Remember when you didn’t care how long your lead time was, as long as it was consistent? It wouldn’t have been such a bad system, except that lead times are never consistent.
So companies like yours began maintaining a safety stock, “just in case.” Of course, “just in case” costs you money in the form of larger inventory. Better to go with “just in time.”
I’m talking about predictive lead time. It’s real. It’s here. And it can relieve some of your biggest supply chain headaches while saving you money.
What Is Predictive Lead Time?
Predictive lead time could mean different things to different people, so I want to define my terms. For our purposes, predictive lead time is the ability to know exactly when to purchase a product or supply so that it will be available for a specific date, no matter what time of year you’re ordering.
I hardly need to explain to you why this is important. Manufacturers and distributors are sick of holding inventory for months and months just because they’re afraid of running out at the wrong time. And they’re equally tired of having to scramble at the last minute to find an alternate supplier due to shipment delays.
So, how can a company actually achieve predictive lead time? We at Demand Management approach the challenge of predicting the future by looking to the past. We’ve designed a module that can track every line item of every previous transaction, run this data through a forecasting engine, and then generate a lead time for any item.
The key here is that our engine doesn’t just generate a lead time based on an average of all previous lead times. Instead, it takes seasons into account to come up with a lead time that’s most realistic for the exact time of year you’re ordering. For example, if you’ve typically experienced significant delays in getting products for Christmas season, that will be reflected in all future lead times.
The Top Benefits of Predictive Lead Time
Most of the benefits of having predictive lead time information at your fingertips are probably intuitive to anyone who orders supplies and products as part of their day-to-day duties. You can finally overcome lead time variability. Minimize inventory. Prevent stock-outs. Avoid having to make flimsy excuses to your customers.
But there’s another important benefit to having this data: the ability to reduce supply chain risk. The fact is, many manufacturers and distributors are trying to consolidate their spending with their lowest-cost providers. But what if one of your major suppliers goes bankrupt? You’ll be up a creek.
Predictive lead time data can’t protect your suppliers from hard times — but it can give you an in-depth view of supplier performance. When you get early warnings that Supplier A is taking longer and longer to fill orders or Supplier B is delivering more faulty products, you can take action before these problems affect your own bottom line.
Find Out More
I’ll be writing more — much more — about predictive lead time in future blog posts because I think it’s one of the most important capabilities any manufacturer or distributor can have today. In the meantime, take a few minutes to learn more about the Demand Solutions DSX predictive lead time module.