Lead Time is a critical link in your supply chain that can create big mistakes like overstocks and out of stocks. The industry answer to these mistakes has been Lead Time tracking. In fact, Lead Time Tracking has become a cottage industry where companies offer to track lead time and make a supplier pay a fee when they don’t conform to guidelines like on-time and fill rates.
Numerous studies have shown fines for bad behavior have made little impact toward improving business. The shocking fact from many studies is that overstocks and out of stocks occurred at an alarming rate when on time deliver and 95% + fill rates were achieved! The biggest mistakes found were the replenishment orders were placed on a date to soon or to late in relation to the days supply on hand. Sadly, most companies don’t use lead time as a key metric in their supply chain to determine an item order point. Most inventory replenishment systems today are driven by plans or open to buy spreadsheets which are top down methods to determine the item order date. There are better answers…
A simple Lead Time Test Case:
- Your product has a demand forecast to sell 100 units a day for the next 45 days.
- Lead Time of 7 days is needed from the date you place the purchase order until the date the goods are available to your consumer.
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