Lead Time is an important factor in any demand-driven forecasting or retail replenishment system. It drives your order points and helps you place orders at just the right time. If your lead time is inaccurate you will quickly find yourself overstocked or understocked. Are you making these common lead time mistakes that cost retailers millions?
- Ignoring internal lead times – The easiest lead time to forget is time from distribution center to store. Those days can add up quickly and leave you with lost sales if not carefully managed.
- Using only vendor-quoted lead time – All your vendors supply you with a standard lead time. Do you know if that lead time is correct? If they are shipping even a day before or after the quoted lead time, it is costing you money.
- Using the same lead time for every item – Some items take more time than others for vendors to produce or more time for your distribution center to pick. If you are applying lead times too broadly, you are missing opportunities to tighten your supply chain.
- Using the same lead time for every location – Location 1 is 20 miles from your distribution center. Location 2 is 500 miles from the DC. If they have the same lead time, you have a problem.
- Hidden lead times – Are you factoring in every stop, every touch, every delay? Missing just one could add up quickly when applied to your entire business.
- Poor visibility to actual lead times – You know your lead times aren’t quite right, but you just can’t get to the data you need to fix it. Either the data isn’t tracked, is incomplete, isn’t organized, isn’t shared with the right people or is overwhelming.
- Manual lead time input – Even if you can get to the correct information, it’s not easy to update. Finding the time to make all the manual adjustments is keeping you from other parts of your business.
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Why Your Lead Time Process Delivers Major Out-of-Stocks and Steps to Fix
Even small improvements in the accuracy of your lead times can pay off big in GMROI and top-line sales. The best way to fix all these problems is to track and forecast lead times as an integrated part of your demand forecasting or replenishment system. A good system would allow you to easily manage all lead times down to the SKU location while providing comprehensive reporting visible to all stakeholders. If your current system isn’t up to the task,
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