short lead times with a high degree of uncertainty can force necessary inventories upward. Obviously this is something to keep in mind when selecting suppliers.

Reduction of product replenishment lead times is a core element of our supply chain management services.

http://www.corelogistics.com.au/Inventory_management_lead_time_reduction.html

Lessons from the Road: Reducing Lead Time Changes Everything

Ever hear "get it done faster"? It comes from many sources, most importantly, customers. The most time-tested -- and ineffective -- means to actually get faster is to work faster.

Why is getting it done faster so important? It's not what most people think, so they can get more done. That confuses lead time with activity, or what I call calendar time and clock time. Calendar time is how long it takes between the request and the completion. Clock time is how much work went into getting it done. This column, for example, takes the same amount of time on my clock whether I get it done in a day or a week of calendar time. If I wrote faster, I might slightly improve my clock time, while likely doing nearly nothing for my calendar time, or lead time.

Reducing lead time isn't about capacity. The amount of work that can get done is usually still the amount of work that can get done. What lead time does is deliver the request sooner to whomever needs something done. Why that matters depends on the request, but here is a fact that might startle you, as an example. Studies have shown that the first quote, product sample or proposal received is drastically more likely to get chosen, in some cases 80% of the time. It wasn't cost, or quality or value; it was being first.

How do you reduce lead time? It's not by working faster. Here are key strategies:

1. Work in parallel. If work is done in parallel instead of in series, there isn't less work, but it is completed sooner. When my wife asks me to pour the kids some milk while she's putting food on the plate, it gets dinner on the table sooner. Most efforts of set-up reduction are solved in this way: taking steps done in series after the machine stops and moving them to being done in parallel to the machine running.
2. Eliminate loops. Working faster often fails because it inadvertently increases errors. Rework is the most common form of loops. There is an exception, and that is when the loops primarily are designed for learning. If knowledge is the end result of the process, loops aren't rework. They are each a value-added step toward the objective.
3. Eliminate handoffs. Every handoff is an opportunity for a delay or an error. Work stops and must be transferred before it begins again. Worse, the next resource is not immediately ready to begin so the work waits in queue. The most substantive improvements are often from eliminating handoffs. Removing people from the process eliminates handoffs. Many retail services that require approvals give employees the tools needed to do approvals themselves, so customers get answers faster.
4. Eliminate steps altogether. Cutting out steps not only reduces lead time by the time needed for those steps, but also likely eliminates two handoffs. To improve hiring lead time, instead of finance verifying the budget availability, they design tools so managers can do it themselves. This eliminates the step for finance, saving 15 minutes, but the handoff to finance and back eliminates over a week of lead time.
5. Compress the work. Getting the work done in less time, not by working faster, is often the hardest. After spell-check was invented, it took less time to check the spelling in this column. Technology is often a solution here, whether it is buying faster equipment in manufacturing or developing software tools for the office. Capacity frequently is increased, although that was not the driving objective.
6. Increase capacity. Capacity can increase many ways, including by compressing the work. You can also add more resources. This impacts lead time because after a handoff, the resource is busy with the last task, creating a queue. Increasing capacity reduces the queue time.

Lead-time reduction is a game changer for most processes. Delivering faster is a true competitive advantage. The pursuit of lead-time reduction also forces you to eliminate other wastes. If I had to pick a single metric to focus an improvement effort, I would choose lead time.

Contributing Editor Jamie Flinchbaugh is a co-founder and partner of the Lean Learning Center in Novi, Mich., and the co-author of "The Hitchhiker's Guide to Lean: Lessons from the Road."

Lead Time Analysis

The Value of Short Inventory Lead Time

In today’s market, businesses are looking for every advantage possible. Maybe the focus is on increasing profits through improving product, or cutting costs. One way to improve profitability is by reducing inventory lead time, or the amount of time that passes between your customer placing an order with your business and receiving their product. As a result, many firms actively look for suppliers with shorter lead time. 

Why is short inventory lead time important?

Short inventory lead time equals more profit. Customer satisfaction is crucial to keeping a business afloat. With a market full of competitors, customers can easily find another business that can satisfy their high standards for delivery, quality, and cost. A short inventory lead time can provide an advantage. In fact, trends have indicated that quality and delivery often surpass costs in terms of customer’s values. And of course, a long and drawn out lead time means an overabundance of inventories, expedition costs, excessive overtime pay, and inefficient use of resources. And what do these factors add up to? High cost for your company.

A longer inventory lead time translates to more time that your inventory is sitting in your warehouse or store room. As you know, excess inventory adds no value, and in fact is incurring cost. In fact, that product incurred cost before it even was stored in your inventory. 

What's more, lead time reduction can improve the bullwhip effect, make forecast more accurate and reduce finished goods inventory level.  

How can you implement practices that will lead to shorter lead time?

Operations management is going to be a key component of keeping your inventory lead time short. There are several different kinds of lead time that can all be reduced to minimize cost. These lead times are set up time, queue time, and move time. There are two main ways for companies to shorten their all-around lead time: 1. Practice better scheduling and production control, and 2. Re-engineer manufacturing operations. To reduce lead times by adopting better scheduling and production control habits, you may find it helpful to invest in some finite capacity scheduling software. This software will help you determine how to split lots, determine lot sizes, and what delivery dates will work best. To reduce inventory lead times by re-engineering manufacturing, you may incorporate some of the following strategies into your system: shorter product move distances, a narrow set-up variety as opposed to wide, and items that are dissimilar grouped together. This changes can set the stage for reducing set up time, queue time, and move time. By using the strategies of better scheduling and re-engineering manufacturing, your business is almost guaranteed to reduce inventory lead time. This translates to less cost, and more success. 

Furthermore, redesigning distribution network, implementing effective information systems (EDI) and using strategic partnership (POS sharing/VMI) can also help reduce lead time.  

Decreasing Manufacturing Lead Time

How do you cut down manufacturing lead time? Everything from regular meetings with warehouse managers to having an efficient order management system in place can help reduce your manufacturing lead time without sacrificing the quality of your product.

Here are four ways that Traco, America’s leading manufacturer of aluminum building products for the construction industry, use the intense quality measure of Six Sigma and lean manufacturing principles to cut down their manufacturing lead time:

1. Advanced manufacturing practices and reduced manufacturing lead time

Traco made an effort to trim the fat from their manufacturing and focused on less time and material waste. They introduced a new assembly layout that followed the principles of lean manufacturing, instituted a process to approve parts using Six Sigma, and began performing inspections and audits both during the manufacturing process and at completion. In order for these initiatives to be successful, Traco directly engaged employees by showing them how these initiatives made their jobs easier.

2. 5S and assembly layout
A batch processing layout is being ushered out in favor of a layout that supports flow, where a product moves smoothly from step to step. There has also been am emphasis on tidying up the production area with 5S: sort, set in order, shine, standardize, and sustain.

3. A part approval process during production
Traco manufactures cutting edge product that has been optimized for good design plus manufacturing and performance requirements. Part of these process includes making samples in several different stages: a prototype sample, a pilot sample, and a final mock-up sample that is shown to the customer.

4. In-house product audits and inspections
These processes inspect for quality both during production and when the product has been completed. Inspections are completed daily using defined checklists for in-process products, plus the product is audited for aesthetics and operations when it is finished.

Can you incorporate some of these progressive steps into your business to decrease your manufacturing lead times? Constantly re-evaluating the efficiency of your business is paramount to success.

https://www.ordoro.com/blog/2012/10/15/inventory-lead-time/