Knowing how long it takes you to carry out certain processes is of utmost importance to make better planning of the production and distribution of a company’s products. Knowing the lead time is essential to have a better organization in the supply chain, that is why today we will talk about this concept.
The lead time or cycle time, delivery or supply time is the time that elapses when an order is generated until the supplier delivers the goods to the customer. The average lead time will depend on how long the supply chain is, but the shortest time is sought without sacrificing any of the processes.
Importance of having a short logistics lead time
Logistics aim to deliver products in the right place at the right time, which is why a short lead time means that the processes were executed properly. A lead time is reflected in the following results:
Demand planning: With short distribution and supply times, it is possible to reduce uncertainty and accurately predict forecasts of upcoming orders.
Reduced stock: The right lead time allows operating with a smaller number of inventories to meet customer demand.
Improved customer service: By accelerating lead times you can speed up lead times and meet customer commitments, plus it reduces intermediate steps and simplifies processes.
How is lead time calculated?
The simplest lead time calculation is to subtract the date on which the order was placed, minus the date of delivery. The result shows how long it will take to fulfill the order. To reduce the lead time it is necessary to optimize all phases and processes to achieve the right lead time. Inventory control is one of the key factors to optimize cycle time and lead time.
It is also important to work closely with the right suppliers and distributors so that all phases of the process are executed on time and the end customer is well served. Finally, proper transportation is critical so that inconveniences are reduced.
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