This shift has significantly influenced their expectations from manufacturers. Customers now demand simplicity, ease of ordering, and prompt product delivery. Consequently, manufacturers need to rise to this challenge and not just meet customer expectations but surpass them to remain competitive. One crucial metric that can help manufacturers gauge their ability to meet customer demand and drive customer satisfaction is lead time.

Understanding Manufacturing Lead Time

Lead time refers to the total time span from when a customer places an order until the product is delivered to their doorstep. This timeframe includes various stages such as administrative tasks, management processes, procurement activities, inventory management, and logistics functions. By considering all these components, lead time provides an overall measure of how efficiently an operation handles and fulfills customer orders.

Various Categories in Manufacturing

In the world of manufacturing, lead time plays a crucial role in determining the efficiency and effectiveness of production processes. By understanding the different types of lead time, managers and technicians can identify areas for improvement and drive process enhancements.

Customer Lead Time: Meeting Customer Expectations

Customer lead time, also known as order lead time, is the duration from when an order is placed by a customer, retailer, or supplier, to when it is delivered. This is the most familiar type of lead time for stakeholders outside the manufacturing company. It directly impacts customer satisfaction, as meeting delivery deadlines is crucial for maintaining a good customer relationship. By minimizing customer lead time, manufacturers can enhance their reputation and retain loyal customers.

Ensuring Timely Material Availability

Material lead time refers to the time it takes for materials to arrive once the need for them is recognized. Many manufacturers keep safety stock on hand, so the realization of material shortage may not occur when it reaches zero. Material lead time includes variables such as manufacturing time at the vendor, shipping time, and more. Supply chain planners rely on material lead time to meet production schedules and reduce wait time for inbound stock. By optimizing material lead time, manufacturers can ensure timely availability of materials and avoid production delays.

Efficient Production Processes

Production lead time begins when the required material for an order has arrived and extends throughout the entire production process. This type of lead time assumes that all necessary materials are in stock and machines are available for production. Unlike other types of lead time, production lead time is internally managed and controlled. By optimizing labor, reducing waste, controlling machine downtime, and streamlining processes on the shop floor, manufacturers can enhance production lead time and achieve greater efficiency.

 Identifying Process Bottlenecks

Some manufacturers go a step further to examine WIP (Work in Progress) lead time as a means to delve deeper into the production process and identify areas for improvement. WIP time encompasses the time it takes for materials to move through various sub-processes within manufacturing. The total WIP lead time equals the production lead time. By managing and analyzing WIP lead time, manufacturers gain insights into potential bottlenecks and inefficiencies in their production processes.

Macro and Micro KPIs

Cumulative lead time is the aggregation of all other lead time categories. It allows managers to view lead time performance from a macro perspective and identify areas for improvement in both sales and production processes. By examining the cumulative lead time, manufacturers can identify and address issues that impact the overall efficiency of the operation, enabling them to enhance performance and meet customer expectations.

How to Calculate Lead time?

Calculating lead time is relatively simple and helps provide a rational format for manufacturers and customers to communicate. The formula for lead time calculation is:
 

Lead Time (LT) = Order Delivered (OD) - Order Received (OR)
 

Lead time is typically expressed in days, allowing for easy interpretation by manufacturers and customers alike. This facilitates effective communication and planning, while also helping to set realistic expectations. On the other hand, cycle time, which represents the time taken for one complete cycle of a process, is generally measured in seconds, minutes, or hours. Unlike lead time, cycle time focuses on the internal workings of a process, whereas lead time considers external factors as well.

Why is it Important to Reduce Manufacturing Lead Time?

Lead time impacts the entire manufacturing process, and there are many benefits to reducing it. These reasons include the following:

Greater Customer Satisfaction

Today's consumers are more sophisticated and informed, and they have greater expectations of suppliers. Reduced lead time means faster order fulfillment, which can result in higher customer satisfaction, repeat orders, and improved brand awareness.

Lower Manufacturing Costs

When manufacturing processes are optimized, fewer labor and equipment resources are required to produce the same amount of goods. This optimization results in lower manufacturing costs.

Lower Holding Costs

Inventory management teams must constantly balance warehouse space, indirect labor, and logistics to meet production demand. If lead times are reduced, material flows through manufacturing more rapidly, reducing holding costs.

Reduced Waste

Waste can occur in the form of labor (such as wait time) or spoilage (in industries where material may need to be thrown out). It can also occur when materials are expedited, risking too much of one component or creating dead stock. Reduced lead times mean less waste in many areas.

Better Demand Planning

In fast-paced industries where demand changes quickly or seasonally, reduced lead times help planners manage demand more accurately. Planners can forecast in the near and long term to ensure capacity is available to meet demand while also having time to react to disruption.

How Do You Reduce Lead Time?

Lead times play a crucial role in the manufacturing industry. They are the timeframes quoted by vendors who provide materials to manufacturers. Manufacturers, in turn, quote lead times to their customers for finished goods or parts. The ability to reduce lead time holds significant benefits for manufacturers, as it allows them to improve their processes, optimize logistics, and streamline scheduling and forecasting. By reducing total lead time, manufacturers can better meet customer expectations and develop a key competitive advantage.

