Lead time reduction by changing materials supply in manufacturing of customer-order-unique products

Purpose - The purpose of this study is to investigate potential for and cost related impact of internal lead time reduction through coordination between materials supply and a production activity of customer-order-unique products. In order to achieve the purpose two questions are answered; 1. How can with respect to sourcing strategy, coordination between materials supply and production activity of customer-order-unique products be achieved? 2. How does a coordination affect cost items in related areas of the business? Method – Based on literature in the area of materials supply a theoretical framework for the study was established. The company JELD-WEN, an industrial manufacturer with customer-order-unique-production of fire- and safety-doors was used for a case study. Data collection was performed through interviews, observations and document studies. A comparison between the theoretical framework and empirical data generated the final results. Findings – Using a hybrid sourcing strategy, changes in materials supply through an internal call-off together with the materials feeding method kitting proves potential to reduce the internal lead time in the manufacturing process. An economic impact of such coordination with a production activity has been found for three cost items; handling cost (increase), administrative order cost (increase/decrease) and inventory carrying cost (increase/decrease). Implications – The study does not contribute to new theory in the field. Instead existing theory and relations defined in the theoretical framework have been verified by the case study. Internal lead time reduction identified in the study may be used in other ways than by the means of an improved customer offer. This can be done through sharing time to other time-exposed activities in the manufacturing process or as an additional safety time for finished products to secure company's delivery accuracy. Therefore, in a decision situation for change affected cost items should be assessed in contrast to the more indirect value of a lead time reduction. Limitations – Modifications of materials supply occurs in a context where conditions outside the unit of analysis plays a crucial role and thereby limits the possible usage of the potential lead time reduction. The study handles impact of cost items in a general direction (increase or decrease). Absolute terms contribute to more precise consequences and are probably necessary to support a company's final financial decision of using an alternative approach in materials supply