Long lead times are a common problem within organizations. This negatively impacts inventory costs and creates inefficiencies in operations. In this blog, Ralph Engelbert, Senior Functional Consultant at Eqeep, shares his insights on how organizations can reduce lead times, what strategies are effective in achieving this, and how this can contribute to cost savings and improved competitiveness.

The challenge of long lead times

Long lead times are a recurring challenge for many companies. One of the most common obstacles to reducing lead times today is the shortage of materials. An uncertain delivery time often leads companies to maintain higher safety stock levels. This contributes to higher inventory costs and results in suboptimal processes. The cost of excess inventory accumulates quickly, including storage and depreciation costs, and you run the risk of product obsolescence. Depending on the industry, the marketability of your inventory also plays a role, how quickly and easily the products in your inventory can be sold. Take the high-tech industry, for example. Imagine your company still has a substantial stock of the 2023 variant of a product, but your customers already want the 2024 edition. Then you are forced to sell the old stock at a lower price or even eventually write it off. Companies with shorter lead times can react more quickly to changing market conditions. So if you have a good supply chain, you need less buffer stock.

Strategies to reduce lead times

One effective way to reduce lead times is to implement a First-In-First-Out strategy (FiFo). By adopting this strategy, you ensure that the oldest inventory is used first, which helps prevent obsolescence and promote the flow of goods. It is also important to stay in constant contact with your suppliers to obtain up-to-date information on delivery times and to ensure that up-to-date logistics arrangements are in your systems. Regular consultation with suppliers can help minimize unexpected delays and increase delivery reliability.

In the real life situation

At a leading international telecom infrastructure specialist, we recently conducted training sessions focused on improving lead times and optimizing the supply chain. In these trainings, we share best practices from the market and give project controllers, buyers and work planners a better understanding of issues such as lead times, order times and strategic inventory levels. What these trainings have achieved in financial terms is too early to say, but internally they have certainly had an impact. We have initiated discussions between the different regional depots in this way. Employees have gone into each other’s kitchens to learn how to make process improvements. This culture of continuous learning and improvement has created a wave of positive change.

Want to know more?

Did these insights start to get you thinking? At Eqeep, we help organizations make their supply chains more flexible and efficient. Contact us for a free consultation or request a demo to see how we can help you optimize your processes.

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