Dependence of lead time on batch size studied by a system dynamics model

Most planning models treat lead time as a constant independent of workload, but the resulting order rate implies capacity utilisation that, in turn, affects the lead time. An important factor that determines production order rate is the batch size, and one therefore expects a relationship between batch size and lead time. This dependency is examined for different operational conditions using system dynamics simulation of a manufacturing model comprising a quality control unit that is also the bottleneck of the system. It is shown that there is an optimal batch size that results in a minimum lead time and that inventory level at optimum matches the desired inventory. Below optimal batch size, lead time increases sharply due to congestion at the bottleneck. The results have implications for production planning and implementation of process improvement.