Do you want to keep your customers waiting, or do you want to give them what they ask for as soon as possible? If you chose the 2nd option, this article is for you.
Introduction to ‘Lead Time’ and its importance in project management
In the business world, efficiency in project management is crucial to remain competitive. One of the key concepts in this management is ‘Lead Time’. Measuring and optimizing this time can make an essential difference to the company’s competitiveness and customer satisfaction. In this article we will explore in depth what ‘Lead Time’ is, its importance, how it is calculated and the tools available to improve it.
What is ‘Lead Time’ and why is it crucial for your business?
Lead time is the time that elapses from the time the customer requests something of value until the customer receives that final value. It covers all stages of the process, from the order request to production and distribution.
A shorter lead time means that products or services reach the customer faster, which can increase customer loyalty and reduce warehousing costs. It also enables companies to adapt quickly to changes in market demand.
Differences and relationships: ‘Lead Time’ vs ‘Cycle Time’.
It is common to confuse ‘Lead Time’ with ‘Cycle Time’, but these concepts, although related, are not the same. Cycle Time is the time it takes to complete a specific task within the production process, measured from the time work began; Lead Time, on the other hand, includes the entire cycle from order to delivery. The difference between the two is that the ‘Lead Time’ includes the time from when the order is received until work begins on it, which is not included in the ‘Cycle Time’. To better illustrate:
- Lead Time: Includes all stages, from the time an order is received until it is delivered.
- Cycle Time: Only considers the actual production time, i.e., from the start of work on the order until it is completed.
It is also common to confuse ‘Lead Time’ with the famous ‘Time to Market’. Time to Market’ is the time it takes to bring a product to market from the time the idea is conceived until the product is available to consumers. On the other hand, ‘Lead Time’ is the total time required to manufacture a unit of product from the time an order is received. Lead Time’ is therefore a part of the production process, while ‘Time to Market’ includes both product development and market launch.
How to calculate the ‘Lead Time’ in your projects
Calculating Lead Time objectively and accurately is essential for process optimization. Here we explain how to do it step by step.
Understanding the time cycle: steps for an effective calculation
- Identify key milestones: Clearly define the start and end points of the lead time. Normally, the starting point is when the order is received and the end point is delivery to the customer.
- Record times for each stage: Break down the process into its different stages (order reception, processing, production, packaging, shipping, etc.) and record the time taken for each stage.
- Add times: Add the times of all stages to obtain the total ‘Lead Time’.
- Analyze variations: Examines possible variations in times (mean, median, maximum, minimum…) of the different stages to identify bottlenecks and areas for improvement.
Tools and software to measure Lead Time
There are several tools and software designed to help measure and optimize lead time. Some of the most popular include:
- ERP Systems (Enterprise Resource Planning): ERP systems integrate all areas of a company and provide accurate Lead Time data, facilitating informed decision making. Examples of robust ERP systems are: Syspro, Holded or Acumatica.
- Project management software: There are visual and simple tools such as Kanban tool, Trello, Asana and Monday.com, which allow you to track the time of each task and stage of the project, providing a clear view of the ‘Lead Time’.
Strategies to reduce lead time in software production and development
Reducing Lead Time is essential to improve efficiency and competitiveness. The following are some effective strategies.
Kanban techniques for workflow optimization
The Kanban system is a visual tool that helps to manage work efficiently. Use cards and dashboards to visualize the progress of tasks and deliverables, making it easy to identify bottlenecks and areas for improvement.
Application of Six Sigma and Scrum to minimize lead times
Six Sigma and Scrum are methodologies that can be very effective in reducing lead time.
Six Sigma
The term “Six Sigma” (Six Sigma in Spanish) comes from the field of statistics and quality management. Six Sigma is a process improvement methodology that helps organizations to measure and refine their operational efficiency and processes. It was developed by Motorola in 1986.
Six Sigma focuses on quality control, seeking to reduce variability and defects in the delivery of a product or service to the customer.
The name “Six Sigma” refers to a statistical concept. Sigma (σ) is a Greek letter representing standard deviation in statistics, a measure of variability or dispersion in a data set. You can identify the maturity of a process by its “sigma” rating, which indicates the percentage of defect-free products. The goal is for processes to operate so efficiently that defects are reduced to below 3.4 times per million, or in other words: a Six Sigma process is one in which 99.99966 % of the products are expected to be free of defects. This level of quality is achieved when the process is operating within six standard deviations (six sigmas) of the mean. By reducing process variability, Six Sigma stabilizes and accelerates production, thus reducing lead time.
Scrum
Scrum is an agile methodology that divides work into sprints, short cycles in which valuable deliverables are completed and shown to the customer for feedback, allowing for frequent adjustments and continuous improvement. This Scrum focus on high delivery frequency, implemented with short sprints, allows us to measure in each sprint the number of tasks (or user stories in software development) that the team is able to finish in each sprint; this way we can better adjust in each future sprint how many tasks we should plan, to be predictable, making the finished look more and more like what was planned, following the motto “Stop Starting, Start Finishing”. Scrum thus facilitates rapid problem identification and resolution, which helps to reduce Lead Time.
Impact of ‘Lead Time’ in different agile methodologies
Lead time is a key factor in several agile methodologies, where efficiency and speed are essential.
The role of ‘Lead Time’ in agile software development
In agile software development, Lead Time is crucial to measure the speed with which a team can deliver value. Methodologies such as Scrum and Kanban use Lead Time as an indicator to identify and eliminate bottlenecks, enabling faster and continuous deliveries.
How lead time management benefits e-learning and digital education
In the field of e-learning and digital education, an optimized ‘Lead Time’ makes it possible to respond quickly to educational demands by updating educational materials rapidly.
Success stories and case studies
We present two case studies that show how Lead Time optimization can transform operations in different industries.
Lead Time Reduction in the Software Industry: A Case Study
A specific example of a company in the software industry that has managed to reduce its Lead Time is Orthofix, mentioned in a case study by CyberPlan. According to the case, Orthofix used advanced software to achieve a significant reduction in its warehousing by 53%, which in turn helped to level the warehouse, eliminate shortages and reduce production times.
Innovation in production: how lead time control leads to operational excellence
The quintessential example is Inditex, which has managed its Lead Time extremely efficiently, allowing it to maintain a competitive advantage in the fast fashion industry.
Inditex-Zara has developed, based on Kanban principles, a super-reactive supply chain that reduces the “bullwhip effect”, minimizes the time from order to delivery in stores, and ensures lean inventory and high product availability.
In conclusion, effective lead time management is essential for any organization seeking to improve operational efficiency and customer satisfaction. Whether in software development, digital education or manufacturing, optimizing lead time can lead to significant improvements in productivity and competitiveness.
