When starting a business it is very important for you to manage each and every inventory-related operation very carefully. By this, you could avoid any uncertain situation which might cause a downfall in your reputation. In addition to this, you should also focus on the time in which your product is being manufactured and delivered. Your supply chain running smoothly and according to the exact vision of your company will have a positive impact on your profit of the business. Similarly, lead time in the supply chain of your company needs to be as minimized as possible to build trust and confidence among the customers. Let us discuss it from the start.

What is Lead time?

Lead time is basically defined as the time period that is required to complete the specific process of anything. For instance, when you are going shopping, the time frame from making the list of items that you need to buy to reaching the store and buying them would be your lead time. Similarly, when we are talking about inventory, the lead time in inventory management of your business will be referred to as the period that is required by the supplier to issue the stock to the firm so that they could fulfill the orders of the customers.

However, it is very essential that the lead time of the inventory of your business is as low as possible. Because it will have a huge impact on your sales, as long as the inventory lead time is, you are making your sales delay.  Furthermore, when the lead time is long it will also result in the form of angry customers which will have a bad effect on the reputation of your business.

The formula of calculating Lead time:

The inventory lead time is simply calculated by estimating how much time is being required by the supplier to accept your order till the time when the order is reached in your warehouses and later shipped towards the customers. You should try your level best that the lead time of your inventory is minimized as much as possible so that your orders are not delayed and are piled up in the pending section.

The correct formula of calculating the inventory lead time of your business is stated below;

Lead time = the delay in the re-ordering time + the delay in the supply time.

You need to make sure about what is the order process time of your supplier to make sure that you place the order within the appropriate time period so it is checked and processed by your supplier without causing you delay.

Importance of Lead Time in Inventory Management System:

Lead time in the supply chain management of your business plays a very crucial part to make your orders reach right on time towards your customers. As we are aware of the process through which the product is manufactured, reached towards the wholesalers or the retailers and at last to the consumers, all this comprises to form a supply chain. So obviously a good lead time will be favorable for the optimal delivery of the goods towards your customers.

How to manage Lead time in the Inventory Management System:

It is very important that the inventory lead time of your business is managed efficiently so that all your customers are satisfied. It would be a smart move if you see a product is growing in the market, you can order it in bulk from the supplier so that the orders could be fulfilled at the right time. Fast order delivery means happy customers, everyone wants that right?

When your orders are not shipped from time to time in your warehouses you won’t be able to serve your customers at the right and needed time which will cause you the loss of clients. However, you can eliminate this huge problem by ordering your inventory more frequently so that you could avoid the risk of being short of stock and manage your inventory lead time more effectively. Therefore it is very essential that you manage your lead time of supply chain as well as your inventory lead time by taking some necessary measures that are discussed below:

  • Decrease the volume of orders:

Managing the volume of your orders would be the first step to managing the inventory lead time of your business. You should always accept the order which is enough and could be delivered at the right time. Because let us be obvious, delay and pending orders would only create a burden or stress over your company and cause you loss of customers. Therefore firstly accept the orders that could be fulfilled in the given time and then make orders to the suppliers at the right processing time so your lead time is not expanded.

  • Automize the inventory management system:

Using automated software and digitizing your inventory management system could also help to a great extent to manage your inventory lead times and the lead time of the supply chain. In order to do this, you can use software that will guide you about the lead times of your inventory so that you could work accordingly within the specific time period avoiding any kind of disturbance.

However, you could employ Inventooly, great software for the effective management of the inventory of your business that guides you perfectly well in terms of how to manage the order points and how to ship your products after checking effectively towards your customers.

  • A good relationship with suppliers:

If your supplier is irritated or unhappy with your dealings, he may cause himself to deliver you the required products which may be the major cause of delay shipment towards the customers. In order to maintain good relations with your supplier, you must offer and pay him incentives and inform him about the need for products before a given time so he may proceed with your orders more effectively. All this will help a lot in the reduction of the inventory lead time as well as the lead times in your supply chain also.

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