A guide to optimising your supply chain lead time

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Inventory control is all about ensuring there is always enough inventory stock to supply customers with what they need when they need it. It also involves reducing the volume of any inventory stock kept in storage unsold, as this can be at risk of becoming obsolete or expired. When inventory stock is under control, these balances happen seamlessly and the company can be profitable. And let’s face it, the financial profitability of the company is a major goal.

Business profitability is dependent on large orders, both in size and frequency, and repeat customers. One way to increase the frequency of ordering is to reduce the lead time for products, which is extremely beneficial to the planning for both yourself and your customer. However, finding ways to reduce lead times is a delicate art, which we shall explore in this article.

Location, location, location

Freight is a significant component of a product’s lead time and as such, should be considered carefully to reduce the overall lead time of inventory stock from a supplier. Ensure your company’s supplier list is composed largely of suppliers within the same vicinity as the company warehouse. In doing this, freight times and subsequent costs can be significantly reduced, which will have a large positive effect on the lead time of the inventory stock your company receives and the lead times your company is able to provide to your customers.

Integrated system

Communication is a vital component to every flourishing relationship and often needs to be honed and refined. A strategy to enrich the supplier relationship and reduce lead times is to have fewer suppliers with which you can build quality business relationships. Additionally, it is extremely beneficial to invest in a meaningful system that can be integrated with the suppliers’ system so that when inventory stock needs to be ordered, it can be done so in a timely and efficient manner.

Efficient ordering

In conjunction with efficient supplier ordering, to reduce lead times you must ensure customer orders are entered in the systems quickly and accurately. This will ensure the company can be respond to a customer’s order promptly by placing an order with the supplier, reducing any delays in the whole ordering system. If time is of the essence, this is a simple adjustment that can yield significant results.

Group products

Efficient inventory stock picking and usage in manufacturing can be achieved by grouping raw materials into kitsets that can be used in production. This can be either done in-house, allowing ease, efficiency and accuracy in locating items for manufacturer, however, for a small cost, they can also be purchased from a supplier. It is suggested that despite the increase in costs to purchase kitsets as-is rather than as raw materials, it can still represent a fantastic way to save money and reduce lead times long term.

Consider standard availability of items and alternatives

Rather than setting up to fail or simply expecting a customer to happily wait for a product despite there being perfectly appropriate alternatives, why not select products based on their consistent availability? This is the first step, which should then be followed by identifying suitable alternatives that you can suggest if indeed the situation occurs where there is a stock-out.

Reduce in-house processing times

Any process that is performed in-house and affects a product being ordered and delivered should be analysed and optimised to reduce its impact on the overall lead-time of manufacturing inventory stock. This may well include the review period of any customer orders and subsequent orders placed with the company’s supplier. This can be achieved by reducing the review period or ensuring there are appropriate automatic systems in place that can alert the purchasing and sales staff to any new orders.

Encourage lead time reduction

Finally, once all process and in-house factors that impact inventory stock lead times have been addressed, it is time to consider any practices that the supplier can put in place to achieve lead time reductions. One way to encourage this it to preferentially place orders with reliable suppliers that are focused on lead time reductions and place importance on continuous improvement and developing efficient systems.

We have considered some aspects that can play a role in the lead times of inventory stock. Sometimes the answer is not to work harder to achieve an efficient result, but to work smarter by identifying methods that are be simple yet effective.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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