KPI Number One: Lead Time (LT)

Ten years ago, while working for a multinational, we had to do extensive regular reports to demonstrate the health of our business. We often got lost in the maze of KPIs. During a lunch break of one of such monthly review session, my MD turned to me and asked me, “If you were running this business, what will be your number one focus?”

My answer was Lead Time, without any hesitation. He took it in without saying much to me; his expression indicated to me he was mulling it over. In the following weeks and months, I could see that penny had dropped. The changes were on the way.

Lead time, when looking from customer perspective, includes all activities – time to respond to a quote request, order entry, processing a purchase requisition, receiving a product into stock, and of course producing. If you wish to improve lead time to the customer, the lead time of all individual connecting stages, not just the largest, must be monitored and continuously improved. That is what the MD had introduced to the front end of the business first, and then to all support processes.

Habitual batching in the name of efficiency of transactional processes is often the hidden killer. Visual tools are of help here. Lower LT helps to achieve high inventory turns, improved cash flow and higher productivity. Lower LT than your competitor, means repeat orders, as it positively impacts the planning stress of your customer.

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