Forecasting of Production Order Lead Time in Sme’s

Abstract

More and more companies on the global market are today capable of manufacturing individual or small-series orders at comparable prices and quality. The main difference between these companies is the expected production order development-time and the observance of delivery deadlines. Before making a bid, the sales department must establish what operations will have to be carried out for a particular order, the time needed for performing these operations, and what delivery time is required. Currently, operation-time data are usually obtained from experienced company employees (however, a problem arises if they leave the company, because SMEs do not usually have systems for knowledge capture—the “knowledge with which they are dealing is more oral tradition, knowledge obtained by experience), while the customer specifies the delivery time. However, estimates on lead times, and thus delivery times, based on personal experience can be rather misleading. Bids may consequently be based on wrong decisions, or even worse; because of an incorrectly specified delivery time the company may not receive the order, because the delivery time (if not specified by the customer) may be too long and therefore uncompetitive in comparison with other bids. Another type of a problem arises if the specified delivery time is too short and cannot be met. The development of information and communication technologies (ICT) makes it easier for a company to improve and maintain its competitive advantages on the market (Leem C.S., Suh J.W., 2005), because it is very easy to access the data. A company striving to be competitive on the global market needs a suitable enterprise resource planning (ERP) system. There are several ERP systems available (Scherer E., 2005) and each company must select the optimal system for its needs (Starbek M., Grum J., 2000). This chapter presents how the data stored in the ERP system can be used for the calculation of lead times of operational and assembly orders and indirectly, for forecasting production order lead times, depending on the confidence interval. Naturally, if the company does not have an ERP system, it is possible to manually obtain the data required for forecasting lead times. The disadvantage of such a method is that the manual procedure is rather time-consuming in order to build an applicable database. The chapter presents a review of the literature and some achievements and guidelines related to lead times of orders and delivery times. A procedure for forecasting production