Lead time creep: it’s one of the more frustrating topics for discrete manufacturers because it seems unavoidable—and it’s definitely costly.
There are two types of lead time: the physical lead time, which is the time it takes for a product to get from a manufacturing facility to the final customer; the other is systemic lead time and refers to the time eaten up by delays along the supply chain. In most cases, systemic lead time accounts for about half of overall lead time, and much of that may be avoided.
Delays in the supply chain add significant cost to your process, primarily because you need to carry more inventory than you would without those delays. Some supply chain partners must carry two months or more of stock just so they can satisfy customer demands. Delays can be costly in other ways, too, like causing a slow order-to-cash cycle.
Start taking steps to reduce your lead times with a 30,000-foot view of your supply chain and processes to tackle some of the “low-hanging fruit”:
Can You Consolidate Supply Chain Sources?
Over time you’ve probably accumulated a number of suppliers that provide parts and fasteners, etc., and you deal with the ordering, invoicing and other steps associated with each. Take a look at what each vendor offers to see if you can eliminate one or more by consolidating parts through a single vendor.
Another way to reduce the cost and time you spend managing vendors is to implement a vendor managed inventory (VMI) program. A VMI partner takes over procurement and storage of class C components and saves you the hassle of shipping and receiving—and downtime you might have spent waiting for shipments to arrive. A VMI partner might also recommend kitting some of your components, making it easier for your workers to grab the right pieces and keep production more organized and efficient.
Can You Outsource Subassembly Builds?
Outsourcing your subassembly builds—the smaller builds that are integrated into the primary product—can be a great way to minimize costs. Instead of your workers spending time to build these subassemblies you hire a third party to take on this part of the process. With parts arriving ready to install, you’ve removed a step in the process and accelerated your lead time. You’ve also saved all the time you’d typically spend negotiating, processing purchase orders, managing inventory, receiving shipments and inspecting the pieces.
Can You Reduce Hand-offs?
As you look at your process, do you see opportunities to consolidate steps? Each time a product goes from point A to point B within the production process it means a delay and the potential for error. Look for ways to have two steps originally done at separate points done at just one.
Speed Lead Times with an ERP Solution
Those opportunities, as we mentioned, are low-hanging fruit when it comes to solving your lead time issues. Additional opportunities are made clear when you’ve got a business management solution in place.
These tools, usually referred to as enterprise management solutions, or ERPs, provide very detailed visibility into your supply chain and, with the insights they provide, allows you to remove every possible bit of waste from it. An ERP system presents real-time information on the performance of every aspect of the supply chain from initial order all the way to final payment. It’s the fuel for decisions that will result in reduced inventory costs, improve turns and, ultimately reduce lead times so your business can grow faster.
With an optimized process throughout the supply chain you’ll be able to rely less on forecasts—what you think you’ll need—and build to actual demand. No more inventory taking up warehouse space just in case you might need it.
Knowing precisely where your lead time contributors are is critical. Some organizations use only gut instinct or isolated data points to guess at where logjams are and work only to iron out those issues; often they’re wrong. With data from end to end, you’ll have insight on what’s happening where (and why), and be able to focus on those critical points.
Reducing lead times is one of the most important ways to leverage a competitive edge. If a company can offer significantly shorter and more reliable delivery times than competitors, it’s in a better position in the market.