COMPETITIVE ADVANTAGE – SHORT LEAD TIME

Lead time can be possibly important competitive advantage when stock is not held in advance. Many organizations, including many not for profit and service organizations where the customer is directly involve in the process are necessarily make-to-order business. The order might for a standard item or a special item that has to be designed but the item still can be made and delivered to customer within the time-frame that customer is willing to wait.

Lead time is extremely important thing in customer’s perception of business performance. In make-to-order business the lead time has a direct impact on business and customer.

Total lead time is the result of total work in process. This is primarily driven by :

1 ) excessive queue time / work-in-process.

2 ) batching of product.

3 ) batching in time.

Making Money Out Of People In A Rush

è If our actual manufacturing lead time is shorter than our standard lead time, or if we have a lot of spare capacity , or we can reduce transfer batch size on “hot” orders easily, then offering “rush” service at a premium price is a tactic to increase cash flow. Aim to bring in new customers who haven’t yet availed themselves to the standard service.

Making Money Out Of People With Time To Spare.

è Customers with time to spare are also a good source of additional revenue. Again it is dependent upon having sufficient spare capacity on hand. By offering a discount for long lead time for additional work, we can slot this work in to fill-out your work load. Care needs to be taken segment these clients (isolate them) from the standard work, or else we will simply downgrade (discount) our existing clients without increasing throughput. Again we are aiming to bring in new customers or new work that hasn’t yet availed itself to the standard service.

Having a shorter lead time then competitors in a market constrained make-to-order environment is a important advantage. Obtained a shorter lead time is mostly policy driven in the form of reduced total work-in-process, reduced transfer of process batch size, and increased frequency of scheduling.