Have you lost business or new opportunities due to the lead times of your products and services?
In today’s “I want it now” world, it’s critical for B2C and B2B manufacturers to develop strategies for reducing lead time to stay competitive, reduce costs and increase cash flow.
Studies have shown that being first is key to success. Quality and value are important, but being the first to respond to an RFP makes you more likely to be chosen (i80% of the time) and in many cases, it allows you to charge a premium for your products and services.
Are you tasked with increasing your market share and relevance?
Reducing lead times is a key competitive advantage that means more now than ever before. Conversely, if your competitors lead times are shorter than yours it is not a question of if you are going to lose business, but when.
Primary Benefits of Lead Time Reduction
Decreasing carrying costs
Streamlining operations and optimize productivity
Improving customer satisfaction and referrals
Outpacing the competition with order fulfillment
Creating transparency, trust and collaboration
How much time has your team lost dealing with disgruntled customers?
When lead times exceed expectations, your team spends more time communicating with and reacting to unfavorable situations, which increases stress and decreases cash flow. Even worse, your organization misses out on additional opportunities and growth. Operational confidence takes months to build, but can be lost in an instant. Once it is gone, it must be rebuilt both outside and within your walls.
Given lead times are so important, what can you do to ensure your lead times are optimized? There are some tactics you may think you are doing but probably aren’t.
1. Lead Time Reduction Strategy #1 – Tighten Supply Chain Management and Strengthen Partnerships
- Find U.S. suppliers. Having geographically closer suppliers reduces shipping times, increases ROI from faster order fulfillment and makes for easier returns. International suppliers may be less expensive but can add two to three weeks to your lead time.
- Create a legally binding lead time contract with your suppliers outlining their lead times for parts and service. Make it specific with penalties for delayed orders, so they will give you realistic delivery times.
- Provide pre-order summaries in anticipation of need, so your suppliers can plan accordingly and not be surprised by a large order. Share sales history and projections and create a true partnership with your suppliers to decrease lead times, build your business and create trust.
- Place smaller orders more frequently to help you increase your rate of inventory turnover and manage your carrying costs if goods aren’t sold as planned.
- Evaluate your supply chain. Eliminate vendors that are consistently late or deliver poor products that cause you delays. Be well prepared to switch vendors by ordering enough supply from your current vendor to cover changeover time.
- Consolidate suppliers whenever possible. Consolidation helps you leverage buying power, better manage vendor relationships and create stronger vendor partnerships.
2. Lead Time Reduction Strategy #2 – Automate Your Workflow and Order Processes
How automated is your ordering system? Once your parts are ready, are your internal order processes aligned with operations, finance, quality assurance and customer service? These internal order processing factors affect lead time:
- Time to get new orders into the system
- Time to process a change order
- Delayed orders due to miscommunication
- Lost orders or order errors due to manual entry
Using software to manage your ordering process can decrease order errors, substantially reduce lead times, keep departments aligned and create satisfied, happy customers. An automated system will route order details from one department to the next, keeping all departments aligned and informed. The benefits are endless:
- Eliminating manual entry
- Converting purchase orders automatically to sales orders
- Reducing order errors and pricing discrepancies
- Creating real-time order transparency
- Tracking orders easily
- Increasing speed and accuracy of large batch orders
3. Lead Time Reduction Strategy #3 – Streamline Operations from Order Entry to Production
Do you have bottlenecks that slow down production? Are your employees given clear direction and do they understand the metrics behind the success of their departments? Is everyone working on continuous improvement efforts? Operational excellence is something every organization should strive for. Here are a few areas you should consider when trying to reduce lead times:
- Evaluate all steps. To optimize your operations, evaluate each step and handoff point in the lead time process. Determine which processes can run simultaneously and which ones need to be in a specific order. Run processes in parallel as much as possible.
- Eliminate rework and unnecessary steps. When you work faster to reduce lead time, you often cause more errors. Instead, we recommend making sure each step is necessary. Clean up or eliminate steps that are the root cause for error by breaking them into smaller steps or consolidating them under one department instead of many departments. In some cases, you may need to evaluate technology to help eliminate steps via automation.
- Reduce handoffs. Each time a product is handed off to another department, there is risk for error and delays. Eliminate people in the process or combine processes to reduce handoffs and reduce lead time by eliminating the handoff times for each of the steps.
- Compress the work by updating tools and resources. Make sure you are using the most efficient and effective tools, including new technologies. Return on investment is key to determining which processes need an update and which are already optimized.
- Increase capacity through increased resources. Do you need more people or tools to conduct business? Be purposeful about adding value through added resources.
The goal of lead time reduction is not to work faster and harder but deliver faster by working better and smarter. Reducing lead time is a true competitive advantage and should be a top priority for any organization. Reach out to one of our Lead Time Reduction Specialists to see what reducing lead time can do for your bottom line.