Local vs Global Optimization

There is a risk that if local processes are optimized too much, the question of whether the overall chain is still functioning in the best interest of the customer is ignored.

For any customer-driven business, there are now two key metrics that lead the way:

  • Lead time
  • Production time

Lead time is the time between ordering a product and receiving it. Production time is the total production time required to manufacture a product, including setup time.

An example might be that for a composite sheet metal product you need a total of 3 hours (10 minutes of cutting, 20 minutes of edging and 2.5 hours of welding), but a lead time of 3 weeks.

To find out if local optimization still adds value, you can calculate the ratio.

  • 3 weeks = 3 (weeks) ×7 (days) ×8 (hours)=168 hours.
  • 3 / 168 = 1,78%

Conclusion: In this example, this product waits 98%+ of the time!

The point is:

Local optimization often adds little to the bottom line and customer experience. If the ratio is usually below 5%, it is better to focus on lead time.

Adding a faster machine, more employees or applying shopfloor software to the floor may look good on paper, but will have little impact if it does not focus on lead time.

The best way is to set up better workflows that allow production to start faster (especially in the office), reduce intermediate inventories and deliver faster when the product is ready.

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