Blog

The best content on costs and profitability

Find out now what lead time is and how to reduce its value

Find out now what lead time is and how to reduce its value

Have you heard of lead time, or know what it is? This term refers to the time the business takes to complete an order or project. The concept takes into account the period from the moment you receive a customer’s order or request, or start an activity, until the time when it is completed and delivered.

The lower this number is, the better, as it is a sign that the company’s productivity is streamlined. Although widely used in the industry to measure the productive capacity and production time, lead time is also used in other sectors, such as administrative and financial.

Next, learn how to calculate the lead time in your company and what measures are important to reduce and control it. Keep reading!

How to calculate lead time?

Now that you know what lead time is, we will show you how to calculate the production time in your organization. The calculation of this ratio consists of adding up all the products or inputs that need to be used in all phases of the work, the time it takes to acquire them, and the time it is actually spent producing (working), that is, the hours, days and months.

It is important not to forget to include in the calculation the holidays, weekends, breaks during working hours or possible delays, such as a meeting or audit at the company.

How to reduce lead time?

The higher your lead time is, the longer you will take to produce and deliver your project, task or order. There are some measures and good practices that impact this ratio and help to reduce it. See below what they are.

Make a process mapping

Through process mapping, the whole team will know the workflow. By identifying all stages, it will be possible to visualize stages in which there are bottlenecks and other issues that affect the progress of the flow and are demanding more time than necessary.

Draw up a standard

Process standardization is essential to have a good lead time. After all, when the work is not standardized and each employee carries out the activities in a different way, the greater the working time and the chances of errors are. Therefore, the entire workflow should have standards and clear specifications for all procedures, including the professionals responsible for each process and the methodologies and tools used.

Negotiate shorter terms with suppliers

The calculation of your lead time needs to consider the time you take to acquire inputs, raw materials, tools and all the items used in your work. Therefore, if you are able to negotiate shorter terms, it is possible to streamline your production and reduce time.

Optimize production processes

Process optimization consists of implementing improvements and eliminating failures and unnecessary steps. As a result, there is an increase in productivity and the quality of work, which are decisive for reducing the lead time.

To this end, in addition to mapping to identify bottlenecks and the flow of processes, you need to detect faster and more agile ways of performing tasks. For example, how can the analysis of documents and contracts be faster? How to optimize financial records? The rational use of resources also needs to be taken into account in order to reduce costs in the company.

Invest in technology

All the measures we have mentioned will take you on the same path: technology. In order to optimize your processes, you need automation systems so that you can streamline tasks and ensure that they are done flawlessly. That way, your productivity is increased and the production time is reduced. In addition, up-to-date and efficient software are important tools to detect failures and reduce costs.

Now that you know what lead time is, you can see that the lack of strategies to reduce it can affect your company, because the longer it takes to work, the more resources you will use and the less you will be able to produce. All of these factors interfere with your competitiveness and profitability.

Take the opportunity to like our page on Facebook to have access to our management tips and news.