Strategic lead-time

management
Time-based competition
The concept of lead time
Logistics pipeline management
The lead-time gap
Time-based competition
 Customers in all markets, industrial or
consumer, are increasingly time-sensitive. In
other words they value time and this is
reflected in their purchasing behavior.
 For example, in industrial markets buyers

tend to source from suppliers with the

shortest lead times who can meet their
quality specification. In consumer markets
customers make their choice from amongst
the brands available at the time.
 The concept of lead time
 From the customer’s viewpoint there is only
one lead time: the elapsed time from order to
delivery.
 The supplier’s perspective, is the time it takes

to convert an order into cash and, indeed, the

total time that working capital is committed
from when materials are first procured
through to when the customer’s payment is
received.
The order to delivery cycle
Cumulative effect of variations in an
order cycle
2. The cash to cash cycle
 How long does it take to convert an order
into cash?
 That time is represented by the number of

days of inventory in the pipeline, whether as

raw materials, work-in-progress, goods in
transit, or time taken to process orders, issue
replenishment orders, as well as time spent in
manufacturing, time in queues or bottlenecks
and so on.
Logistics pipeline management

 The key to the successful control of logistics

lead times is pipeline management.
 Pipeline management is the process whereby

manufacturing and procurement lead times

are linked to the needs of the marketplace.
 At the same time, pipeline management

seeks to meet the competitive challenge of

increasing the speed of response to those
market needs.
The goals of logistics pipeline management

 Lower costs
 Higher quality
 More flexibility
 Faster response times
 Pipeline management is concerned with
removing the blockages and the fractures
that occur in the pipeline and which lead to
inventory build-ups and lengthened response
times.
 The lead-time gap
 The time it takes to procure, make and
deliver the finished product to a customer is
longer than the time the customer is
prepared to wait for it.
 Customer’s order cycle
 The customer’s order cycle refers to the
length of time that the customer is prepared
to wait, from when the order is placed
through to when the goods are received
 Supply chain map
 To enable the identification of opportunities for
reducing end-to-end pipeline time, an essential
starting point is the construction of a supply
chain map.
 A supply chain map is essentially a time-based
representation of the processes and activities that
are involved as the materials or products move
through the chain.
 At the same time the map highlights the time that
is consumed when those materials or products
are simply standing still, i.e. as inventory.
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