Ask anyone in a manufacturing company about their manufacturing lead time and you will get a wide variety of answers. The definition of manufacturing lead time is directly related to the person you ask and their role in making the product. A fascinating exercise is to challenge managers in a company to define the manufacturing lead time (MLT) in their own words. The result can be surprising, and scary!
But what really is this time interval? The APICS Dictionary defines Manufacturing Lead Time (MLT) as “The total time required to manufacture an item, exclusive of lower level purchasing lead time.” The dictionary goes on to further define this lead time for make-to-stock and make-to-order products. In general, the dictionary shows this time to be the length of time from the release of the order to production to its completion as a finished product. This is a correct definition, but how many people in any company refer to the APICS Dictionary to answer this question? (Not enough!)
This definition is valid but doesn’t acknowledge what the customer is thinking when he asks about your MLT. The question of MLT should be taken from a customer’s perspective. The customer wants to know how soon you can complete his order and supply his raw material. The customer usually doesn’t care about holidays, late suppliers, lost drawings, broken down machinery, or work force shortages. The customer only knows when he needs the material to meet his own production schedule.
Inside many manufacturing companies the confusion about MLT can lead to embarrassment. Don’t assume that everyone in a manufacturing company understands the MLT in the same way you see it. Does it start when the work order goes to the production department; or when the engineering configuration is approved; or when the sales department accepts the order? The best way to avoid confusion, finger-pointing and bad customer relations is to firmly fix the MLT in everyone’s mind. The customer, the sales department, the engineering department, the purchasing department, the production, and the accounting departments should all know what you mean by the MLT and how their contribution fits into this time period.
So, let’s look at MLT from the customer’ s point of view (he is, after all, paying the bill!). For the customer, the time interval from the issuance of a purchase order to the receipt of the finished product at his dock is the lead time to him.
Therefore the manufacturer should consider all actions between these two time points to be his MLT whether he likes it or not. Excluding the mail transit time for the purchase order and the delivery time of the finished product, everything in this time interval is under the control of the manufacturer. From order entry, to engineering approval, to material procurement, to production, to testing and inspection, to shipment is the manufacturer’s responsibility. How he can shorten this manufacturing lead time is a topic for another series of essays, but he must master the activities in his lead time sphere or lose business to more efficient competitors. Everyone in a company should be talking about MLT with the same definition in mind.
To monitor the MLT and the activities in this time period, the Master Schedule is the most useful tool. It can be used to set deadlines, and to highlight potential bottlenecks before they cause problems. The master schedule can be used as the benchmark to measuring the performance to the schedule and the stated MLT.
When you clearly define your MLT to your employees and departments; and monitor your flow with the Master Schedule, you have taken the initial and crucial steps to improving your customer service and making genuine reductions in your manufacturing lead time.
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