Warehouse Management: Lead Times Explained

Lead time refers to the total duration between initiating a process and its completion. In the context of warehouse management and customer inquiries, it typically translates to delivery lead time. This is the time it takes for your customer to receive their order after placing it.

Your delivery lead time is a critical measure of how quickly you get products into your customers’ hands. It starts from the moment an order is placed and encompasses several key stages within your warehouse. First, your team verifies the order, checks stock availability, and handles any discrepancies. Then comes picking, where skilled personnel locate and carefully select each item. Finally, the order is meticulously packed for safe transport and shipped to your customer’s address via your chosen carrier.

Shortening this delivery lead time translates directly to happier customers. Faster deliveries and increased satisfaction results in repeat business and a stronger competitive edge. By optimising each stage in your warehouse, from inventory management to picking technology and packing efficiency, you can significantly reduce lead times. Additionally, partnering with a reliable shipping partner for on-time deliveries ensures a smooth final leg of the journey. By focusing on these areas, you can transform your delivery lead time into a competitive advantage that keeps your customers coming back for more.

Keeping the right amount of inventory on hand is a balancing act. As your stock of an item dwindles, you need to place a new order with your supplier. The time it takes for that order to arrive, known as the supplier lead time, plays a crucial role in this process.

Essentially, your supplier lead time dictates how low you can safely let your inventory dip before placing a new order. Shorter lead times offer more flexibility. They allow you to maintain lower inventory levels, reducing storage costs and the risk of holding onto unsold products. However, this also means you need to be more precise with your ordering to avoid stockouts before the new shipment arrives.

On the other hand, longer lead times necessitate a higher level of inventory to act as a buffer inventory. While this can increase storage costs, it ensures you have enough products on hand to meet customer demand, even with potential delays. By considering your supplier lead times alongside sales data and forecast demand, you can establish a reorder point that minimises costs and keeps your customers happy.

Your supplier in turn, has their own lead times. These could include the lead times of their own suppliers (or tier 2 lead times from your point of view). These suppliers ship raw materials and components that are used in your supplier’s manufacturing operation. Your supplier will also have a production lead time, which is the time required to manufacture products. There will also be an inspection lead time to check the quality of the finished product and a stocking lead time to place them in inventory.

If your supplier is doing a good job with their inventory management, then they will have anticipated your order. They will already have manufactured the goods waiting in their inventory when you place your order. At this point, your supplier’s delivery lead time to you will be similar to your delivery lead time to your customers. This is the total time required to process the order, pick, pack, and ship the order, and the time required for the truck to bring the goods to your receiving dock.

Effective lead time management for the supply chain maintains the profitability of a business. A short lead-time can reduce the need to keep a large inventory, therefore improving the cycle time between each purchase order. The delivery date can be managed without supply delay which in turn improves customer satisfaction.

For information on improving your warehouse management operations, contact us today.