Page 104 - How To Implement Lean Manufacturing

The Significance of Lead T ime 83

How Lead Time Works for a Job Shop
There is one last point to make about lead time in a job shop environment, and it is
absolutely critical to understand. Unlike the typical automobile supplier, job shops
often do not have a promise of three years worth of work on the horizon; usually they
live from job to job. Typically, their jobs are competitively bid, and very often quoted
delivery time is a crucial decision making criteria, second only to cost in the final bid
analysis. If you are not able to deliver on time, even with the low bid, you will lose the
job. So lead time is crucial to these entrepreneurs. Although short lead times will not
guarantee success, long lead times will almost certainly guarantee failure. Short lead
time is equal to future business to these dynamic businesses.

Lead Time as a Basic Tool in Variation Reduction
Reducing the lead time is not only a result of reducing variation, it is a variation reduc-
tion technique of extreme power. Reducing the lead time directly allows inventory
reductions in the process. This reduces exposure to environmental factors and possible
damage and deterioration.
Also, there is the variation introduced to the process as a direct result of the plan-
ning process. I find the planning process to be a huge source of variation in its best
form. Anyone who has tried to manage a production floor using MRPII (Manufacturing
Resource Planning Two) or any of the other planning models will attest to this. It is not
practical. The shop floor is operating at a speed that the typical planning processes are
not able to achieve—even under the very best of circumstances. Usually, the planning
cycle has a weekly update, but the floor is changing hourly or faster. It makes no differ-
ence if the planning process is updated daily; it still isn’t fast enough to manage the
production floor.
In addition, the farther out you need to project your plan—that is, the greater the
planned lead time is—the more uncertain the plan is. This uncertainty is simply varia-
tion by another name. To make sure all contingencies are covered, planners pad their
estimates and add just a little, “just to make sure” or “just in case” (JIC). Now we have a
JIC planning process trying to guide a JIT (Just in time) production process. When the
“padded” plan is given to the tier 1 suppliers, to cover their contingencies they “further
pad” their estimates, creating another layer of JIC. It proceeds this way down the entire
planning chain. This adding over time is amplified, and the further out the schedule
goes, the more the amplification. This happens along the supply chain and is a major
source of variation. Or simply put, the shorter the lead time, the more accurate is the
forecast.
Planning programs such as MRPII are still
needed to do long-term planning and raw materials
handling as well. They also function well as an inter- Point of Clarity Lead time
IS the basic measure of being
face to accounting, for example. But make no mis-
take about it, to those who do not understand a JIT Lean!
system, MRPII makes sense. To those who under-
stand JIT, MRPII is a large waste generating, tool—when it is used to trigger production
on the floor.

Techniques to Reduce Lead Times
Seven basic techniques can be employed to reduce lead time and improve flow.