Time from customer order received to customer order delivered.In detail:
Order Lead Time is the longest lead time. When a customer sends an order, the clock starts ticking. This ticking ends onlywhen the order has been fulfilled and the customer has received what was requested. If the order consists of several deliveries, measuring ends when the last delivery is received or each delivery can be tracked on its own. This time represents the ability to respond to orders and is almost always up to the effectiveness of the supply chain. Order Lead Time is the only lead time that is of interest to the customer because the customer only wants to know when he or she will receive what was ordered. This is easy to understand when compared to ordering from the Internet. After one has placed the order, it is nice to get emails telling that it has been processed or sent, but all that one really care about is the date when the products should arrive.
Time from customer order received to sales order created.In detail:
Customer orders can be received through several methods, including fax and email. When the order has been received, measuring of Order Handling Time begins which ends when the order has been entered into the system. Between these two steps, the order has to be validated to ensure its correctness. It has to include all needed information, e.g. requested delivery date, delivery address, products, quantities and prices. Order entry processing includes checks to export control, transportation time, sales availability and product life cycle. Optimally, the Order Handling Time should be a day or less, but in international firms, that might be hard to achieve. Even more important is order correctness, which requires high attention as mistakes can cause severe delays later on down the supply chain.
Time from sales order created to production finished (ready for delivery).In detail:
When the order is input to ERP, it is visible at the factory. It is also when measuring of Manufacturing Lead Time begins as the ball is handed to the factory. It is their job to confirm material availability, plan and begin production and prepare the goods for shipment. For following how fast orders are actually fulfilled at the factory, Manufacturing Lead Time gives the needed information. In Make-to-Stock production, this is the most important phase where time can be saved or wasted. Manufacturing Lead Time is an external measurement; it does not tell what has been made, but how fast the finished goods are ready to be shipped. If inventory value was not important, ready-made units could be simply stored in a huge warehouse and shipped after an order is received, which would lead to an extremely short Manufacturing Lead Time. This is, of course, not a real situation as it is not cost efficient and would lead to a high risk. As Manufacturing Lead Time does not see what is happening inside the factory, it solely is not enough. There has to be an internal measurement as well.
Time from start of physical production of first submodule to production finished (ready for delivery).In detail:
The factory's internal measurement is Production Lead Time. As actual production of the ordered product begins, starts also Production Lead Time. Usually, the finished module is assembled from submodules. Production Lead Time for a certain module is counted from the oldest submodule's production start to the module being packed and ready to ship. For submodules, the moment when production can be seen as started is when it has a serial number, i.e. when the ID label is printed on it. Whereas Manufacturing Lead Time is an external measurement, Production Lead Time is an internal measurement. It does not tell how fast after an order the product was ready, but it tells how long it took to make it. The time it took to produce a finished module tells also how long effort and money were bound to it before it was of any actual value to someone.
Time from production finished to customer order delivered.In detail:
After the work at the factory has finished and the products are packed and ready to ship, delivery process begins. The exact moment for this is pressing post goods issue for outbound delivery, which decreases inventory, enables billing and allows booking transportation. Measurement ends when the delivery is signed as received at the destination and the customer has received the order. Delivery Lead Time is usually quite static and depends on the chosen transportation method and the distance to the destination. It can be shortened only to a certain extent, mainly by reducing extra steps that add waste like non-value handling or waiting. In international deliveries, Delivery Lead Time can be the most time consuming part of the Order Lead Time, especially in the MTS model.
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Lead Time is a widely used measurement in manufacturing. It tells how much time it takes to start and finish something. Lead Time terms can be seen very differently, depending on personal preferences and work background, which is why these terms were defined. The scope of these terms is from customer order received to customer order delivered, which is the most vital measurement for any company and solely up to the structure and effectiveness of the firm. Steps from customer order received to delivery received by the customer are represented by five terms. They are listed in a temporal sequence and explained in detail above. The amount of work each term covers varies and some of them are timely situated parallel to each other.
A restaurant opens up and a customer walks in. A waiter guides him to a table, gives him the menu and asks what he would like to order. The customer selects a dish and the waiter writes it in his notepad. At that moment the customer has made an order which the restaurant has accepted - Order Lead Time and Order Handling Time have begun.
Now the waiter marks the order in the cash register, rips the paper from the notepad, takes it into the kitchen and puts into the order queue. The order has been handled and is waiting in the factory (kitchen) for manufacturing.
As there are no other customers, the waiter decides to stand outside the kitchen, by the door, waiting for the dish to be prepared and begins calculating Manufacturing Lead Time.
Meanwhile, the chef finishes what he was doing, takes the order from the queue, starts his clock as a mark for the start of Production Lead Time and begins cooking. The chef chops the vegetables, fries the meat and boils the pasta. When the dish is ready, the chef rings a bell and stops his clock.
At the same time the waiter stops calculating Manufacturing Lead Time and rushes through the kitchen door to get the food while it's hot.
When he picks it up, begins counting of Delivery Lead Time that ends when the dish is served to the customer, who can now happily say that the Order Lead Time was shorter than he had expected.
As you can see, these terms can be easily applied to other circumstances than telecommunications production. In fact, the only limiting factor is that there needs to be a customer.
Out of the Lead Time terms there are two that have a special relation to each other. These two are Manufacturing Lead Time and Production Lead Time, which both measure the efficiency of production. Manufacturing Lead Time measures exactly the same steps than Production Lead Time but includes also steps before production is started. Production Lead Time on the other hand begins only when the first submodule is started.
What these terms have in common is also the thing differentiating them. They both tell how good the production is in something but with a difference. Manufacturing Lead Time measures how fast an order is fulfilled - how long it takes for the factory to dispatch the ordered products calculated from the moment the order was input to the system. It is an external measurement. Once the order is in the system, it is the factory's task to produce it as fast as possible. In the perspective of Manufacturing Lead Time, speed can be achieved by having huge buffers of ready-made products simply waiting to be delivered. This way it would be possible to fulfill orders in a few moments. The model could be compared to a supermarket - just pick up the products requested.
However, having a large buffer of expensive basestations that are not necessarily ordered even weekly would introduce sky high inventory costs. This is where Production Lead Time can be seen as useful. It measures how long resources are tied up before they are of actual value to someone. It is an internal measurement. Once production starts, expensive components are used to build the modules, but it doesn't create any profit before a while after the customer has received it. Basically any time spent in a buffer or a warehouse is a waste of resources and should be avoided. For these buffered products Production Lead Time would be painstakingly long as the time measured doesn't end when the product is finished and packed. Instead, it ends when the delivery of these products starts, so having an extremely short Manufacturing Lead Time on the expense of Production Lead Time is definitely not the correct approach.
A balance can be found between the terms - a situation where both give out good metrics. This is achieved when a short Manufacturing Lead Time is gotten through improving production so that Production Lead Time is also short. Lets consider a production that is run by purchase orders. Once an order is in the system, production begins at the first available time in the schedule and all the required components and parts are available without extra procurement delay. In this case the best results overall are gotten when the production is efficient so the product is made quickly. In a situation like this, Manufacturing Lead Time is not the shortest possible but instead it is quite close to Production Lead Time, being only slightly longer due to scheduling delay. But it has to be longer in a PO controlled production to avoid high inventory costs.