Vendor Lead Time Forecasting

What is vendor lead time forecasting? This is widely considered to be the time from when a Purchase Order is placed until the goods are ready and available to sell or ship off the shelf. Think about it this way:

  • Replenishment: If you sell 1000 units a day and it takes 10 days from when you place an order until the goods are on the shelf to sell (or ship), then on the day you have 10,000 units remaining, you need to place an order or you will run out. (1000 units/day * 10 days = 10,000 units sold in 10 days)
  • Fashion: If your line of products is suppose to be ready for your customers to buy on March 21, then you need to place the purchase order 10 days prior to March 21 or more if additional store set time will be needed after the goods arrive.

What is vendor lead time forecasting? This is widely considered to be the time from when a Purchase Order is placed until the goods are ready and available to sell or ship off the shelf. Think about it this way:

  • Replenishment: If you sell 1000 units a day and it takes 10 days from when you place an order until the goods are on the shelf to sell (or ship), then on the day you have 10,000 units remaining, you need to place an order or you will run out. (1000 units/day * 10 days = 10,000 units sold in 10 days)
  • Fashion: If your line of products is suppose to be ready for your customers to buy on March 21, then you need to place the purchase order 10 days prior to March 21 or more if additional store set time will be needed after the goods arrive.
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Vendor Lead Time

If you plan on the lead time taking 10 days but the goods are not available for 12 days, then you just generated 2000 lost sales units! Knowing the correct lead time and the ability to correct for changes in lead time is important to you and your vendor (supplier)

The problems with vendor (supplier) lead time are:

  1. You have no idea what the lead time is for your products.
  2. Lead Times change over time, they can:
    • Run long, you run out before the new product/replenishment arrives.
    • Run short, the product arrives before expected now you have overstock , goods just waiting for something to happen to them in the back room.

Long Lead Time

Import vendors (suppliers) often have a long lead time. A long lead time of 60 days or more can become the largest influence in your safety stock due to variations in the actual lead times for receipted goods. The resulting high safety stock will lower your profit margins significantly.

A solution for Long Lead Time

iKIS vendor lead time forecasting removes the impact of the variations with our accurate vendor forecasting tools. iKIS customizable exception management and reporting tools provide you a way to message your team when vendor lead times change based on actual or percent change in carrying cost days, units or dollars. You can also run a ‘what-if’ scenario to see if the import price and resulting gross margin are actually more profitable than a higher priced product bought locally that has short lead times. Remember the additional lead time days and variations will lower gross margin and that may make a difference in where you source your products to get the highest possible gross margin return.

There is a Better Way

A recent study of a Top 100 North American Retailer showed they were losing over a million dollars in gross margin due to inaccuracy in their lead time planning.

At Data Profits, the iKIS solution tracks every purchase order, every line. The system can track any of the following data points: date the order is placed, ready for pickup, arrival, and close date. Tracking the data, the iKIS Lead Time forecast engine updates the real time lead time forecast to use for your orders. iKIS Lead Time Forecasting provides tools and methods that surpass what’s available in the supply chain software market today.

iKIS Vendor Lead Time Forecasting Features

Acquisition Cost

  • Three methods to determine which lead time is used for each vendor in a department:
    • Vendor (supplier) quoted Lead Time
      • Your vendor(supplier) provided you with the number of days lead time.
    • Manually input lead time
      • A user can manually enter a number to be used in Lead Time planning.
    • Forecasted Vendor Lead Time
      • The system reviews each line(product/location) in each PO and calculates the current real lead time.
  • Alert tools you set that tell you
    • When a vendor lead time has changed significantly
    • How many days increase or decrease in the change
    • The cost in carrying inventory due to the change
    • Variance between vendor quoted and forecasted lead time.
  • A graphical wizard to show you when and what PO are adversely affecting the vendors lead time forecasting.
  • The ability to exclude PO from Lead Time forecasting. If you are pre-ordering goods; say Halloween candy in July, you do not want those purchase order lead times to effect a change in the regular lead time for the vendor.
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