Cycle time is a measurement of how many units of product are received, produced and shipped in a certain period of time, and it indicates the general efficiency of the supply chain. A company’s cycle time consists of several linked parts:
- Production cycle time: Total time producing a product.
- Order processing: Time of processing an order.
- Cash-to-cash cycle time: Time needed to regain financial investments.
A long or extended cycle time tests a company’s ability to convert manufacturing costs to profits. A short cycle time maintains an efficient and agile supply chain. Productivity loss means wasted resources, extra costs, bad customer experiences and less success in the market.
Transportation management and processes affect the ability to reduce cycle time. By reducing the amount of time needed to transport an item from one link in the chain to another, a company will reduce the cycle time of the entire supply chain. The first step toward shortening cycle time is the measurement of present processes and identifying factors that add time to cycle.
- Is your company missing delivery dates?
- Are operators always backlogged?
- Are rush orders ruining the schedule?
- Can you sell the products you are making?
Lead Time:
Lead time is the amount of time that passes from the start of a process until its conclusion.
The term borrowed from the manufacturing method known as Lean or Toyota Production System where defined as time elapsed between a customer placing an order and receiving the product ordered
Lead time = ordered received – ordered delivered
Lead time is a crucial metric for any business. It assists the company in predicting sales, making operations efficient, and improves customer satisfaction.
Material lead time = Procurement time + Manufacturing time + Shipping time + Delays
- Purchase order/Supply / Material lead time:
Time between purchase order place & Items arrive at manufacturing or received at workshop floor
Material lead time = Procurement time + Manufacturing time + Shipping time + Delays
- Production /Manufacturing lead time:
Time between order received at production & order shipped
- Delivery / transport /shipping lead time:
Time between material shipped from factory & reached at the final destination.
- Cumulative lead time / maximum lead time:
The longest length of time involved to accomplish the activity from conceptualizing, material requirements planning, reviewing each bill-of-material path, and whichever path adds up to the greatest number defines cumulative material lead time.
- Inventory lead time:
Time between order received in warehouse and PO placed to restock products
- Demand lead time:
Time between total demand present or current demand to anticipated delivery after next one reorder to replenish the inventory.
Lead time demand = Lead time x Average daily sales.
- Customer lead time:
Time between customer order received by salesman to order delivered to customer
- Business lead time:
The number of days companies review lead time in manufacturing, supply chain management, and project management during pre-processing, processing, and post-processing stages.
(Manufacturing + Supply Chain Management + Project management) during pre-processing, processing & post processing stages.
- Payment lead time:
Time between vendor invoice raised & customer to pay after satisfaction. It is also called payment terms.
Cycle time:
Cycle Time is the amount of time a team spends actually working on producing an item, up until the product is ready for
Cycle time = Net production time / No. of units produced
Reduce lead time of purchase:
- Appropriate funds availability
- Complete, detail specification with drawings, samples, special instructions of product or service against contract with tolerance limit should be available.
- Approved list of suppliers for the product or services availability
- Clearly identify source for non-competitive bid products and services that are unique, designated to match existing product or system.
- Purchase requisition should submit along with all documents (supporting datasheets, quotes, proposals, pre-hire worksheets, drawings etc.) in complete in same day
- Risk assessment should done & bring attention of buyer well in advance.
- Obtain approval for items required before submission of purchase requisition
- Use & developed a domestic supplier for faster delivery.
Reduce lead time of inventory management:
- Proper tracking of inventory movement like it follow FIFO methods.
- Receiving, put away, picking, packing and shipping time reduction
- Accuracy of inventory data with regular audit
- Smart demand-oriented inventory keeping
- Systematic documentation with automatic bar code procedure
- Visibility enhancement for easy identification.
- Follow system documentation not manual.
- Categorization stock with high value, hazardous & other relevant area wise as per business requirement
- Smart inventory planning & management operation with different product portfolio
- Review adequacy of software used & back up planning for smooth shipping with server down condition