Beware: Reducing Cycle Time May Be the Wrong Objective!

by Dave Garwood

A few years ago many companies finally responded to an old wake up call ... shorter lead times solve lots of problems! This time the call came from the Pacific Rim. Campaigns under the names of JIT, Lean Manufacturing and others began to focus on cycle time reduction. And confusion set in! Cycle time and lead time are not necessarily the same.

The drivers of this reduction effort included increased flexibility to respond to customer needs, lower inventory, decreased working capital and improved cash flow. Among the tactics deployed to reduce lead times was grouping equipment into cells. One piece flow was a companion objective.

Traditional Process

Process maps for manufacturing processes were drawn. Parts were found to flow all over the plant floor ... in and out of functional departments and sitting idle in WIP at each department. Before the flow was subjected to "lean thinking," the material flow may have looked like this:

Once material arrived from an external or internal supplier, it was stored in warehouses and waited it's turn in Q's at each department. When completed, the material or product was sent to an internal or external customer or warehouse. A key question was, "What date do I tell the suppliers to deliver the material?" The answer depends on when it must go to "customers," and then back off the lead time. The longer the lead time, the earlier we need the material, and the higher the inventory. Also, longer lead times cause us to base today's supplier deliveries on a "to" warehouse or customer schedule (master schedule) that is farther in the future and more likely to change. This causes material to often arrive earlier than needed ... and up goes the inventory! Lead times of 4 to 14 weeks were not uncommon.

The Lean Process

Lean manufacturing challenged the traditional flow thinking. Equipment was extracted and grouped into cells. Equipment in departments 102, 403 and 25 were pulled out to create Cell 66. The grouping was based on parts that have a very similar process flow. For example, all large gears went to the large gear cell. Small gears went to ... guess!

The Q and, thus, wait time were eliminated between operations formerly done in the functional departments. Material was often delivered directly to the cell or POU (point of use). Efforts were focused on reducing the throughput time, or the cycle time, for the cell. These efforts were often successful, reducing the time from start to finish for an item from weeks or days to minutes. One piece flow meant the part went directly to the next operation and was worked on immediately as each operation was completed. But many times, the next piece started in the cell had to be the same as the first one because the setup to time to switch from one part to the next was several minutes or hours. Several pieces of the same item was needed to manufacture cost effectively. The entire lot size was "snaked" across the cell. In the old days, we called this splitting the lot. With the cell, lot splitting could be done cost effectively.

Cycle time, the time it takes to go through the cell, was significantly reduced. Lead times may not be reduced as much. For material planning, the same key question beckons an answer, "What date do I tell the suppliers to deliver the material?" The answer still depends on when it must go to "customers," and then back off the lead time. The supplier needs to know one lead time ... their lead time, which may be 2-22 weeks.

Assume the cell makes 5 different items, each with a cycle time of 30 minutes. Each item must be run in a lot size of 100, which requires a week or more to make the entire lot of one item. One item may have to wait four weeks in Q, although the cycle time is 30 minutes per piece. What lead time should be used for planning and calculating the delivery date from the supplier? Thirty minutes is too short. A week is too short because the other four items may be in Q and also needed. Some items may need to be run early to get them all done on time and level the work load. The only safe lead time for planning is five weeks.

Another issue ... capacity! What happens if the volume scheduled (master schedule) causes a required capacity to exceed capability (demonstrated capacity)? Material will flow in at a faster rate than it flows out. Actual lead time through the cell will increase ... cycle times won't. Inventory will increase. In fact, mismanaging capacity, with or without a lean process, is the number one cause of excess inventory, long lead times and excessive costs.

Reducing the Right Lead Times

Lean processes, cellular manufacturing and cycle time reductions are all beneficial activities, but beware! Increased flexibility, lower inventory, decreased working capital and improved cash flow depends on shorter lead times. Shorter lead times are realized when capacity is properly managed and lot sizes are reduced by first overcoming obstacles and achieving a true mixed model scheduling capability. Are you focused on lead time or cycle time reduction?