Lead time vs capacity utilization
How to successfully master the conflict of objectives in production
In the world of industrial manufacturing Efficiency, Adherence to deadlines and Customer satisfaction is one of the key success factors. Two decisive parameters are at the heart of operational and strategic production planning: throughput time and capacity utilization. If you want to organize your production economically and efficiently, you need to understand how these two variables are interrelated – and why they often conflict with each other. This article shows how this conflict can be systematically resolved, what the consequences of incorrect control can be and how modern planning tools can provide support here.
What exactly is lead time – and why is it so crucial for production?
Lead time describes the time an order takes from the start of production to full completion. It includes all process components – from the processing time of individual steps to transport and set-up times to waiting phases and idle times. The pure processing time often only makes up a small part of the total time. Waiting times between operations, for example due to a lack of capacity, material bottlenecks or poor control, are more decisive.
A short production throughput time has many advantages: it reduces inventories, lowers capital commitment, enables greater flexibility for short-term customer requests and improves adherence to delivery dates. In dynamic markets where time is a decisive competitive advantage, the ability to reduce throughput times is of strategic importance.
What does utilization mean – and why can it be counterproductive?
Capacity utilization describes the relationship between the used and available capacity of machines, systems or employees. High capacity utilization is often seen as an economic goal: Fixed costs are better covered, resources are seemingly used efficiently. But the reality is more complex. Excessive capacity utilization can be the cause of excessive throughput times, error-prone processes and unplannable production processes.
If a system is permanently at its limit, even the smallest disruptions result in waiting times. There is a lack of buffers, deviations from the plan run through the entire chain and production control comes under pressure. In this case, the supposed efficiency comes at the expense of quality, reaction speed and flexibility – particularly problematic in customized or short-term production.
Conflicting goals of throughput time vs capacity utilization: a balancing act with consequences
The so-called target conflict between throughput time and capacity utilization is a central challenge in production logistics. It describes the phenomenon that maximizing capacity utilization cannot simultaneously lead to a minimization of throughput time – and vice versa. Producing large batch sizes, for example, increases capacity utilization in the short term, but worsens the order throughput time because small orders are blocked. If, on the other hand, the batch size is reduced, the throughput time is reduced, but at the same time set-up times may increase, which in turn reduces efficiency.
This relationship becomes particularly critical when bottlenecks occur – in other words, when individual resources are regularly overloaded. In such cases, the waiting time increases disproportionately, which in turn leads to poor delivery performance. A poor ratio of processing time to lead time is often an indicator of structural weaknesses in capacity planning or production organization.
How can the conflict of objectives be resolved? Strategies for balance
The solution does not lie in either/or, but in an intelligent and dynamic balance. A holistic process analysis, which not only looks at machine runtimes but also reveals organizational weaknesses, is crucial. Identifying bottlenecks is an important first step. If critical resources are relieved, for example through prioritization rules or targeted capacity adjustments, the entire system improves.
Targeted control of stock levels can also help to bridge waiting times without having to completely restructure production planning. At the same time, key production figures such as cycle time, cycle time or the ratio of throughput time to processing time should be regularly evaluated and optimized. The use of small, flexible batch sizes can also lead to better overall performance in many cases if it is combined with an efficient reduction in set-up times.
How Axxalon Flow resolves this conflict of objectives in practice
With axxalon flow®, manufacturing companies have a modular MES system at their disposal that was developed precisely for these challenges. By integrating intelligent planning technology and a graphical order display, bottlenecks can be identified at an early stage, throughput times reduced and capacities controlled in a targeted manner.
axxalon flow® not only supports classic production control, but also detailed planning, bottleneck management and adaptive capacity planning – without the need to replace existing ERP systems. With scalable modules and an intuitive user interface, both small and complex production structures can be efficiently mapped and controlled. The result is a system that grows, adapts and helps to keep throughput time and capacity utilization in balance.
Throughput time or capacity utilization? Find the right adjustment screw for your production!
Literature used
Slack & Lewis: Operations Strategy, Nyhuis: Produktionsplanung und -steuerung, Wiendahl: Betriebsorganisation für Ingenieure, Schuh: Lean Production, VDI 2870, REFA-Handbuch 4.0, Heizer & Render: Operations Management, Hopp & Spearman: Factory Physics, Industrieanzeiger.de, ifaa.de, Fraunhofer IPA, Bitkom-Studie zur Fertigungsdigitalisierung