Order Management System (OMS)

Cumulative lead time: Example and Calculation

Nguyễn Viết Lộc

You may be familiar with the term "cumulative lead time", a manufacturing measure that tells you the estimated period of time you'll have to wait for a widget when you begin working on it then. Yet, before that, keep reading this post to gain a clear grasp of this metric.

What does the cumulative lead time mean?

The period of time between the start and finish of an action or process is known as "lead time”.

What is the cumulative lead time
What is the cumulative lead time

Therefore, the time needed to manufacture items, including the acquisition of raw materials and the production of any subassemblies, if any, is referred to as cumulative lead time. It is the length of time necessary to finish an activity in a process. The cumulative material lead time for any product or process is determined by looking at each bill-of-material route below the item, and whatever process or path adds up to the largest figure is defined as the cumulative material lead time. The cumulative lead time of a manufacturing company is demonstrated in the following image.

Cumulative lead time graph
Cumulative lead time graph

The figure above illustrates how different assemblies complete tasks at varying rates of speed. Each assembly has three lead times: one for preprocessing, one for processing the assembly, and components, and the other for postprocessing. By going through indented bill layouts, Material Bills calculates lead time of cumulative manufacturing as well as cumulative total lead time. This cumulative lead time calculation includes the updating of item information. 

👉 Read More: Item Coding: Definition And Benefits 

The  Lead Time of Cumulative Manufacturing

According to Material Bills, cumulative manufacturing lead time for an item is determined by adding its own production lead time to the highest cumulative production lead time possible for every component, with operation offset taken into account. 

The manufacturing lead time of the item is multiplied by lead time % for the process in which the part is applied, relying on a single lot size lead time, to determine the operation offset. There is no cumulative production lead time for purchased items. The following calculation is used in Material Bills to determine lead time of total manufacturing: 

lead time of manufacturing for an item + maximum [(lead time of cumulative manufacturing - offset days) for any part]

Total Lead Time of Cumulative

According to Material Bills, the total lead time cumulative for an item is equal to its lead-time + the highest cumulative total lead time value, minus any parts operation offset. A component's operation offset is calculated by multiplying the manufacturing lead time relying on a single lead time lot size by the operation's lead time percentage. The following formula is used by Material Bills to compute the total lead time cumulatively: 

The total lead time cumulatively of an item + max [(total lead time cumulative - offset days) for one part] 

Let’s see a cumulative lead time example below! Assume, for instance, that Item A includes B, C, and D. When calculating we employ the manufacturing lead time for A; B, C, and D at operations with the values of 20, 30, and 40, respectively. The offset days, lead time and component, and percentage for every component are shown in the table below: 

Example of cumulative total lead time
Example of cumulative total lead time

The following is how Material Bills determine the total lead time of manufacturing:

  • lead time for manufacturing A + maximum [(lead time of cumulative manufacturing - offset days) for any part B, part C, or part D]

lead time of Cumulative manufacturing = 10 + 16 = 26 days 

The cumulative total lead times for parts B, C, and D are shown in the following table: 

How to determine cumulative total lead time
How to determine cumulative total lead time

The following is how Material Bills determine the cumulative total lead time for A:

  • The total lead time for item A + max [(cumulative total lead time - offset days) for any part B, part C, or part D]

Total lead time of cumulative= 27 days (10+17) 

👉 Read More: Item Master: Example And Best Practices

How to lower the cumulative lead time?

When determining MRP and estimating how long it will take to produce a product from scratch, the cumulative lead time of an item is a crucial piece of information. 

How to lower lead time
How to lower lead time

So how can lead time and cumulative lead time be reduced?

  • Hold the stock, ideally in the proper quantity.
  • Combine vertically to improve internal sourcing, production, and assembly capabilities. For instance, business operations or suppliers can be vertically integrated.
  • Cycle times can be cut, which will cut production lead times.
  • Have reliable quality systems and procedures, together with necessary facilities and employee availability.
  • Reduce lead times for suppliers. Consider buying locally.
  • Implement vendor-owned (VOI), vendor-managed (VMI), consignment, and other inventory management systems.
  • Change your delivery strategies and start doing quicker, more frequent shipments.
  • Ensure precise planning, scheduling, and forecasting.
  • Good quality control and supplier performance.
  • Reduce variety in the product and its components, as well as old low runners.

Less risk and material management result from decreased inventory and an increase in the businesses' cash on hand. It may entail increasing sales while maintaining higher inventory levels.

👉 Read More: 13 Stages Of Procurement Cycle With Detail Instructor

👉 Read More: 10 Steps Of The Procurement Cycle

Final Thoughts

Have you got everything about the cumulative lead time and its calculations? We hope this post will truly help you with those things! Happy calculating! Hope you have a good time with Efex.