Long Lead Times aren’t what many inventory managers want to deal with, but long lead times are not the enemy, and if you know how to prepare for them, you will be able to run an efficient supply chain.
Several items or products will have extended lead times due to the location of your supplier, manufacturing limitations, or just supply and demand fluctuations. As long as your quoted lead times are accurate and you’re using the longest reasonable lead time for any forecasting calculations, you will be working from the right plan.
If you think about your inventory as a pipeline and stagger your orders, you can maintain a good product flow to ensure you always have the right amount of product on hand, never too much or too little.
Let’s say you have a product with a four-month lead time. In a perfect inventory scenario, each month, you would see one month of stock coming in and one month of stock going out. Instead of placing one large order to get you through the four months until the next shipment, work with your supplier and set up your orders as best you can to stagger your shipments so you always have more product on the way. If demand unexpectedly increases and wipes out your supply, you won’t be stuck waiting three months for a replenishment. Clearly, nothing is ever perfect, and market conditions will cause the numbers to move up and down. The bottom line here is that just because the lead time is four months, that does not mean you buy four months of goods at a time.
This approach turns a potential long stockout into a short stockout and ensures that your next replenishment is not much more than one month out.
Some low-volume buyers may run into issues with filling containers and only order 4-5 shipments per year. In this case, follow these guidelines:
- Maintain Open Communication – If you’re ordering from overseas suppliers, you’ll deal with the time difference and possible language barrier. Attempt to keep communication open between you and your supplier, checking in on the scheduled dates and making sure you’re always informed of changes
- Parts Quality – Many items that take an extended time to arrive will come on ships. The journey and elements can cause damage to your product, so you’ll want to order an overage to account for any damaged goods
- Adaptability – Have a backup plan if your original supplier can’t deliver your goods. It’s good practice to research other suppliers before you run into an issue.