At last! Your products are ordered.You worked with your customer service representative to create a forecast. The supplier arranged for the raw materials. A production schedule was created and aligned. You signed off on the schedule and once the manufacturer knows they have the raw materials, the order is confirmed. You’ve been given a lead time of 110 days until you take possession of your products. Exactly what goes into determining that lead time and can anything be done to shorten it?
Four elements determine lead time:
Among those four elements there is little wiggle room to improve on lead time. Let’s take them piece by piece starting with transit.
The most common and cost-effective method of getting products from Asia to the US is ocean transit. It’s typically reliable, if relatively slow. Ocean transit takes 30-45 days, which is one-third of the total lead time. That’s the good news.
The not-so-good news is that your contract manufacturer has virtually no control over global shipping. They simply can’t make ships move faster. [Have you seen those New Panamax ships??] If there’s an issue — timing, weather, ship- or port-related problems — your supplier can air freight to the West Coast and move product via trucks, but the price makes that option unsustainable over the long haul.
There are ways to increase production but they are very costly. So costly, in fact, they are rarely if ever deployed. Your CM could add more shifts, offering overtime to current workers, to produce your product. They could even hire more workers but let’s face it, that’s not practical.
Acquisition of raw materials is the one place that your supplier might be able to buy some lead time. Manufacturers can order materials and hold it in inventory, they can also hold finished product. This is called safety stock, a term used in the logistics industry to describe a level of extra stock which is held to mitigate risk of a shortage of raw material or packaging. Some companies will do this, others won’t. You need to talk to your customer service representative about your requirements, and be honest with yourself and them. There is a difference between must-have and nice-to-have.
One of the reasons you chose your supplier was because you determined they did a good job of handling the logistics portion of their business. Trust their experience. Your logistics/customer service representative will keep you informed of any hiccups that could delay your order. They know your order is important to you. It’s important to them, too. In fact, your satisfaction is their biggest concern. They know that even if they do a fantastic job of manufacturing your product, if your shipping experience is jacked up they could lose your business. When you receive a lead time of 110 days (or whatever it might be) it’s going to be spot on for the most part. They’re working hard to meet that quote so that you can build your business with confidence.
For additional reading on the topic of logistics:
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