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Empirical Data from Several Projects on Lead Time Reduction

by Francisco Tubino and Rajan Suri

Summary

Quick Response Manufacturing (QRM) is a companywide approach to lead time reduction proven successful at many manufacturing enterprises. Currently, there is detailed literature on QRM principles, on how to implement QRM, and on its potential benefits. However, this literature tends to be anecdotal and descriptive, and the link that ties and quantifies actual cost benefits achieved with specific lead time reduction targets has not been formally established.

The purpose of this study is to obtain more empirical data and to develop rules to quantify the benefits of QRM. In this study, we gather detailed data from several company projects on lead time reduction. Then we use a recently developed methodology to quantify the benefits of QRM.

In parallel to this, based on selected hypotheses, we derive a simple functional form for the impact of lead time reduction on costs. We refine this functional relationship via the empirical data. The result is a simple, quantitative “rule of thumb” that managers can use to set lead time reduction targets.

The empirical data also clearly show a baseline link between lead time reduction and cost savings achieved. In addition, we present data on the impact of lead time reduction on several other performance measures including quality, labor productivity and on-time delivery.

Although this is a preliminary study on these issues, we hope that the general approach and the simple rule of thumb will be of immediate use to both practitioners and researchers in this field.

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