Shorter lead times are always a good thing. In many markets, the ability to deliver sooner will win business away from competitors with similar products, quality and price. In other markets, quick delivery can justify a premium price and will certainly enhance customer satisfaction. In all cases, shorter lead times increase flexibility and agility, reduce the need for inventory buffers and lower obsolescence risk. Lead times are cumulative and bi-directional—that is, order handling, picking, packing, transportation, planning, procurement, inspection, handling, the suppliers’ lead-time, and delivery to and between your warehouses all contribute to the lead time; and the time it takes to get signals down the supply chain to initiate each activity adds to the overall time it takes to get the job done.
 

Inflexible business rules and policies can drive undesired effects. Purchasing rules too focused on unit cost lead to large quantity buys that result in high inventory and long lead times. Ironically, this type of buying can also lead to shortages, since longer lead times mean you will be buying to a less accurate forecast. The best combination of price and lead time often comes from a stable buyer-supplier collaborative relationship based on long-term contracts with deliveries according to a forecast that is shared with the supplier and updated frequently. The same is true on the customer side. Instead of focusing on securing large, one-time, single orders that clog up the supply chain, companies must focus on creating long-term contracts with customers and inducing customers to share forecast information so your preparations can reduce their lead times.

Appropriate measurements contribute to high performance. On-time shipment and inventory turns are good examples of high-level measures that tie to company objectives. Focusing on isolated measurements like purchase price variance or incoming freight cost creates excess inventory and longer lead times. Warehouse floor measurements must encourage overall performance—shipping orders on time at minimal total cost and minimal total cycle times.

Performing manual transactions often slows down the supply chain and adds to lead time. Reporting transactions at each activity or creating a paper purchase order before suppliers work on an order are just two examples. In addition, manual transaction reporting often introduces errors and impacts work productivity. Companies must eliminate non-value added transactions and automate valuable transactions to speed up the supply chain. For example, electronic pick systems or wireless scanners can be used in the warehouse to direct picking and report activity, and supplier purchase orders can be electronically sent or completely eliminated using Supplier Relationship Management (SRM) solutions.