How can you effectively shorten your lead times and optimize inventory management?
The first thing to do when trying to reduce lead times is to understand your supply chain processes, from end-to-end intimately. Document your supply chain journey and identify all the points along the way where you can expect waiting times.
Plan for the worst-case scenarios as well as seasonality. What if your supplier is delayed just before a Christmas sale? Once you understand what the long possible lead time looks like you can work from there to reduce it.
Here are some factors you can consider:
- Increase the frequency of orders and decrease the volume
Instead of ordering a large amount of inventory, order smaller amounts that take less time to manufacture and ship. Your inventory is then replenished more frequently and more consistently.
- Incentivize your suppliers
Work a lead time clause into your contracts with suppliers. This could either be in the form of a bonus should they deliver well in advance of what they estimated or in the form of a penalty if they are delayed. This helps in getting your suppliers to stick to the agreed lead times.
- Automate your inventory management process
Speed up your time to market by automating your inventory management workflows . With tools like QuickBooks Commerce you can reduce the time taken to create and manage purchase orders, always be in contact with your suppliers, keep track of stock levels all without worrying about manual data entry and human error.
It should not come as a surprise that shipping your products from international suppliers will increase your lead time. Finding international suppliers may seem appealing due to potentially lower manufacturing costs, but in the long run, it could cost your business more if you are just waiting for stock to arrive. Finding local suppliers could help reduce your lead time significantly.