In the world of e-commerce, faster is almost always better – and it’s no different when it comes to supply lead times.
But it’s not just about speed – it’s also about reliability.
Merchants must be able to rely on supplier lead times to order stock at the perfect time, eliminating the risk of stockouts and overstock (which both have a devastating impact on cash flow).
Efficient, reliable supply lead times can dramatically boost operational efficiency at an e-commerce brand, as well as boost customer satisfaction, protect cash flow and give you a competitive edge in a crowded marketplace (especially during a downturn).
This blog will help you understand the importance of supply lead times and show you ways to optimize supply lead times in your business, including using Inventory Planner by Sage to manage lead times more effectively.
What is lead time?
Lead time refers to the duration between placing an order with a supplier to processing the inventory at your warehouse. It’s a crucial factor that determines whether you’ll run out of stock or receive your inventory on time.
For e-commerce businesses, lead times are the difference between running out of stock (and disappointing customers) or ending up with too much stock, and inventory arriving right on time.
The COVID-19 pandemic had a huge impact on supply lead times for e-commerce brands. Increased demand and supplier shortages along with manufacturing delays, transportation disruptions and trade restrictions massively increased supply lead times.
While many of the issues have been resolved, supply issues – including unpredictable lead times – are still an issue for lots of merchants. Research suggests up to 88% of businesses are still experiencing longer-than-usual lead times.
Top tips to optimize supply lead times:
1. Factor lead time into forecasting
Lead time directly affects your inventory; the longer your lead time, the more stock you need to hold (and the more cash you have to tie up in stock, which puts your cash flow at risk).
By using advanced inventory planning software to forecast your sales demand, you can eliminate the errors and delays that go hand-in-hand with relying on spreadsheets.
Inventory planner lets you customize your forecasting at a granular level, including inputting your days of stock. This is the period of time for which you’d like to have enough stock (aka your stock cover). It’s also your purchasing frequency.
Including this data in your forecasting means you only have to order what you need and you can be confident that your next order will be placed in time, without risking running out of stock or ordering too much. Discover more about inputting your lead time here.
2. Automate POs
Creating and placing purchase orders, if done manually, can have a significant impact on how long it takes to receive new stock. Using inventory planning software to automate the process can make order processing more efficient and minimize errors. This can significantly speed up your overall order processing time.
With Inventory Planner, it’s easy to create POs directly from your buying recommendation report, which offers merchants massive savings. For instance, wellness retailer Inside U saves around 20 hours every week – or 80 hours a month – by drastically reducing the time needed to purchase inventory.
“Each PO probably takes us 10 fewer minutes than before, which really adds up,” says Steve Velthove, the brand’s Founder and COO.
“I love that it stops us forgetting to complete orders and that it pops up with intuitive notifications that prevent us from making mistakes. For instance, if we try to order an item that’s out of stock in one warehouse, but in stock in another warehouse, a box will pop up to say ‘hey, did you know you already have ‘x’ number of these in ‘x’ location?’.
“Plus, it’s easy to combine warehouses and create POs directly from the app. The functionality is awesome!”. Find out more about Inside U’s experience, and other customer stories, here.
3. Calculate ‘real’ lead times
The lead time quoted by your suppliers is one thing; the actual time it takes for your order to arrive and be processed by your warehouses can be another thing entirely.
That’s why it’s so important to turn to your data and look at how long it actually takes for items to arrive from your suppliers.
Once you have this information, you can go back to your forecasting and add in your ‘real’ lead times, not idealized lead times which inevitably result in issues. This video covers more about how to do this in Inventory Planner.
4. Cut transit times
The time it takes items to be shipped from your suppliers to your warehouse has an obvious impact on your overall lead time. It’s worth periodically assessing whether you’re getting the best (read: fastest) service.
Explore your options with reputable shipping partners to see if you can cut your transit time. Negotiating favorable terms, optimizing packaging, and leveraging technology for tracking and logistics can all contribute to faster and more efficient delivery. Local suppliers might be able to offer shorter lead times due to proximity.
The best inventory planning software, like Inventory Planner, helps you keep track of multiple suppliers and shipping providers in one centralized hub. It includes real-time details about products currently on order or in transit, the costs, payment terms, and shipping methods—plus contact information, transaction history, and handy notes about each supplier.
5. Improve supplier communication
On average, 21% of manufacturers cite lack of visibility over lead times as the cause of supply chain disruption. It pays to communicate clearly and regularly with your suppliers, and it’s definitely worth agreeing on fixed terms with new suppliers (which include lead times).
Inventory Planner gives you an at-a-glance view of all your orders and suppliers, and factors in on-order merchandise into your forecasting. This enables better communication across your supply chain.
Maintaining strong relationships and open lines of communication can ensure prompt responses to inquiries, faster order processing, and quicker delivery times.
How Inventory Planner can help optimize supplier lead times:
- Accurately forecast demand based on sales history, factoring in lead time, stockout times, and seasonality
- Get replenishment recommendations to meet customer demand
- Forecast demand for individual or multiple warehouses and inventory locations
- Check and adjust lead times to ensure the right amount of stock is in place before the next purchasing round
- Check supplier requirements so that orders are processed smoothly
- Adjust forecasts to account for promotions and other expected demand peaks
- Create purchase orders in just a few clicks
- Adjust lead time by vendor, warehouse, variant, and assembly
Cut your lead times with Inventory Planner, starting with a free demo.