“If your supply chain had an arch enemy, it would be called unreasonably long lead times”.
When it comes to sending your freight, timing is everything.
The concept of lead time, or the time it takes for goods to move from one point in the supply chain to another, plays a pivotal role in determining the efficiency of any business operation.
For companies involved in both domestic and international trade within Australia, understanding and minimising lead times is crucial to ensuring timely deliveries and, ultimately, customer satisfaction.
Unfortunately, businesses in all industries – especially industries like retail, manufacturing and construction – suffer from extremely long lead times for a variety of reasons. This translates into something no company wants to ever experience – delayed projects and/or angry customers.
So below, we will outline the dynamics of lead time, the factors that contribute to long lead times and provides a comprehensive guide on strategies to avoid them.
What is lead time?
Lead time is a critical metric that impacts both inventory management and customer satisfaction. It generally refers to:
- the time it takes for inventory to move through various stages of the supply chain, from the point of ordering it from a manufacturer to when it’s ready to be fulfilled in customer orders, and
- the amount of time it takes for an order to be delivered to its destination, from the moment a consumer purchases it online to when it finally arrives.
In the context of getting inventory to your warehouse, lead time involves several key steps:
Order placement
Average lead time
This is when a business places an order for products or materials from a manufacturer or supplier. The clock starts ticking from this point.
Manufacturing time
Average lead time: 3 – 14 days
The time it takes for the manufacturer to produce the ordered goods. This may include the production process, quality control checks and other related activities.
Transportation time
Average lead time: 2 – 5 days
After the products are ready, they need to be transported from the manufacturing facility to your warehouse.
This can involve various modes of transportation, such as road, rail, air, or sea, depending on the geographical locations involved.
Receiving and inspection
Average lead time: 3 days
Upon arrival at the warehouse, the products need to be received, inspected for quality and quantity and then stored.
Order processing
Average lead time: 1 day
When a customer places an order, it goes through an order processing stage, which includes picking, packing and preparing it for shipment.
Delivery time
Average lead time: 1 – 6 days
Once an order is ready, it needs to be freighted to the customer’s location, which can take various amounts of time depending on the shipping method chosen and the destination.
It’s important to note that lead times can vary significantly depending on the specific circumstances of the supply chain, such as geographical distances, modes of transportation and customs and regulatory requirements.
To illustrate the impact of long lead times, let’s consider an example within our own shores of Australia.
What causes long lead times?
There are dozens of reasons why long lead times in supply chains. The precise reasons will vary industry per industry, but below are the primary reasons most lead times extend longer than expected.
Spikes in demand
When there is an unexpected surge in demand for a particular product, manufacturers and logistics providers may struggle to keep up.
This creates a demand-supply bottleneck which ultimately leads to delays in production and transportation.
Holidays
Many industries, especially those that rely on Asian manufacturing, face significant disruptions during holidays, such as Chinese New Year, when factories shut down for extended periods. Even our own manufacturing in Australia seems to shut for most of January.
Labour shortages
Labour shortages can slow down production and logistics processes, making it challenging to meet deadlines. This is especially the case with skilled labour.
Raw material shortages
A lack of essential raw materials can halt manufacturing processes, forcing businesses to wait for the materials to become available.
Natural disasters
Natural disasters, like bush fires and floods, can disrupt transportation routes, damage infrastructure and lead to delays in the supply chain.
Supplier delays
Delays in receiving materials or products from suppliers can have a cascading effect on the entire supply chain.
Shipping disruptions
With our great size of Australia the biggest issue facing disruptions within our country has to be the closure of the rail lines, due to the extreme heat or flooding, closing of these rail lines causes huge peak in freight requiring urgent transport via roads.
How to prevent long lead times in 5 steps
Below, we’ve outlined six ways your business can prevent long lead times from arising in their business in the first place. Again, the detail will differ from industry per industry, but this general guideline provides an overview applicable to most.
- Plan for your needs early
Proactive planning is a cornerstone of efficient supply chain management. Businesses that anticipate their labour and material needs well in advance are better equipped to reduce lead times and maintain consistent production schedules.
Accurate forecasting, driven by historical data and market insights, enables companies to adjust their workforce and raw material orders accordingly. This approach not only helps in averting shortages but also provides a buffer against sudden demand spikes.
In addition to human resources, it is equally crucial to plan material sourcing early. Strategic relationships with suppliers can facilitate efficient communication and coordination, making it easier to meet deadlines.
- Source locally
Sourcing materials and products locally offers a variety of advantages when it comes to reducing lead times. Local suppliers can provide you with products more quickly and efficiently than international suppliers due to their proximity.
This not only cuts down transportation time but also reduces the complexities associated with international shipping, such as customs clearances and import regulations. Local suppliers are often more accessible for quick, just-in-time deliveries, allowing businesses to respond promptly to fluctuating demand.
Choosing local suppliers promotes collaboration within the community and strengthens the local economy. It enhances your ability to build strong, long-term relationships with suppliers who understand your business’s specific needs and can accommodate sudden changes in your production requirements.
- Optimise inventory management
Effective inventory management is a crucial aspect of mitigating long lead times. One strategy is to implement a just-in-time (JIT) inventory system, which focuses on having the right amount of inventory on hand precisely when it’s needed.
This approach minimises warehousing costs and excess inventory while reducing the risk of stockouts. JIT is particularly beneficial when dealing with products or materials with variable demand.
Lean supply chain practices complement JIT inventory management by eliminating waste and improving efficiency throughout the supply chain. By reducing unnecessary steps, minimizing lead times, and enhancing resource allocation, lean principles help streamline the entire process.
- Develop a network of backup suppliers and routes
Overreliance on a single supplier or transportation route can be a risky proposition. Diversification is a key strategy to mitigate potential bottlenecks and disruptions that can extend lead times.
By establishing relationships with multiple suppliers for critical materials or components, businesses create a safety net that can be activated when a primary supplier encounters difficulties.
Diversification also fosters competition among suppliers, potentially leading to better pricing and terms.
- Invest in a reputable transport provider
Investing in a reputable transport provider is key to ensuring timely deliveries and reducing lead times.
Reputable transport providers also have the means to effectively handle disruptions, be it due to unexpected weather events, port congestion, or other unforeseen challenges. Their experience and network of resources enable them to find alternative routes, adjust schedules and expedite deliveries when necessary.
This level of preparedness and responsiveness can make a significant difference in reducing lead times and enhancing your supply chain’s overall efficiency.
Slash your lead times with DSE Transport in your supply chain
DSE Transport is not just a transport company. It offers comprehensive supply chain solutions that can significantly reduce lead times and improve your bottom line.
By partnering with DSE Transport, businesses can streamline their entire supply chain, from order placement to final delivery, ensuring smooth transitions and minimising delays between different stages of the process.
With DSE Transport as a trusted partner, you gain access to their wealth of expertise, established logistics network, and a proven track record of delivering on time. Don’t let long lead times hold your business back – reach out to DSE Transport today and supercharge your supply chain for timely deliveries and enhanced efficiency.