A product’s lead time is the time between when an order is placed and when the product is delivered. This when you are on the recipient end of an order. When you are a manufacturer, your lead times are the times between when an order is presented to you, and when that order is fulfilled, shipped and no longer on your present task list.
However, it is not simply the time taken to manufacture the product, but also includes other factors that inevitably affect the total lead time. Such factors include how many other orders the manufacturers (or you) are obligated to fulfil ahead of yours, the availability of their raw materials and fluctuating shipping times due to seasonality restraints or natural disasters for example. Therefore, as frustrating as it is, lead times can be variable throughout the year. Due to this phenomenon, it is vital to be aware of what factors affect lead times for your products (both as a manufacturer and as a customer) and how you might adjust your own practices to ensure the effects of these are minimal on your own production and supply obligations.
As a manufacturer, your ability to get on and make a product when an order is received is completely dependent on whether or not you have the required materials and necessary equipment on hand. If you do not, then you will need to quickly place an order of your own. This increases the total lead time, thereby decreasing your throughput and influencing customer satisfaction.
How might you get around this? By accurately analysing historical customer orders using inventory management software that allows for forecasting and reasonable safety stock calculations to facilitate timely fulfilment of customer orders.
Thoughtfully engage your suppliers
If you have an exorbitant number of variable suppliers for similar parts, each with their own individual lead times and constraints, you are simply multiplying the variables you need to control for your own production timelines.
A handy way to decrease your own lead times is to thoughtfully select your suppliers based on their reviews, ability to supply, quality of product and geographical location etc. In doing so, you consolidate your orders and shipments which decreases lead times, the opportunity for errors and even shipping costs as they may well offer combined shipping.
In addition, it is helpful to choose a supplier who is interested in having an intimate working relationship with your company, where they can monitor your usage of materials and, coupled with their willingness to keep stock on-hand, they can continuously fulfil your orders based on real-time requirements.
All things shipping
Consolidating your supplier list can also have a positive effect on shipping delays. The fewer shipments you have coming in, the less vulnerable you are to adverse events that may alter the course of shipping, for example, roadblocks, natural disasters or human error. Additionally, as you build your relationship with your supplier, they can build a trusted relationship with a shipping facility, thereby ensuring the integrity of the whole ordering and supply chain.
Refine your processes
Now we consider the manufacturing plant. If your current model involves your staff producing or building all parts of the final product on-site, you may well find your lead times are greater than desired or than they could be. A solution to this is to investigate the option of engaging off-site production to complete sub-assemblies so that your own staff’s time can be better spent assembling the final product to a high standard, thereby increasing throughput, sales and your return on investment.
Inventory management is a vital part of the ordering and lead time aspects of manufacturing. Failure to control your inventory will inevitably result in under or over-stocked items that can either result in longer lead times or tie up precious revenue. Using inventory management software can help you keep track of orders, raw components and lead times takes the hard work out of ensuring you have what you need when you need it. This allows you to get on and fulfil orders and keep customers and the bottom line happy.
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.