What is your production lead time?

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Production Basics

Before we dive into this question, it’s important to understand the two primary types of manufacturing or production. You have traditional production and on-demand production. Traditional production is when you mass produce your product and once created, you store it in some kind of location whether it be a home garage, closet, storage facility, or warehouse. On-demand production is the exactly opposite. Instead of producing a large number of products and storing them, you produce the product once the order comes in. In recent years, on-demand production has become more popular for startup companies. To be clear though, on-demand production is not a new concept, it’s just been increasingly easier to manufacture more and different types of products while decreasing upfront costs. Companies who produce highly customizable products create those products on-demand. My mother made baked goods on demand when I was younger.

Production Lead Time

Now the basics are out of the way, let’s move to production lead time! Your product’s lead time is the time from when a customer orders your product to when it is delivered to their doorstep (or where ever they want to the product delivered). Why is this important? It’s important because in a world where companies like Amazon can deliver a product to you within hours of ordering, the time from order to delivery has become increasingly important to consumers. Even I will chose a product I can receive same day over one I can get next day. Yes, I’m spoiled…you might be too!

Long Lead Time

If an investor believes your production lead time is too long, they’re going to want to know more about your production process. Within production lead time, you have let’s say “sub times” (I’m not sure if that’s even a thing, but you get what I’m saying!) Within production lead time, you have:

• The time it takes to create the product (production time)
• The time it take to complete quality checks on the product (QA or inspection time)
• If you’re using traditional production, how long it takes to get from Inspection into storage (move time)
• Also if you’re using traditional production, the time it sits in the warehouse before being ready for delivery (wait time)
• The time it takes to ship your product to the customer’s desired location (delivery time)

Production Analysis

Active investors will help you analyze each of these five times (or 3 times if your strategy is on demand) to see where you can streamline your production. The analysis could result in you moving production from our house to a manufacturing facility or changing manufacturing partners, or negotiating deals with new or current vendors. Whatever it is, the goal is to get the product to the customer faster and in a more efficient and sometimes less expensive way. The goal is to increase your company’s return on investment. That return on investment could be:

• Increased customer satisfaction
• Better cash flow
• Better production quality
• Greater flexibility
• Reduced costs

As I always say, processes are one of the most important parts of a business no matter what you’re providing a customer. Production processes are no exception to this statement. What are your processes? How are you streamlining the production of your products? Take some time to re-asses your production lead time and if possible, find ways to optimize your production for your sake and your customer’s satisfaction. That’s all for today, I’m your host, Adrian T. Marable.

Until next time, and remember, “If you can’t describe what you are doing as a process, you don’t know what you’re doing.”