Lead time will always be something that really holds up all of the e-commerce world. It’s the one enemy of what would be the perfect business. If you could order something on your phone and have it at your door within 30 minutes, we wouldn’t be writing this post about lead times.
But because we still don’t live in a perfect world, you’re probably still trying to figure out how to speed up the overall timeline of product delivery. In today’s post, we’re talking about all things lead time and how you can take a few steps to speed things up. Here are some strategies that are tried and true to make a difference.
What is Lead Time?
Lead time can mean a lot of different things depending on the context of where it’s being used. There’s supply chain lead time, manufacturing lead time, customer lead time, and more! We’re focusing primarily on supply chain management and supply chain lead time in this post, but we’re also going to define each of the different lead times and what they mean for you.
Customer Lead Time
Customer lead time is simply the amount of time it takes from order confirmation to order delivery or fulfillment. In some cases, such as Amazon’s Prime shipments can be delivered within a few hours, same day, or next-day depending on where the item is being delivered to in relation to Amazon’s distribution warehouses. For smaller e-commerce businesses, customer lead time includes the time it takes you to prepare an order for shipment and shipping it.
Material or Manufacturing Lead Time
Material and manufacturing is the lead time it takes to have everything to begin production on the product. Depending on your product, this could take more or less time. Take, for example, a tech item. Having all the components ready to go might take some time.
Factory and Production Lead Time
Factory and production is the time that will be used by your supplier to manufacture and ship the finished product to your warehouse. Production is generally a variable that you won’t be able to control, but there are few ideas, outlined below, that might be able to help you speed up this process.
Cumulative or Supply Chain Lead Time
Cumulative or supply chain lead time refers to the total amount of time from the inception of a product to the item being in the hands of a customer. Without ordering ahead
Ways to Improve Supply Chain Lead Time
There are many ways that you can reduce the amount of time that different parts of your supply chain take up. Here are some of the most common ways that you can improve supply chain lead time.
Use a Domestic Supplier
While using suppliers in foreign countries often offers a lot of benefits when it comes to cost, there is a huge downside. That being, the time it takes to ship those produced materials to your domestic warehouse. Finding a local supplier that can quickly fulfill your orders without the week or more, it takes to ship things internationally can make a huge difference in the lead time that your business will need.
Increase Order Frequency
Ordering more often can also help to decrease your lead team. When you’re ordering all the time and not just when something runs out, you might not have to worry about how long it takes for the order to arrive. Ordering on a more regular basis based on the frequency of sales is a great way to help keep your flow of products moving well. The key in that situation is to make sure that you have good sales going before you choose this strategy.
Provide Sales Forecasts
Sales forecasts are what you’ll need if you’re going to effectively increase your order fulfillment. There are lots of ways that you can forecast sales, but it can become a full-time job to forecast sales if you have a large product inventory. Here’s a quick post on some great tips for forecasting sales.
You can also forecast sales and keep an eye on inventory by using a program like Extensiv Warehouse Manager from Extensiv. Extensiv Warehouse Manager is a fully integrated warehouse management tool that allows you to track inventory, shipments, and run your warehouse. It’s a great way to provide sales forecasts and manage your warehouse effectively.
Convert to Standard Components
This one is a little harder to control and ensure that it goes well. In most cases, after you design a product, your supplier will likely have to make some of the components from scratch or source them from another location. Some of the back and forth along with the creation of new components could be solved by finding a standard component that can match your design and need is a great way to speed different parts of the production process, thus decreasing the needed lead time.
Consolidate Suppliers
Consolidating suppliers is another great way to make everything flow better throughout the supply chain. If your product has to go from one supplier to another before finally reaching the warehouse where it can be shipped, then you’re likely losing a lot of time and creating longer lead times. A strategy for your supply chain management should be to consolidate your suppliers into one or fewer. This leaves less room for error and less wasted time when products should just be created and finished all in one place.
You’ll likely find many benefits to changing or consolidating suppliers, so be sure to take the time to thoroughly look into the option.
Create an Incentive
Just like you probably offer incentives for employees that do well, consider offering incentives for your suppliers if you’re looking to get more out of them. Maybe your supplier is getting the shipments to you on time, but it’s taking 10-12 weeks for each batch. Consider offering them a higher price as a type of incentive to get you the batches in two weeks less than that. There’s no use in pushing your supplier to work harder without some type of benefit for them.
Communication throughout the Process
Communication is truly key to everything. Whether you’re trying to speed up timelines, keep things running well, or navigate tense situations, without communication, you’re not going to get very far. Keep in touch with your supplier while keeping them informed of your need for products when you have one.
Many manufactures will regularly accept longer lead times as the standard way of doing business. While it’s certainly a common part of this business, it’s not the only way for the business to be run. Communicate well with your supplier about your expectations and how you like to work on a time reduction. Communication is going to help your bottom line and help reduce lead time.
More Ways to Reduce Lead Time
Here are a few more ways that we’ve found to work well when you’re looking to reduce lead times.
Hold Stock
Keeping a good amount of stock on hand, as long as it’s the right stock, will help so much when it comes to reducing your lead time. We’ve spent a good bit talking about this above, but it’s still incredibly valuable to reiterate the importance of ensuring you have the right stock on hand when you need it.
Verticle Integration
Instead of depending on outside companies to produce all of your products, you might consider what is called verticle integration. Verticle integration is the process of combining what was at one time, the processes of two different companies in production. If you’re able to source the raw materials you need to produce your product, it might not be a bad idea to consider creating a process where you could manufacture all the products you need. This would allow your operation to be in better control of the inventory.
Reduce Cycle Times
Different cycles throughout your process may need to be optimized. In brief, there are many hands that your products go through, and any one of them could increase efficiency to help to reduce times in future cycles. The best way to reduce cycle times is to give a good and honest look at all of the different processes and ensure that every area is properly looked after and taken care of.
Have the Right Equipment and Employees Available
Having the right equipment could make a world of difference in your lead time. Maybe it’s time to invest in a pallet jack or a forklift. Perhaps you need new tools for packaging. Whatever it is, it’s key that you properly take care of it and ensure that your employees have the equipment they need to take care of your business.
Additionally, it’s essential that you have proper employee availability. In many cases, warehouses may need to be running 24 hours a day to keep up with the rush. If this is the case, then be sure that you have the right amount of employees. You don’t want to take advantage of employees and force them to work too much or keep them from their families. Instead, have enough employees that different individuals are able to take time off work and recharge so that they can bring their best while they’re working for you!
We hope that you’ve found this guide helpful! There are many ways that you can work towards a lead time reduction. Be sure to check out the rest of our blog for more information on shipping and warehouses, along with tips on how you can streamline your processes.
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