What is lead time?

What is lead time?

Lead time is a widely used concept. We can see companies using lead time in manufacturing, supply chain management as well as project and product management. Let’s dive deeper into the lead time meaning in Kanban.

  • Lead time in Kanban is the time you need to deliver the service / to fulfill the request. Lead time: the amount of time between selecting an item to work on and delivering it to the customer. 
  • Customer lead time: the time measured from the moment the customer placed the request to the moment it was delivered.

How exactly should we calculate the lead time? 

David Anderson, Kanban Method pioneer, theoretician, and practitioner, defines that we should calculate the lead time “starting at the mutually agreed commitment point and continuing until an item is ready for delivery”. In other words, in Kanban, we start counting lead time from the point when a customer can legitimately expect us to work on the request until we can legitimately expect the customer to take delivery. Any additional waiting on the delivery end is not counted. This definition is unambiguous and can work consistently for any workflow and service. 

However, given the Kanban Maturity Model studies, we should recognize that this definition works reliably at maturity levels 3 and more, while at lower maturity levels it is problematic.  

At lower maturity levels, the commitment point is often ambiguous and at best asynchronous, i.e. the customer/upstream commits a request before the delivery/downstream service workflow is ready to commit. In this case of asynchronous commitment, David Anderson recommends measuring lead time from the point when the delivery workflow pulls the item into WIP.  

Often in maturity level 2 workflows, there isn’t a strong concept of commitment. Hence, there is a tendency to measure lead time from the point a work item is submitted. This is legitimate for internal shared services and other similar systems where the work is irrefutable. The term “lead time” therefore means, “If you know when you need to take delivery, the lead time is the amount of time you need in advance in order to place an order and expect delivery on or before when you need the item”. Or simply, the period of time that commitment must lead to delivery. 

Lead time example

Imagine an advertising agency working for a client. When a client is ordering a development of an advertising campaign for their new product that they are about to launch. The agency needs about 2 weeks to develop the proposal, where:  

  • 2-3 days Accountants will need to work with the request, clarifying it, gathering the information, and preparing a brief for their team;
  • 2-3 days Creative Director will work with the request with the creative team and copywriters;
  • about 2-3 days Accountants and the Creative Director will need to finalize the selected ideas;
  • and 2-3 days they will be preparing and finalizing the agency’s proposal together with designers before Accountants will send out the final version to a client. 

In this example, we see that the customer lead time of the project will be 2 weeks. Therefore, the client knows that 2 weeks is a waiting time before he/she will receive the agency’s proposal = the agency’s lead time for this type of request. However, each internal service (Accountants, Creative Team, Designers, etc.) will have their own lead time, which may be also called local cycle time in Kanban.  

Can the lead time be shortened?  

If we want to shorten the lead time for this type of request, we should think of how we can improve the process. Given our example, we could do it, for instance, by introducing a client`s brief form, where the client could insert all the necessary information about the project itself. It would save up to 2 days on working with request and make a lead time of 8 working days instead of 10.  

Also, this work item can be expedited. That would mean that the ticket of this project would kick out other work from the queue like an ambulance outrunning other cars on the highway. However, it is a one-time solution and won’t mean that the lead time will be improved. Using an expedite class of service stresses out the system and should be used in rare special cases. 

 

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