Why is lead time important?

Why is lead time important?

Why is lead time important? One reason is that improved technologies and the rise of Ecommerce has increased expectations of what is possible when it comes to lead times.

In a post-Amazon world, the customer has got used to rapid delivery, excellent communication and high levels of service.

In many cases, manufacturers are having to catch up quickly.

First of all, it might be useful to define what customer lead time is. Put simply, lead time is the time it takes between a customer placing an order and it arriving at their door.

Unfortunately there is often a differential between what the manufacturer promises and what the customer actually experiences due to unforeseen challenges that could occur at any point in the process – from inaccurate stock levels to supply chain break downs.

What is important to recognise is that action can be taken to better align customer expectations with reality – particularly with the help of ERP software.

Here are some reasons why customer lead time is so central to maintaining a successful business operation.

Improved competitiveness

Manufacturers are constantly battling with competition that have found ways to cut down lead times. If your company produces similar or identical products to a competitor but they have found a way to reduce lead times by one week compared to yours then the customer is likely to take their business elsewhere.

When all else is equal, shorter lead times are going to make or break your ability to sell.

Better forecasting

By cutting down lead times and making them more predictable, you can begin to make better forecasts.

This has a range of benefits. First of all, forecasting makes your customer’s life easier, as they know when to expect their goods to arrive, allowing them to plan ahead and meet the expectations of their own customer base.

In addition, better forecasting allows you to optimise inventory levels and avoid a build up of unwanted stock that accumulates when you’re unable to predict how long parts will stay on the shelf for.

Better customer satisfaction

When customer satisfaction is low, word travels fast. By cutting down lead times, you can move one step closer to boosting your customer relations and building customer loyalty.

Now that businesses are competing with highly effective companies from around the globe, you cannot take custom for granted, and business will soon look for other solutions if it takes too long to send the required products their way.

Communication is key. By being open and honest with suppliers and customers, you are less likely to leave them feeling disgruntled.

Accurate information from ERP-driven data is one way of providing customers with reliable information.

Excess inventory

There are many reasons that high lead times cost you money, but one of the most invidious is through high inventory levels.

Growing customer lead times often result in excess stock sitting on shelves, as it becomes difficult to predict when each individual item is needed.

Allowing stock to sit unused can lead to items depreciating in value, or more likely, tying up money that could be used elsewhere in your business.

Optimising stock levels is best achieved through short, reliable lead times, so take extra care in cutting these down to size.

Ready to take the next step in your attempts to cut down customer lead time? ERP software could be the way to go. Get in touch with one of our ERP experts here and begin to learn more.