Strategic lead-time management

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Time based competition
Time sensitivity of customers:
Hectic life-style of customers (end customers experiencing
difficulties in banking, shopping, eating etc.)
Short lead times for delivery (distributors experiencing
difficulties with long lead times of product deliveries)
JIT assembling requires for JIT deliveries (manufacturers
experiences difficulties with higher inventory carrying
costs)
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Competitive advantage of time focus
Competitive
advantage
Product Service
On time
delivery
JIT
Short lead
times
Time reduction:
Cost reduction
Less WIP inventory
Less working capital
Greater flexibility
Cash-to-cash cycle
time reduction
Less vulnerability/risk

3
Logistics pipeline
(cash-to-cash cycle time and end-to-end pipeline)
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5
Time Based Competition
Price and quality important, but increasingly
cost of time is crucial element in choice:
Shortening life cycles
Customers drive for reduced inventory
Volatile markets making reliance on forecasts
dangerous
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Life Cycle and Lead Time
Time
Sales
Late Entrant
Obsolescent
Stock
Market
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Drive to Reduced Inventories
The drive towards Just in time delivery has
had a major impact .
Responsiveness can only be achieved through
time compression in supply chain.
Volatile Markets & Forecasts:
History tell; us that no matter how sophisticated
the forecasting technique it will be wrong
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The Concept of Lead Time
The time it takes for customers to receive their
purchases.
The order to delivery cycle
Customers are increasingly sensitive to time.
Shortening delivery time a major potential
source of competitive advantage
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The order to delivery cycle
Order Cycle Time:
Time taken from order to delivery Short lead
time major source of competitive advantage.
Customer
places
order
Order entry Order
processing
Order
Assembly
Order
received
Transport
Each step consumes time
If order not met from stock but manufactured
lead times will be extended.
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Cash to Cash Cycle
Time taken to convert order in to cash.
The longer the pipeline form the source of
materials to the final user the less responsive
to changes in demand the system will be.
Ensuring timely response to volatile demand
will require a fundamentally new approach.
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Logistics Pipeline Management
The process whereby manufacturing and
procurement lead time are linked to the
market.
Key managing the supply Chain as a single
entity.
Common fallacy long lead times give security.
The opposite is true!
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Lead Time Gap
Problem of most organisations is time taken
to procure, make and deliver is longer than
the customer will wait.
Procurement Manufacturing Delivery
Logistics lead time
Customer order cycle
Order fulfilment
Lead Time
Gap
If logistics lead time = customers required order
cycle. Forecast & inventory not required!
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Reducing Logistics Lead Time
The visibility of the logistics process must be
increased.
Fundamental questioning of why we do things the
way we do.
Optimising Production Technology (OPT
1
):
All activities can be categorised as bottleneck (slowest
activity in the chain)or non bottle necks.
Throughput of whole system is determined by
bottlenecks.
Bottlenecks often associated with information flow
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Improving Visibility of Demand
Key requirement of getting earlier warning
about customers requirements.
Real demand may happen a lot earlier than
demand penetrating the system.
How:
Improving information flow so manufacturing gets
to hear about changes in the market earlier.
Postponement of commitment of product to its
final form
Earlier notification of customer intentions get
customers to order more frequently
Impact of pipeline on profitability

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Dimensions of time based competition
1. Time to market (recognizing the market and reacting with product or service):
Continuous market research
Innovation
New product development (parallel to sales of existing products)
Launching the product on time
2. Time to serve (order to delivery cycle):
order fulfillment team (cross-functional analysis)
3. Time to react (flexibility or time required to respond to the market change):
Reducing the lead times (both procurement and order delivery)
Integrating with suppliers
Reducing the forecast time horizon
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Strategies to reduce lead times
Shortening the pipeline time by identifying value
added and non-value added times:
Time based representation of materials/ products
movement (horizontal time or value added time)
Time based representation of materials/products
waiting/idle time in inventory (vertical time or non-
value added time, increases costs only)
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Process flow (supply chain) mapping
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Value added through time
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Dealing with non-value added time
Logistics process re-engineering:
Eliminating stages in multi-echelon distribution chain
Moving the inventory to close to customers (to local
warehouses, distribution centres to minimize transportation
costs and lead times)
Speeding up the flow of relevant and correct information
Reducing the process flow and waiting times wherever
possible
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