Controlling Input: The Real Key to Shorter Lead Times

Abstract

Operations managers are now more than ever acutely aware of the importance of Manufacturing Lead Times (MLT). Tremendous advantages such as increased flexibility, increased responsiveness, decreased work in process (WIP) inventories, improved due date performance, and decreased finished goods inventory can be realized with a shorter MLT. Unfortunately, US manufacturers have not been very successful at efforts to reduce MLT. This is especially true for those companies using MRP. In MRP, component lead times are often exaggerated to insure that sufficient time is available for the completion of all components. With the exaggeration of component lead times comes an increased manufacturing lead time. Also, due to the normally accepted weekly time bucket, a product with six levels in its bill of materials requires a minimum of six weeks to manufacture. A second reason US companies have failed to significantly reduce MLT is the over‐emphasis on machine utilizations. When plant performance is based on overall utilization, shop floor foremen try to maintain a sufficient level of work in front of their department to ensure that the machines are never starved. As a result of these large queues at each workcentre, a high level of WIP in the entire plant is maintained. And, due to the direct relationship between lead times and WIP to be discussed later, as the level of WIP increases, a proportional increase in lead time follows.