Definition: Lead Times in the Manufacturing Industry

$129.5 billion is a lot of money – but that’s how much North American retailers are expected to lose because of out-of-stock products. And it’s not just the retail store that’s suffering. Take the example of a manufacturer of computer monitors.

Pulling all of the components together to keep monitors flowing off the line involves dozens of suppliers. And those suppliers might be located in five or six different countries. Add in transportation issues, and the logistics become incredibly complex.

That’s why managing lead times in manufacturing is critical to success. Let’s take a deeper look at lead times with this guide.

What Are Manufacturing Lead Times?

The simplest explanation of manufacturing lead time is the time it takes to create a product and deliver it to the consumer. But, does the manufacturing process involves getting materials and products from outside suppliers? If it does, then the time that takes gets included in the lead time.

Measuring and controlling lead time to guarantee fast, consistent deliveries involve other factors, like throughput time. That’s a way of measuring how long it takes a product to move from the beginning to the end of the line. Waiting time, moving time, and inspection all count in lead times.

Why Reduce Lead Times?

Let’s say you know your lead time to the second. You can say just how long it takes to get the components, assemble a monitor and get it ready for shipment. Your process and inventory are completely under control. Why would you want to reduce lead times?

The answer is you should always try and reduce lead time. Here are four reasons why:

• You’ll have greater flexibility if the market changes
• Avoiding out-of-stocks and backorders
• You’ll be faster than your competitors
• Less spent on carrying costs.

All four of these reasons relate to money. They either mean increased sales or less cost to you.

How to Reduce Lead Times

Knowing that reduced lead time is good for your bottom line, the question is how. Here are just a few ways:

• Ordering smaller quantities of supplies and components more frequently
• Treat your supplier as a partner
• Use lead time contracts to control timing and price

How Do You Manage Lead Times?

It’s easy to accept your current lead time and hard to shorten it. But if you do, if you take control of your lead time, you can improve your bottom line. You’ll have more sales flexibility, reduced inventory costs, and consistent deliveries.

Managing all of that involves multiple complex factors. That’s where good manufacturing business software like this comes in. Enterprise Resource Planning (ERP) takes all of that real-time data you need and makes it easy to manage.

Shorter Lead Times Equal Bottom Line Gains

Now you know what lead times are and why and how to reduce them. The next step is to take advantage of today’s planning software and make managing the process easier and faster!

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