Why is it so important to reduce lead time in contract productions?

Reducing the time needed to make the product is now increasingly important because it allows you to create a competitive advantage over competitors. The quality of the finished products has risen and leveled off, to the point that it is now taken for granted by the end customer. Hence, the time necessary to have the finished product is therefore a differentiating factor of primary interest to deliver the product to the customer who ordered it, within the established date.

Faster output and shorter delivery times

The first benefit of reducing lead time (or crossing time) is the possibility of delivering to the customer more quickly and therefore increasing their competitiveness compared to the competition. In addition, companies that have a lower lead time enjoy an improvement in their reputation and therefore an increase in customer loyalty.

Better cash flow

The reduction of lead time, in addition to improving the level of service to its customers, also brings benefits to corporate finance. The level of capital invested is in fact linked, among other things, also to the materials being processed (also called Work In Progress or WIP) and consequently to the duration of this, or lead time. Reducing the crossing time of a product reduces the time in which it remains present in the company and therefore the inventory levels. Reducing WIP levels therefore reduces fixed capital and increases working capital. In this way, the financial area of the company frees up liquidity to be able to invest in other activities.

Reducing lead time also increases resource productivity, which allows growing companies to avoid further investments in machinery (fixed assets) and therefore to maintain a greater share of available working capital.


Flexibility to change

Longer lead times make it harder to introduce new products and respond to market changes. This is because at any time you have a high number of stocks in the supply chain pipeline. Reducing the crossing time therefore makes the supply chain more flexible and responsive, even in the face of the most rapid changes.

Time is money

Lead time is time and as you know, time is money. This is why more and more companies are investing in tools that can ensure an effective and lasting reduction in lead time. Find out how these manufacturing companies are reducing lead times and improving their ability to respond to the market, read the article: 4 tips to reduce production lead times.

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