SiliciumHex FieldKit

Supply Chain · Improve

Lead Time Compression

Attack the longest segments of your order-to-delivery time: queues, approvals, transport legs and changeovers.

  • Time1 h 30
  • FormatTeam
  • StageImprove

Lead Time Compression: what it is and why it works

Lead time compression shortens the total time from a customer's order to delivery by measuring every segment of that time and attacking the longest ones first. The segments usually include order entry and credit checks, planning and scheduling queues, waiting for materials, production, quality release, packing, and transport. The method measures actual elapsed time for a sample of orders, finds where time accumulates, and removes waiting before investing in faster processing: queues and approvals first, then transport legs and changeovers. It is re-measured monthly and the trend is published.

It works because in most supply chains the work itself is a small fraction of total lead time; the rest is orders waiting in queues, in batches or for decisions. Little's law links the two: at a given throughput, average lead time rises in proportion to work in process, so reducing queues shortens lead time directly. Compressing waiting is usually cheaper than adding capacity and also reduces inventory and forecast exposure. It pairs with WIP Control to cap queues, uses Value Stream Mapping to see the segments, and can be executed through a series of Supply Chain Kaizen events.

What you need

  • Timestamped data for a sample of orders from order receipt to delivery
  • A process map listing each segment and handoff
  • Current work-in-process and queue levels at key steps
  • Approval rules, batching rules and changeover times
  • Transport lead times and schedules

What you get

  • A segment breakdown of total order-to-delivery lead time
  • The longest segments ranked, with their causes
  • Implemented changes to queues, approvals, batching, transport or changeovers
  • A monthly lead time trend published internally
  • A revised lead time promise for customers when justified

When to use it

When customers ask for shorter lead times and the answer is always “capacity”.

How to do it, step by step

  1. Measure the full order-to-delivery time and split it into segments.
  2. Find the longest segment — it is rarely production.
  3. Attack queues and approvals first; they compress without capital.
  4. Shorten transport legs and changeovers next.
  5. Re-measure monthly and publish the trend.

Worked example: Shortening delivery time for custom heat exchangers

Illustrative scenario — figures are realistic but not from a real company.

A manufacturer of custom plate heat exchangers quoted eight weeks from order to shipment. Competitors offered five. Management assumed it needed a second assembly line, estimated at $2 million.

  1. The operations manager traced 40 recent orders through the ERP and email records and split the time into segments: order entry and engineering review 12 days, waiting for engineering drawings 9 days, material procurement 14 days, production queue 8 days, assembly and test 4 days, and packing and shipping 5 days.
  2. The largest waiting blocks were engineering review, which ran in weekly batches, and procurement, triggered only after drawings were released.
  3. Engineering switched to daily review with a standard configurator for 70% of designs; procurement started ordering long-lead plates and gaskets on order acceptance for standard frame sizes.
  4. Production changed from weekly to twice-weekly release, reducing the queue in front of assembly.

Result. Average lead time fell from 52 to 31 working days within six months, without the new line. Production time itself was unchanged at four days. The lesson: only about 8% of lead time was spent building the product.

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Common pitfalls and how to avoid them

  • Assuming production is the bottleneck.Measure every segment on real orders; office queues, approvals and material waits are often longer.
  • Using standard lead times from the system instead of actual times.Trace actual timestamps for a sample of orders to see real elapsed time.
  • Buying capacity before removing waiting.Attack queues, batches and approvals first; they compress without capital.
  • Improving averages while leaving long tails.Track the distribution, such as the 90th percentile, since customers remember the slowest orders.

Frequently asked questions

How can you reduce lead time in a supply chain?

Measure the full order-to-delivery time, split it into segments, and attack the longest waits first: reduce batch sizes, remove or speed up approvals, cap work in process, start long-lead procurement earlier, cut changeover times and shorten transport legs. Re-measure regularly to keep gains.

What is Little's law?

Little's law states that, in a stable system, average work in process equals throughput multiplied by average lead time. Rearranged, lead time equals WIP divided by throughput. It means that for the same output rate, reducing the amount of work waiting in the system directly reduces lead time.

What is the difference between lead time and cycle time?

Usage varies, but lead time generally means the total elapsed time a customer waits, from order to delivery, including all waiting. Cycle time often refers to the time to complete one unit or one step of a process, or the interval between completions. Lead time is usually much longer than the sum of cycle times.

Origin

Time-based competition — Stalk & Hout, "Competing Against Time", 1990.

Used in these playbooks

Lead time halving week 1 week

One week to find where time hides: map the flow, walk it, compress queues and lots — measure before and after.

  1. Value Stream Mapping
  2. Bottleneck Walk
  3. Lead Time Compression
  4. WIP Control
  5. Level Scheduling (Heijunka)

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