21 Jan Lead Time
Technological advancements have started to demand the need for information systems to survive in the business world. There is an inherent need to be fast and efficient to conquer the market. In order to reduce time to market there is a need to shorten the lead-time in design and development process of products. Hence, lead-time is a significant performance metric for a product development organizations having information systems (Joshi et al, 2019).
The ability of a firm to quote a short lead time (LT) to its customers is considered as a key factor of success in many industrial and service sectors (Hammami et al., 2015). However, as both demand and processing (production) time are generally stochastic, a shorter LT increases the risk of late delivery, especially in a Make-To-Order (MTO) context. According to Savaçaneril et al. (2010), examples that show the importance of reliable LT quotes are abundant in industry and failure of satisfying the quoted LT might lead to large penalties. Slotnick (2014) also emphasizes how late delivery might affect the firm’s reputation and deter future customers. The risk of late delivery is accentuated by the consideration of an endogenous demand that is sensitive to LT and price (with comparison to the case of an exogenous demand). Indeed, a shorter quoted LT or a smaller price generally yield a higher demand, which leads to a longer waiting time in the system. Thus, it is common to impose a service level constraint that ensures that the probability of serving the customers’ demand on time must not be smaller than a minimum service level s; defined by the firm (Albana et al, 2018).
- Albana, A. S.; Frein, Y.; Hammami, R. (2018). “Effect of a lead time-dependent cost on lead time quotation, pricing, and capacity decisions in a stochastic make-to-order system with endogenous demand”. International Journal of Production Economics, 203, 83-95.
- Hammami, R.; Nouira, I.; Frein, Y. (2015). “Carbon emissions in a multi-echelon production-inventory model with lead time constraints”. Int. J. Prod. Econ. 164, 292–307.
- Joshi, P.; Akbari, A.; Svensson, R. (2019). “Impact of usability on process lead-time in information systems: A case study”. Journal of Systems and Software, Volume 148, Pages 148-169.
- Savasaneril, S.; Griffin, P.M.; Keskinocak, P. (2010). “Dynamic lead-time quotation for an M/M/1 base-stock inventory queue”. Oper. Res. 58, 383–395.
- Slotnick, S.A. (2014). “Lead-time quotation when customers are sensitive to reputation”. Int. J. Prod. Res. 52 (3), 713–726.