Improve Management and Inventory Control

One of the major challenges that manufacturers face is stockouts. Stockouts occur when materials or parts are unavailable for required orders. This shortage can lead to a ripple effect where other production must be moved, pulled forward, or delayed as the manufacturer rushes to deal with the problem. The best way to reduce stockouts is by automating the inventory process. Manual inventory management in the age of IoT and digital technology is highly inefficient. By automating the inventory process, inventory is optimized to meet order demand, and the chances of stockouts are significantly reduced. But stockouts are only part of the problem. Human error in manual inventory transactions reduces visibility on the production floor. These errors may impact production, cause unnecessary expediting, and affect work in progress (WIP) needed for production.Inventory management software is an excellent first step in the optimization process needed to reduce stockouts and drive inventory optimization. Linking this software with a machine data platform allows for an accurate perpetual inventory management system tied to other real-time monitoring. This ensures that production always has what is needed and knows when replenishment will occur.

Audit and Manage Vendor Relations

Vendors play a crucial role in the manufacturing process. It's not uncommon for manufacturers to utilize several vendors for the same material, which may be considered interchangeable or backup. However, in today's business environment, disruptions are becoming the norm.
Auditing and managing vendor relations can help reduce variable lead times caused by vendor performance issues. By evaluating vendor performance and consolidating vendors when possible, manufacturers can minimize delays in the supply chain. Consolidating vendors can also help build stronger relationships with selected suppliers, ensuring a more reliable and efficient supply of materials. Going one step further, manufacturers can consider in-sourcing work that has historically been outsourced to other companies. While this may not be feasible for all companies due to cost considerations, it can offer a significant reduction in lead time and increase control over the manufacturing process.

Eliminate Unnecessary Processes

Manufacturing is a complex process, often involving multiple variables such as original equipment manufacturer (OEM), machine type, operator training, product type, and more. With these intricacies, it's no surprise that many companies still rely heavily on manual management and process intervention. While automating tasks and processes can help reduce lead times in the examples mentioned earlier, there is no better way to reduce manufacturing lead time than by eliminating unnecessary processes that slow down the production and supply of finished products to customers. Manufacturers should thoroughly evaluate each step of their processes to identify any unnecessary tasks or procedures. By streamlining operations and removing redundant or time-consuming activities, companies can significantly shorten lead times and improve overall efficiency.

Using Nirmalya Unified Platform to Drive Down Lead Times

By utilizing an integrated platform like Nirmalya, companies can transform their production processes and achieve significant gains in efficiency.

Enhancing Connectivity and Monitoring Production

With NERP, companies can connect their factory assets and monitor production at a granular level, down to the machine and spindle level. This level of connectivity allows for real-time data collection and analysis, providing actionable insights to drive process improvement. By utilizing Nirmalya's integrated platform, many manual tasks and processes can be automated or semi-automated. This automation not only improves operator performance but also enhances machine utilization, leading to increased efficiency.

Leveraging Real-time Actionable Insights

One of the major advantages of Nirmalya is the ability to provide real-time actionable insights based on production data. This empowers managers to quickly identify trends, pinpoint areas requiring intervention, and create effective strategies for process improvement. By leveraging these insights, companies can make informed decisions that directly impact lead time reduction. They can identify bottlenecks and inefficiencies, implement targeted improvements, and drive incredible gains in overall productivity.

Eliminating Unnecessary Processes

A machine data platform, such as Nirmalya, can eliminate various unnecessary processes that hinder efficiency. Some of these processes include:

• Redundant Operator Tasks: With Nirmalya, operators can focus on value-added activities rather than repetitive and redundant tasks, improving their overall performance.
• Manual Data Tracking: Nirmalya automates data collection and tracking, eliminating the need for manual data entry and reducing the risk of errors.
• Manual Analysis using Spreadsheets: Nirmalya's advanced analytics capabilities eliminate the need for manual data analysis using spreadsheets, saving time and enabling faster decision-making.
• Archaic Preventive Maintenance Strategies: By leveraging machine data, Nirmalya enables manufacturers to adopt more effective preventive maintenance strategies based on actual usage and wear. This reduces downtime and extends the lifespan of equipment.

Automating Low-Value Activities

Utilizing machine data, Nirmalya enables companies to automate low-value activities and develop advanced production floor strategies. For example, predictive maintenance can be implemented to identify potential equipment failures before they happen, lowering costs and minimizing downtime. By replacing traditional preventive maintenance with predictive maintenance, companies can optimize machine performance and reduce lead time by avoiding unexpected breakdowns and improving overall equipment reliability.

NERP offers a best-in-breed machine data platform that leverages real-time data from equipment to improve existing processes, eliminate unnecessary ones, and significantly reduce lead time. Utilizing an integrated platform like NERP can have a transformative impact on a company's manufacturing processes. By connecting factory assets, leveraging real-time data, and automating low-value activities, companies can optimize efficiency and greatly reduce lead time. With the ability to identify trends, intervene in problem areas, and craft effective process improvement strategies, NERP enables manufacturers to stay competitive in today's fast-paced business landscape.

If you're looking to reduce production costs, do robust capacity planning and improve operational efficiency, NERP is the solution you need. Our platform offers a best-in-breed solution that empowers businesses to capture shop floor data directly from equipment, eliminating the need for operator input. With out-of-the-box reports and dashboards, users can quickly identify waste and take strategic action to lower costs. Contact us today to learn more about how NERP can help your organization thrive in a competitive market.