Normally, manufacturers communicate a lead time expressed in weeks or even months. However, when we look only at the time needed to actually build the product, we usually come to a figure based on days or even hours. Why this major discrepancy?

Let’s consider the imaginary situation at MacBean, a coffee machine manufacturer. Their products are built using 3 or 4 manufacturing steps: drill, weld, assemble and pack. The finished product is then transported to the customer. Breaking down the lead time into the actual touch and planning lead times reveals the following:

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Planning lead times – hidden complexity
Due to the influence of economic order quantities (and other factors), planning lead times are much longer than the actual touch times. The welding task, for example, is given a planned lead time of 2 days. During that period the semi-finished products are also moved to, and waiting for the next operation step to take place. The overall lead time or Manufacturing Critical-path Time (MCT) for manufacturing the machine is found by totaling all the steps – in this case a total of 6 days.

Tackling the problem in the right way
Given the above, it might seem strange that many companies address lead times by spending terrific time, energy and money on attempts to reduce the touch time. They’ll invest heavily in introducing fast machine change-over programs like SMED, improving processing time and bringing in flexible machining solutions.

In reality though, what is the benefit for the customer likely to be? Are they going to get their orders quicker when the weld time goes down from 25 to 10 min? The answer, simply, is no. Weld time may be reduced by 60%, but the overall effect on the MCT is negligible. The money invested in bringing about the improvements is very unlikely to be recouped though significantly improved customer service.

Mind the gaps
When considering these questions, it’s very important to remember that the ‘white parts’ (the differences between the touch and lead times) also incur costs. In his book ‘It’s about time’, Rajan Suri clearly explains that only focusing on the cost related element, in my example the welding, assembly, packing, etc., will not deliver the breakthrough.

The ‘white parts’ in the overall lead time, the periods where the order is not touched, can have a much bigger impact. Imagine an improvement of just 60% on the lead time of the welding process, rather than the touch time. That’s more than a day!

Although managers wanting to boost profits may think the cost part of the process is the smart place to focus (i.e. the touch activity), it’s driving down the overall lead time that will have the real financial benefit to the business.

Leading by example
By looking at the bigger picture and the time spent between the physical operations, machine manufacturers like Agrifac in The Netherlands have reduced overall lead time from months to weeks.

By adopting a new modular product design and outsourcing some of the component manufacturing, the company was able to drastically cut down the time needed to turn an order into a delivery. They decreased the amount of product in progress, and in turn reduced investment in working capital. For the fast runner in their portfolio, the Condor sprayer, they now just need a week for manufacturing of the parts, a week for assembling and just two testing days.

Plant manager Frank Jan Evers sets it out clearly: “We focus on growth with scalable production, small amounts of work in progress, short lead times and of course, delivering high quality”. By looking at the entire flow through the shop floor, rather than the specific operations, they compete on speed – and succeed!