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35
CHAPTER 7
Lead time and time compression
Objectives of this chapter
• To emphasise the importance of responsiveness to customer needs
• To consider differing perceptions of ‘lead time’
• To explain the importance of lead-time variability
• To outline the component parts of lead times
• To explain the need for expediting, how it is prioritised and organised and how it can be
reduced
• To consider the inclusion of liquidated damages, penalty and force majeure clauses in a
contract
List of Cases, Research Boxes and Figures in this chapter
Case Studies
Nil
Research Boxes
Nil
Figures
• Figure 7.1 Delay in supply of goods or services results in a slower cycle time and
adversely impacts on cash flow
• Figure 7.2 Some perceptions of ‘lead time’
• Figure 7.3 Delivery performance
Teaching Notes
This chapter is concerned with the importance of on-time supply, and includes a discussion of
lead times and techniques employed in achieving time compression.
The recognition of ‘time’ as a key variable, and the need to minimise time as waste in the
supply chain, has led to an increased degree of concern with time and responsiveness in recent
years. Attention is being paid to the benefits which might arise from increasing responsiveness
at all stages.
Instructor’s Manual
The key concern of this chapter is to ensure that the concept of lead time is fully understood, as
it has many different meanings, which can lead to misunderstandings, ambiguity and a resultant
lack of effectiveness in lead time reduction programmes or time compression as it is also
known.
Lead time is perhaps the critical component in SCM; however, it is usually viewed
incrementally and sub-optimally.
For the purpose of clarification, I have broken down lead time into its constituent parts as
follows:
Eight types of lead time:
• Lead Time Action By
• Pre-order planning User Customer
• Procurement Order placing Customer to supplier
• Supplier Order despatching Supplier
• Production Making to order Supplier
• Warehouse Supplying from stock Supplier
• Transit Transporting Supplier
• Receivers Receiving Customer
• Payment Paying Customer to supplier
This is obviously repeated several times through a long supply chain.
This chapter will investigate how to reduce these components by studying lead time variability.
Clearly, therefore, any attempt to reduce overall lead times must involve reductions in each of
the above components.
