Ideas for Reducing Lead Times

By Thomas D. McBride
Partners for Creative Solutions, Inc.

Most businesses can substantially reduce the time to produce goods or services (lead times) without increasing either production costs or investment. A quick way to check your opportunity is to calculate Value Added Ratio (VAR). Divide the working time required to produce an item by its total lead time. For example, if the actual labor is one hour but it takes 40 hours to complete the item, the VAR is 1:40. A ratio of 1:40 means no value is being added 97.5% of the time. Higher VARs indicate more opportunity to improve lead times, but no single ratio is considered good for all business environments. A good VAR for a manufacturer may be 1:10, but a restaurant should aim for a much lower ratio.

Techniques such as express lanes, scheduling and cross-training workers to meet demand, and other common solutions are helpful but will not be addressed here. Some less obvious but important techniques are:

• Increase velocity of the work by keeping the amount of work in process (WIP) small. Think of a stream flowing into and out of a lake. Water in the shallower stream will flow at a higher velocity than in the lake, even though their flow rates (gallons/minute) are equal. Likewise, when WIP is allowed to build up in a production system, velocity slows (as with deep water) and lead times increase. Some ways to keep WIP low and increase velocity include locating sequential steps close together, advancing work through the steps in small batches, and physically limiting the size of work queues between steps.
• Break large orders into smaller pieces for processing. Manufacturers often do this to create more flexibility for working smaller orders into the schedule, thus reducing their lead times. This technique not only helps all jobs finish sooner but it also provides most of the benefits of an express lane without requiring an additional line.
• Get it right the first time. Sacrificing quality to attain speed never works because reworking products slows down the entire system. When errors occur they need to be detected immediately and corrected before the work proceeds. Of course, the best approach is to prevent errors. Some prevention techniques will be addressed in future articles.

Applying these ideas will require both diligence and creativity, but the effort will result in shorter lead times.

Fall 2002 -Volume 12, Number 4