Lead Time Management Essay

PRODUCTION AND MATERIAL MANAGEMENT

ANSWER 2 ( PART A)

IMPORTANCE OF LEAD TIME IN INVENTORY MANAGEMENT.

Yes lead time in inventory is very important.

A   lead time is the latency (delay) between the initiation and execution of a process. For example, the lead time between the placement of an order and delivery of a new car from a manufacturer may be anywhere from 2 weeks to 6 months. In industry, lead time reduction is an important part of lean manufacturing.

The lead time is the duration between placing an order until receiving the order. This term is used in the production planning. Let's suppose you just noticed that the number of units of product X in the warehouse is not enough and your customer L is in the showroom waiting for his order of product X. Then, you will call the supplier to order the number of units you want. There are two scenarios in this case; the supplier will tell you OK your order will be in your warehouse within a couple of hours. However, the supplier can be in another town or even in another country. Then your order will take days or weeks. Moreover, the supplier may say I am sorry I don't have this number of product X. This scenario shows the importance of the lead time in production planning. So, when there is a lead time we should put in mind this duration in order to satisfy the demand.

In the manufacturing environment, lead time has the same definition as that of Supply Chain Management, but it includes the time required to ship the parts from the supplier. The shipping time is included because the manufacturing company needs to know when the parts will be available for material requirements planning. It is also possible for lead time to include the time it takes for a company to process and have the part ready for manufacturing once it has been received. The time it takes a company to unload a product from a truck, inspect it, and move it into storage is non-trivial. With tight manufacturing constraints or when a...