How to Reduce Supply Chain Lead Times
Customers don’t like to wait. Whether a doctor is running behind schedule, a plane is slow to arrive, or a product fails to come when expected—delays create problems. For manufacturers, long lead times can have the same result. Not only do they create unhappy customers, they force manufacturers to carry more inventory, disrupt production flow, make it more difficult to respond to market changes, and more. All of this affects the bottom line.
In contrast, shorter lead times produce an array of positive outcomes for manufacturers. They enable companies to:
- Reduce volatility while keeping costs low
- Flex and adapt to marketplace shifts, staying in sync with customer demand
- Increase output, improving competitive position in the marketplace
- Boost inventory turns, which increases cash flow
So how can you reduce your supply chain lead times?
Here are some tips:
Know the Drivers
A lot of the time when lead time of a supplier is discussed it is presented as one number, but that one number is a static estimate at one point in time, but there are usually many highly volatile processes that drive that number, such as raw material, transportation, order entry, and disparate manufacturing steps. Completing a high level value stream mapping exercise that identifies each value and non value added step in the process is extremely important in order to pinpoint the areas in which to focus reduction efforts.
At JBC, we have reduced some of our longest lead items by working with our suppliers to create storage locations in the U.S. to eliminate transportation variability caused by ocean travel and stock WIP level inventory to eliminate the first constrained manufacturing step to eliminate volatility associated with capacity spikes. Without first understanding the lead time drivers, we would not have uncovered these solutions.
Streamline Supply Base
While it isn’t ideal to rely on only one source for materials and products, it is rarely necessary to have more than two backup suppliers. Examine where you can condense your inbound supply chain, keeping vendors that balance high-quality products, on-time delivery, good communication, and reasonable costs.
Having fewer vendors will not only reduce the administrative burden on your purchasing team, it will also give you more purchasing power and help you to cultivate long-term strategic partnerships.
Sharing detailed forecasts with your suppliers helps them anticipate coming orders, giving them the ability to “level load” production and avoid the challenges that are often associated with spikes in demand. At JBC we take the information you give us and apply it to our ABCQ segmentation strategy. From there we create a Plan for Every Part (PFEP) which translates into forecast frequency, safety stock levels within various points of the bill of materials (BOM) structure, reorder points, and lot accumulation. All of this helps to give you the lead time you desire. Depending on your needs and order volume, we can even have stock ready to be shipped within 24 hours of receiving your purchase order.
On the flip side, make sure you know your customers’ needs as well. Ask for blanket commitments with built in variability allowances and create buffer stocks to allow for unplanned surges in demand.
Standardize materials when possible
At JBC, everything we make is custom. To meet our customers’ requirements, we order hundreds of different materials from dozens of different vendors. There are times when the material called out on a print is the only one that will work for a particular application and other times where there are many options that will achieve the same result. When more than one option will do, standardization benefits both JBC and our customer. We reduce the number of SKUs we need to manage, increase our purchasing power with our vendors, and lower our demand variation. The customer, in turn, receives lower pricing and shorter lead time.
The takeaway: ask your vendor(s) if they have standard parts or materials that will perform as well or better than the one you are requesting. The more you are willing to explore viable alternatives, the more you can benefit from standardization.
Increase Internal Efficiencies
Reducing handoffs and streamlining communication flows decreases the likelihood that time-wasting errors or exchanges occur. The more people in a process, the greater potential for time to be lost.
Connect purchasing and scheduling teams to better align internal processes. When purchasing and scheduling teams collaborate, they can ensure that material arrivals are timed to better reflect capacity constrained resources, enabling them to schedule around bottlenecks, increase throughput and reduce overall lead time.
Accurate forecasting is key to reducing unnecessary spending, managing production and staffing, managing cash flow, and taking advantage of potential opportunities for growth. Forecasting demand with automated inventory management systems (IMS) helps to manage stock and output, generating purchase orders as soon as inventory levels hit a prescribed reorder point. Producing orders based on a trigger system can cut days off of lead time.
Automated order entry systems help to optimize order processing, improving the coordination of employees across departments and increasing visibility across channels. This helps to further decrease lead time and lower infrastructure costs.
Implement Service Level Agreements
Getting the best results from suppliers requires solid service level agreements that define how you want to do business. Ensure that every contract specifies processes for ordering and shipment, obsolescence, mutual accountabilities, key supply chain metrics (including lead time), and any other important factors to your business. Define lead times for each specific order and stock, penalties for delayed or late shipments, penalties for goods damaged during shipment, advanced notice requirements in light of stock shortages, discontinuations, or price changes.
Measure Supplier Performance
Define formal processes to manage each supplier’s performance and communicate regularly about order fulfillment, delivery, cost, customer service, etc. Provide key performance indicators (KPIs) to help motivate suppliers to achieve expected service levels. Look for vendors that can provide expedited manufacturing processes to get you high quality products quicker than other competitors while still at a competitive total landed cost.
Use Local Suppliers
Give priority to vendors that are close to your warehouse, manufacturing plant, or point of use. Using suppliers closer to home allows manufacturers to increase order frequency. Picking up smaller loads from a variety of local vendors can lower freight costs which can lead to lower total landed costs.
Remember that the overall value suppliers provide is more important than piece price. Working with vendors that offer the best overall level of quality and on-time service—not just the lowest prices—will help reduce supply chain lead times, protecting your bottom line and your customer base.
JBC Technologies is a leading flexible materials converter that provides innovative die cut solutions to manufacturers around the globe. But the impact of what we do goes far beyond die cut parts. JBC also delivers supply chain optimization, helping manufacturers reduce inventory, improve turn times, and streamline their entire supply chain. Contact us today to learn how our strategic vendor relationships with material manufacturers also help you bypass distributors, improve pricing, increase the quality of parts, and boost on-time deliveries.