Lead times are the single biggest factor influencing the performance of any supply chain. Should we be allowing for the lead time that your supplier needs by ordering earlier? Perhaps customers simply need to forecast better?!
When I got to the checkout screen of a recent internet order, the website informed me that delivery could take up to 10 weeks. I did a little digging around and found that the item was coming from China. On rough calculations, items should only take about 2 weeks to be shipped from China so what was happening for the other 8 weeks, I could see no obvious answer.
This experience may seem extreme, however I am sure we have all experienced something similar in recent years both in our personal lives and at work.
Why have we learnt to accept these long lead times?
Should we be allowing for the lead time that your supplier needs by ordering earlier? Perhaps customers simply need to forecast better?!
Lead times are the single biggest factor influencing the performance of any supply chain. Longer lead times result in:
- holding more inventory;
- suffering an increased risk of shortage;
- making it more difficult to respond to market changes;
- increased consequence of any quality problem; and finally
- since the accuracy of any sales forecast decreases the further in to the future you look, the greater the chance your order will not be what your customer wants when it finally arrives.
So long lead times are not good for business, thankfully there is a lot you can do to resolve this, here are some examples that I have recently seen when looking at supply chain waste:
- Delays in internal order processing, particularly when purchasing staff lock themselves into long ordering cycles such as quarterly ordering or try to accumulate large orders to get a lower price.
- Delays in order processing by a supplier.
- Suppliers waiting to receive an order before they order materials. This doubles up the lead time as you are now waiting for your supplier’s supplier to deliver before your job can even get started.
- Decisions to give your product a low priority.
- Delays from completion of the goods to shipping (waiting for the goods to be received in to the supplier’s warehouse, waiting for freight to be arranged.)
- Delays due to the use of non-direct shipping routes where shipments stop at multiple locations.
- Delays at the receiving warehouse waiting for clearance, stock count etc.
Some of these examples can add a few days and some can add weeks. Add them all together and you rapidly find the reasons for your excessive lead times. What is important about these delays is that in Lean terms they are all waste and so they are all opportunities to improve.
The key to understanding and reducing your lead time is a supply chain value stream map. Typically value stream maps only consider the process within one organisation. An extended supply chain value stream map shows the flow of products from your supplier all the way through the supply chain to your business.
You will need to involve your supplier in this process and take a collaborative approach. The goal is to reduce lead times and make things quicker for everyone, not to enforce your will on your supplier. Start by looking at the information flow from yourselves to the supplier and the product flow from the supplier back to you.
By creating some simple supply chain maps, identifying the waste and running lean improvements you can see weeks falling off the lead time in your supply chain.