ABSTRACT
The concept of lead time reduction, in combination with increased throughput, provides a basis to justify projects. The hard dollars of traditional justification include labor savings, material savings, and reduction in operating expenses. These fall within the generally accepted cost categories of labor, material, and overhead. These categories are shown on the justification template under the headings of Cell Time, Material, and Manufacturing Expenses, with the hard dollars being calculated in the $ Savings Column. To justify spare capacity, calculate the lead time impact before and after the addition of equipment. The addition of equipment reduces lead time by reducing the time that a job waits for equipment to become available. The calculation requires formulas for lead time, utilization, and the effect of utilization on lead time. On the justification template, adding labor to reduce lead time will be reflected by additional cost that are offset by lead time saving.
