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Lead Time Management

The Goal of every Commodity manager

should be to have Zero Liability,maximum flexibility and lowest possiblecost Former VP IBM ,Gateway

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Importance of Time

Time is money. Specially in Logistics management.

Cost directly proportional to goods in the pipeline. Long lead time leads to Slow Responsive

ness.

Thus High Cost and Slow Response.

Example:

In 1994, Compack Computers lost between 500m$ to1bn$ in sales due out of stock laptops and computers.

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Definition:

Point Of View

Customer. Time Elapsed from Order to Delivery

Supplier. Time it takes an order to get converted into

cash.

.

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Order to Deliver Cycle [OCT ].

JIT environment leads toCompetitive advantage.

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Total Order Cycle

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Cash To Cash Cycle:- Inventories

Raw Material Work in progress.

Goods in Transit Time taken in processing. Issue Replenishment orders.

Time In Manufacturing Time in Queues. Bottlenecks.

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Cumulative Lead time Build up

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Bottlenecks

High Inventory Holding Cost Reduction in Responsiveness.

All Activities add Cost but not all activities addValue.

Demand Changes.

Not Reliable Forecasting Tools. Traditional ways of doing things. Technology. Ex Safety Pins

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Race Against Time

Cost of Time.1. Shortening Life Cycles2. Customers drive for reduced inventories.3. Volatile Market making reliance on

forecasts dangerous.

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1. Shortening Life Cycles

Example:- Mechanical typewriter, Electro mechanical typewriter,

Electronic typewriter and Word Processor

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2. Reduced Inventories

Raw Materials Components Work in Progress Finished Products

J ust I n T ime

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Scrapping Old Model

Time Compression

Service Enhancement Cost Reduction

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3. Volatile Markets

Forecast Error Increases Lead TimeIncreases.

Demand Volatility.

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Why to Manage Lead Time ?

Pipe Line Management Lower Cost. Higher Quality.

More Flexibility. Faster Response Time. Cost Versus Value Concept.

Salability Performance Functionality Perceived Value Quality

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Cost Vs Value Concept

Differentiate Between Valueand Non Value Parameters.

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Reducing Non Value adding

Variables or Value Engineering

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Lead Time Gap

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Improving Visibility Of Demand

Demand Penetration too far down thepipeline.

Where the real demand meets the planneddemand. Upstream Demand

Forecast Driven Downstream Demand

Response to customer demand The Real Demand is Hidden.

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Demand VisibilityExample:

Paints.Constant demand 100, 150 ,200 units with usage

pattern of 10 per day..