Calculating lead times is of great importance within the entire supply chain, but also within production. Below are some clear examples
Lead times. A definition
Lead time is the total time that a product takes through a process. So from the moment a product is taken in hand in the process up to and including its completion. This is called the processing time.
There can of course also be time between 2 process steps. This is referred to as the waiting time. Within logistics, we also know this as intermediate stock. This can also be the transport time.
These waiting times, but also any waiting times within the process itself, increase costs. So every reason to eliminate any kind of delay and/or waiting.[lean]
There are 2 process steps. Collect and edit.
Collection takes 300 seconds [5 min]
Editing takes 480 seconds [8 min]
The product is waiting for 360 seconds [6 min] between operations
The total lead time is : 300+480+360 = 1140 seconds [19 minutes]
The process efficiency is then: [300+480] / 1140 = 68%.
Average turnaround time. Little’s Law
The example above is based on actual measurement. However, you can calculate the average lead time using the following formula:
Average lead time = average WIP in the process / average output in a period. So the calculation is very simple.
Suppose you have an average of 200 products and the average output per period is 50, then the average lead time is 4 periods.
Within Little’s Law the formula is formally described as: WIP = CT*TH
Where WIP = work in progress [WIP], CT = Cycle time, TH = Throughput
Companies often tend to lower their WIP or WIP by splitting or outsourcing them. However, this does little to help. These processes, however they are divided, remain necessary.
It is the waste [Lean] that can really contribute to improving your lead time. Think of waiting time, transport time, unnecessary storage, errors in the process itself. The importance of shortening your lead time is that it has a leverage effect on your financial performance.
A good way to visualize the real problems in your supply chain or production is to use an Ishikawa [fish] diagram. Based on the categories: Measurements, Methods, People, Machine, Environment and Materials, all possible problems can be identified and solved one by one. Do not forget to continuously register your lead time, both averaged and measured, so that you have insight into the effect of the improvement.
More information on how to improve your turnaround times can be found at the link below