Note: Today’s post is part of our “Editor’s Choice” series where we highlight recent posts published by our sponsors that provide supply chain insights and advice. This article is from Descartes Systems Group and looks at how companies can reduce lead times with real-time data.
As so many of us were made aware since the pandemic lead times were stretched to extreme levels for many products globally. While we’re coming off the extremes from the pandemic years, lead times are still longer, and in many cases more erratic than prior to the pandemic. But, why does having longer and more variability in lead time matter in your supply chain.
What is lead time?
First, let’s define lead time. Lead time in the supply chain is the total time from when a customer order, or purchase order, is placed and when the goods are received. There can be multiple lead times within a supply chain, typically between each node or process along the way from raw materials, processing, and finally getting the customer their shipment.
Why is lead time important?
Tracking and understanding lead time is very important for setting accurate delivery dates for customer orders, for setting inventory and safety stock levels across the supply chain for finished goods and Work in Progress (WIP) materials. Without having accurate lead times, companies will tend to want to hold onto more inventory to avoid stockouts, and with the current economic conditions that is more expensive and ties up valuable capital as well as warehouse space and labor. Additionally, a longer lead time reduce a company’s agility, or resilience, to adapt to demand fluctuations, or other disruptions that may occur.
How can you better manage lead time?
There are many strategic initiatives that can be undertaken to reduce lead time, from contract negotiations, supplier rationalization, vendor managed inventory options, strategic network design and numerous others. In this article, we’ll focus on how you can operationally utilize estimated time of discharge (ETD) to improve lead times and enable better planning all along the supply chain.
A container’s ETD refers to the date and time when that specific container will be available for pickup at the port/terminal. The actual time of departure is difficult (or impossible) to know well ahead of time. Many ports do not make this information available to the shipping lines or the shippers. Without this information it’s hard to plan ahead for the inland transport leg and can lead to containers sitting at the port for a day or more while carriers try to allocate trucks, drivers, and schedule appointments for pickup.
To read the full article, click HERE.
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