Toward a better understanding of lead times in MRP systems

Lead times in MRP systems represent the planned amount of time allowed for orders to flow through the manufacturing system. Setting lead times is a major issue in the operation of MRP systems. There exists, however, very little documentation on just how lead times should be set. This study examines the effects lead times have on MRP-based manufacturing logistics systems. In particular, it examines the effects that lead times have on backlogs, order tardiness, and finished component inventories. A major finding is that changes to the level of planned lead times have both transient and steady state effects that may not necessarily operate in the same direction. A simple methodology is presented for setting the level of planned lead times when the criterion is finished component inventory.