This thesis demonstrates theimportance of short lead times by evaluating the marginal cost of supply-demandvolatility.
Not only this, short lead times bring competitive advantage asincrease responsiveness to customers by reacting faster to demand changes,especially for a highly volatile environment. For an organization whose cost oflead-time reduction policies are lower than the costs caused by long leadtimes, the expectation is that the organization change the strategy totime-based and align processes to ensure shorter lead times in order toincrease competitive advantage (de Treville, 2014c).Ifthe recommendation of having a make-to-stock strategy for raw components isapplied by Acme, the end-to-end lead time will be reduced to 35 days, areduction of 72%. However, as the Cost Premium Frontier indicates in Section7.2, the greatest benefits of the marginal value of time is when the lead timeis closer to the time demand happens. Therefore, both companies must recreate anenvironment where time is the focus, and encourage employees to reduce time in theiractivities.
We recommend top management to usethe model developed by De Treville et al. (2012), which put in context the StarModel developed by Galbraith (1995) for an organization that is transitioningfrom a cost to a time-based strategy. The Star Model specifies that a businessor organization’s strategy must be aligned with its processes, structure,rewards and people-management; and this alignment must be done simultaneouslyrather than sequentially. The model indicates that the time-based strategy mustbe directly link to process initiatives that reduce lead time, such as increasecapacity buffers, eliminate non-strategic variability and reduce lot sizes; andthis relationship is moderated by a structure that supports flow, rewards thatencourage time-based mindset and managing people through trainings and staffingpolicies that goes along with this methodology.