Lead time reduction increases profitability by multiple times. By reducing the lead time from 90 days to 60 days, the company can increase its turnover by 50%, but the profits will most probably jump by over 3 to 4 times. If each task is analyzed and the buffer eliminated, it is not difficult to reduce lead times, especially in the pre production stage.
Lead time reduction is highly beneficial in terms of higher cash flow, more orders and a strong customer relationship. With improvements in IT technology, lead time reductions have become much easier.Broadly lead time consists of
1. Pre production- merchandising
2. Manufacturing-production.
3. Coordination and data analysis.Preproduction is done by the merchandising team and starts from receiving enquiry to costing to finalize the specks to getting the order.
Manufacturing lead time is the time taken to produce and pack the goods and depends upon materials and resources.
Coordination and data analysis is the most critical to lead time reduction.
