How to Reduce Lead Times in the Supply Chain

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Longer lead times in the supply chain can have a series of negative knock-on effects for both the customer and the seller. Lead time is a huge variable influencing the performance of your inventory control processes and supply chain in general. Therefore, managers need to take every step possible to reduce it where they can.

The shorter the lead time, the more productive your company will be, and the easier it will be to increase profits. Shorter lead times are beneficial for all parties involved, and this article identifies the causes of longer lead times to illustrate how you might reduce them.

What is Lead Time?

Lead time is the time it takes between the initiation and completion of a production process for a product or products. This includes the order placement, sourcing of materials, manufacturing and delivery of the final product.

Lead times can be particularly long when sourcing materials or products that are a long distance away. For example, many manufacturers source raw materials from overseas destinations, and many customers buy final products in different countries as well.

Other factors can increase lead time unnecessarily as well, such as delays in order processing, inefficient capacity management by suppliers, delays at the freight forwarder or due to the use of non-direct shipping routes, suppliers’ giving your product a low priority or poor internal processes at the suppliers’ end. These factors can significantly influence things such as inventory control processes and your supply chain in general.

How to Reduce Lead Times

A primary method for reducing lead times is by using a map that traces the entire process from the initial request to the final production. By following the production of the product or products from your supplier, as well as from their supplier and all the way through the supply chain, you will have full oversight of any issues that may arise and have the potential to increase lead time. This is what you might call an extended supply chain value stream map. This map will be even more useful for reducing lead times if it also traces the flow of products through to the customer.

In tracing the entire process, an extended supply chain value stream map will give you full oversight of the entire order, making the process of inventory control much smoother and easier to navigate. Moreover, this will give you a much clearer understanding of the specific events that are increasing lead time.

With this knowledge, you can easily develop a plan to reduce lead times. As this is an attempt to make lead time shorter for all parties, it is a good idea to involve your supplier and build their trust.

You may be best off initially looking at the information flow from you to the supplier and the product flow from the supplier to you. This will give you some key information about how the process first begins, and therefore will give you a head start in attempting to reduce lead time overall.

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Melanie - Unleashed Software
Melanie

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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