How to measure and lower manufacturing lead time: A guide to skyrocket your business efficiency

Consumers today expect products to be well designed, easy to order as well as fast to deliver. Akin to manufacturers, consumers have begun to embrace cutting-edge digital technologies and their expectations from manufacturers have also evolved. 

In the midst of rising expectations, manufacturers have to strive to delight their customers by leveraging a combination of disruptive products and services, faster lead times, and better user experiences powered by futuristic digital technologies. 

Lead time is a particularly significant metric that represents a company’s ability to meet customer expectations and enhance customer happiness levels. It is used by manufacturers across the globe to analyze efficiency and identify areas for process improvement to reduce the time required to deliver finished products to customers. 

What is the lead time? 

Lead time is the total time from when a customer places an order until it is actually  delivered. For example, let’s imagine for a moment that you build barbells for the gyms in your neighborhood. 

For the sake of simplicity, assume that this process takes place in 6 steps: 

• You market your products online and receive customer orders through your e-commerce portal for a particular production cycle
• You order and procure the raw materials necessary for production from a local supplier 
• You prepare the manufacturing plan, set up your machinery accordingly, and instruct your supervisors and operators to commence production 
• You cast the cylindrical shaft of the barbell and safety clips using stainless steel
• You manufacture the weight plates by pouring molten iron into sand molds 
• You process the manufactured items and package them in cardboard boxes to prepare for shipping and delivery

The total time taken for all of these steps is the manufacturing lead time for your gym equipment production business. 

How to calculate manufacturing lead time 

Essentially, when figuring out how to calculate your manufacturing lead time, this is the formula that you will be using: 

MLT = Planning and purchase time + waiting and idle time + material handling time + operations time 

Calculating your manufacturing lead time helps you establish a foundation for increasing your efficiency and reducing that lead time. 

Fundamentally, MLT comprises two aspects that you need to consider: 

Pre-processing lead time 

Processing lead time 

Pre-processing is the planning stage. This is the phase where purchase orders go out. 

Processing lead time, often referred to as throughput time, is the time required to actually manufacture a particular product. 

It is basically the average amount of time for: 

• Materials to come in 
• Processes to get done 
• The waiting times in between 

Going back to our earlier example of barbell production, the preprocessing stage is spent on collecting orders from gyms, calculating the amount of steel and cast iron required for production, purchasing and procuring steel and cast iron from the local mining unit, preparing the master production schedule, etc. 

The processing stage involves the actual casting and finishing of the barbells. 

Strategies to reduce lead time 

Automate inventory management 

Stockouts occur when materials and parts are unavailable for manufacturing. This shortage can further create a ripple effect where other aspects of the production process must be hastened to make up for the time lost or delayed due to a lack of availability of raw material. 

In addition, manual inventory management almost always involves human error and reduces visibility of the shop floor. These errors may cause unnecessary expediting and affect WIP need  for production. 

Also, tracking both suppliers’ and your own lead times is a cumbersome process. Automating your inventory management process will enable you to solve all these problems effortlessly. 

It will enable you to track inventory movement in real time and identify the inventory turnover ratio of your products effectively.

Inventory turnover ratio is quite simply the amount you sell in relation to your average inventory. Monitoring this critical business performance metric will enable you to answer questions such as: 

• Am I holding too much inventory at any given point of time? 
• Am I selling optimally? 
• Are my manufacturing costs way too high? 
• Am I producing products quickly enough to deliver shipments to customers on time?

Investing in a robust inventory management tool is an excellent first step to drive inventory optimization. Linking this software with a data platform will help you ensure that your production team always has what is needed and knows when replenishment will happen.

Order smaller amounts 

If you are always placing humongous orders one it’s time to replenish your products and materials, you are inevitably prolonging the duration of time it takes for those orders to get fulfilled. 

Consider taking a more agile approach and break up your large orders into smaller amounts. This will empower your supplier to fulfill your orders faster, and also enable you to reduce your planning and purchase time by a huge margin. 

Forge powerful partnerships with suppliers using lead time contracts 

In addition, you must have a lead time contract with every supplier that you work with. This contract should clearly specify the penalties for damaged shipments, delays, etc. 

You should also clearly mention terms and conditions for price change as well as discontinuation notifications to ensure that you are not caught off-guard. 

Having a proper contract is a sure fire way to make sure that delays do not happen. At the end of the day, delays have a significant negative impact on your lead time and you must strive to to reduce the occurrence of delays as far as possible. 

Eliminate wasteful processes and harness the power of data

Complexity is quite inherent to manufacturing. With multiple variables to monitor such as OEE, operator training, product quality, and specifications, and more, monitoring your production processes can make you dizzy. 

In such a scenario, eliminating any unnecessary processes that are slowing your business down and extending the time it takes to deliver finished products to customers is one of the simplest and most efficient ways to reduce manufacturing lead time. 

In addition, you can also leverage the computing capabilities of a machine connectivity platform such as Happishopfloor to connect factory assets and monitor production down to the machine and spindle level. 

Using our cutting-edge platform, you can automate several manual processes to optimize operator performance and machine utilization levels. Our tool also provides real-time actionable insights, which allows managers to quickly identify patterns, pinpoint areas that need intervention, and craft excellent strategies for process improvement. 

Ultimately, a competent machine data platform can spike up your productivity by unimaginable margins. It can eliminate several unnecessary processes such as: 

• Wasteful operator tasks 
• Manual data monitoring 
• Burdensome analysis using spreadsheets 
• Antiquated maintenance strategies

In a nutshell

Decreasing your manufacturing lead time can help you advance sales, streamline inventory management, and optimize your production processes. However, you need to partner with a leading digital transformation company to support your lead time reduction initiatives. 

Allow Hakuna Matata to be that partner for you. Happishopfloor, our best-in-class shop floor management platform, uses real-time data to offer you a host of benefits such as enhancement of asset and inventory utilization levels, high production performance, and elimination of redundancies. 

Ultimately, our platform can help you reduce lead time to meet ever-evolving customer demands and stay on top of your game. What are you waiting for then? 

Schedule a free consultation with our experts right away!