When determining lead time, project managers should consider how long it will take an electrician to install the wiring.
Processing time is the amount of time required between ordering a product or service and its delivery. Processing time management is the process of ensuring that actual processing times match a customer’s data. In a manufacturing environment, it can also be applied to ensure that the production of items starts on time to avoid running out of warehouse or storage facilities.
Project managers are typically responsible for lead time management.
Project managers are typically responsible for lead time management. This often includes juggling several different lead times for the various components of a project so that all parts are available when needed. Often certain parts are needed to create other parts; parts and final products have lead times. To calculate an overall schedule, the project manager must accurately estimate lead times for all items.
When working with vendors using a custom fulfillment strategy, delivery can take days or even weeks.
For example, a construction project requires the work of several subcontractors. The person installing the drywall may need four days to complete their work. However, you may not be able to start until the electrician has completed the part of his work inside the walls. If the electrician needs four days and the drywall installer needs four days, the actual turnaround time for this part of the project is eight days. Effective lead time management will take into account the order in which these jobs will be done and allow enough time for both.
Lead time management can help prevent product from running out of a warehouse.
In a custom manufacturing environment, lead time management is similar. Purchasing managers must order raw materials and the delivery time of these materials must be factored into the total production time. Delivery times should also be included. Only by including all of these elements can the business provide an accurate early expiration date to the customer.
Manufacturers that stock a certain number of items and ship them on order have additional lead time management needs. In these cases, running out of a product means disappointing customers and can mean lost sales. Most of these companies automatically start production again when inventory reaches a preset minimum. These minimums are determined by the average number of products normally sold during a period equivalent to the delivery time of that product. Thresholds are usually set slightly above the actual number to allow for fluctuations or delays in production.
Effective lead time management has several benefits. It enables manufacturers to use labor and machinery efficiently and helps set customer expectations. It is also critical for estimating the cost of capital when a job is billed behind schedule.