Addressing Procurement Lead Time Challenges: Best Practices for Inventory Control & Stability

Lead time in supply chain management is the time gap between making an order and receiving that order. Simple, right? Not always. Uncertainty in lead time can disrupt the plans no matter how good they are made. Consider suppliers location, production constraints, or even fluctuations in demand throughout different seasons.

But here’s the good news: with the right strategies, you can take control of your supply chain forecasting and planning to keep things running smoothly.

Let’s dive into five practices that will enable you to lower lead time variation and maintain optimal system functioning.

1. Understand your demand patterns

Why it matters: When your demand is volatile, so is the supply chain. It is, therefore, necessary to begin by analysing the root cause of demand variability in your business. Are daily/weekly/monthly promotions the reason? Are customer preferences durable or does a customer change preferences in the blink of an eye? Utilize historical information, market surveys, and analytical capabilities to predict well.

Pro tip: Couple your forecasting with visibility solutions to identify risks that can slow down work. These insights let you adjust on the fly, so that you can limit surprises as much as possible.

2. Collaborate with suppliers

Why it matters: Your relationship with your suppliers is critical to achieve shorter & consistent lead times.

Open communication is the key. Ensure that all your demand forecasts and your order needs are communicated to your suppliers beforehand. Set specific policies regulating delivery time and work quality.

Pro tip:

• Use tools like EPR and Merchmix with suppliers for seamless communication
• Establish reward frames when performance and key targets have exceeded.

3. Optimise Reorder points and lead times

Why it matters: It is most important not to be over stocked or understocked, and finding the balance will be the key here. This helps you restock the inventory before it gets depleted. Use models such as EOQ (Economic Order Quantity) or ROP (Reorder Point) to find the values scientifically.

Pro tip:

• Safety stock in inventory management should be considered as a safety measure against longer lead times.
• Make it a habit to check your reorder points and change them based on your demand requirement trends.

Embrace Lean and Agile Practices

Why it matters: Lean practices reduce unnecessary costs and expenses while agile practices enable one to adapt to change in order to fully utilise opportunities in the market.

Lean practices refer to the reduction of waste—anything like producing more than is necessary or having more than you need in stock. While, the agile practices are more focused on the flexibilities, such as usage of components or building new prototypes immediately.

Monitor and Control Performance

Why it matters: If it’s not measured, it can’t be improved.

Monitor important performance measures like lead time, inventory turnover, and level of customer satisfaction. Continuously measure discrepancies and match performance against developed goals so that they can address the deficiencies.

Pro tip:

• Develop contingency plans for supplier disruptions
• Safety stocks should be planned in the periods of high demand for buffer replenishment.
• Avoid relying on one single supplier and seek for different suppliers as alternates.

Endnote

Procurement and lead times in supply chain management doesn’t have to be a guessing game. Variability can be addressed directly by establishing excellent relations with suppliers, selecting the right inventory control system approach, implementing the principles of lean and agile supply chains, while monitoring performance indicators and demand.

If you would like further information or details on how these processes can revolutionalise your business, we’re here to help you to stay ahead of the game.