What is lead time

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Value stream mapping is commonly used in organizations looking to reduce the lead time of their process – so what is lead time.

Lead time is the period of time between the initiation of any process and the completion of that process.

So for example if an order is received for a Widget on the 1st of January and the item is shipped to the customer on the 31st of January – The lead time could be said to be 31 days.

Lead time is important to many organizations as it often has associations of cost – for example – buffer stock is often held to counteract long leadtimes (buffer stock has an associated cost of extra material and associated resources e.g. storage).

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One Response to “What is lead time”

  1. Martin Kopp on June 17th, 2011 8:30 pm

    Please see page 26 in the book “Learning to See”. In my 1998 edition it states that the way to calculate lead time is as follows:
    Lead Time = Inventory x takt time / available work time per day
    In the book the lead times noted in the examples are calculated this way.

    During a recent VSM training course I attended the Lead time was calculated as follows:
    Lead time = inventory (WIP) x cycle time / available work time per day

    Using the following example the Results would be .5 days using the Learning to See calculation and 10 days lead time using the other calculation. Why the discrepancy?

    Hours available per day = 8 hours (480 min)
    Customer demand = 960 units per day
    Takt time – 0.5 min.
    Inventory (WIP) staged before a work process – 480 pcs.
    Cycle time of work process 10 minutes.

    Per pg. 26 in Learning to See
    Takt time = 480 min. / 960 pc per shift = .5 min
    Inventory x takt time / available work time per day = Lead Time
    480 x .5 min = 240 / 480 min = 0.5 days Lead Time

    Per VSM training class
    Lead time = inventory x cycle time / available work time per day
    480 x 10 min = 4800 min / 480 = 10 days Lead Time.

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