1. Lead Time-
Getting it Right
Presented by
Stuart Emmett
www.learnandchange.com
And inspired by the book “Excellence in Inventory Management”
by Emmett & Granville (2007)

3. Time is THE resource
1. “Once it has gone, it has gone, it will never to come back”
2. “What separates good and poor managers is how they
manage time”
3. “Time is a budget item”
4. “Unless suppliers get their act together on lead times, then
simply, we will change supplier”
5. “Who should pay, for unreliable lead times?”

4. SUPPLY MATERIALS/ GOODS FLOW DEMAND
PURCHASE PRODUCTION LOGISTICS MARKETING
“SOURCE” “MAKE” “DELIVER” “SELL”
INFORMATION & MONEY FLOWS
RAW WORK IN FINISHED
MATERIALS PROGRESS GOODS
SUPPLIERS ULTIMATE
RECYCLING/RETURNS FLOW
SUPPLIER CONSUMER

5. The Supply chain
Definition:
•“Everything from demand to supply and back to demand”
•Process that integrates/coordinates/controls
•Movement of materials/inventory/information
•Suppliers>Company>Customers
•In a Timely manner

6. Supply chains - key aspects
•Cost or Service?
•Supply chain or demand pipeline?
•Many parts/players/participants involved
•More than one type of supply chain in any company
•30 to 70% business cost is in the Supply chain
Key: Supply Chain is about Movement, therefore, we must
Manage the flows

7. Supply Chain Flows
Materials Flows:
Materials Flows: Money Flows
Money Flows
••Sourcing/buying
Sourcing/buying ••Assets
Assets
••Transport/logistics
Transport/logistics ••Holdingcosts
Holding costs
••Receiving/warehousing
Receiving/warehousing ••Carryingcosts
Carrying costs
••Stockholding
Stock holding ••Debtors
Debtors
••Creditors
Creditors
Information Flows ••Exchangerates
Exchange rates
Information Flows
••Supplycycle; e.g. forecasts, PO’s
Supply cycle; e.g. forecasts, PO’s
Keys: All of the flows are:
Keys: All of the flows are:
••Demandcycle; e.g. replenishment
Demand cycle; e.g. replenishment
••connected
connected
••affected by Time
affected by Time

8. Supply Lead Time: A Starter
What would we find out, if:
•“Pin yourself to an order” (Information flows)
•“Pin yourself to the goods” (Material flows)
•“Pin yourself to a dollar bill” (Money flows)

9. Supply Chain = joined up processes
A Process (like the Supply Chain) is
“A sequence of dependant events, involving time, that has a
valued result for the eventual end user”.
Three key features of processes
•Dependency
•Variability
•Interfaces

10. Any process has 3 versions
What You Think it is What you would Like
What it Actually is
it to be

11. 8 Supply Chain rules
Number 1: “Win the home games first”
Number 2: Inventory is the common concern
Number 3: Collaboration
Number 4: Fixed reliable lead times
Number 5: What do Customers value
Number 6: Smooth continuous flows
Number 7: Trade off holistically
Number 8: Use appropriate ICT
Source: The Supply Chain in 90 minutes
Emmett 2005

12. Inventory
Inventory Management is:
“An approach to manage the product flow in a supply chain,to
achieve the required service level at an acceptable cost”

13. Inventory Key Aspects
•Determining the products to stock and the location where they
are held
•Maintaining the level of stock needed to satisfy the demand (by
forecasting of demand)
•Maintaining the supply
•Determining when to order (the timing )
•Determining how much to order (the quantity)

14. Inventory Key Components
•No 1 Demand Analysis/Forecasting
•No 2 Supply Lead Time
•No 3 Cost & Benefits

15. When To Order/Replenishment
“When stocks at a level,
that are able to satisfy demand,
until the replenishment order is available”
Four basic questions:
•How much demand is expected?
•What cost/service level balance is required?
•Which replenishment method to use?
•How long will the supply replenishment take?

16. When To Order
•Supply LT
•Demand use during the supply LT
•Any Supply LT Variability, (usually poorly dealt with, it must be
measured and must be minimised)
•Any Demand variability, (the difference between the Average
demand and the actual demand, over time and is measured by the
standard deviation)
•Required Service Level, (the availability of stock to service
requirements)
•Free stock

17. Inventory problems
“Frequently, when inventory problems exist, people believe it is
because forecasts are inaccurate.
In our experience, it is more likely to be the result of lead times
being wrongly or inaccurately defined.
Consequently analysing lead times can be fertile improvement
territory”
Source: “Excellence in Inventory Management”
Emmett & Granville 2007

18. Supply Lead Time
Is the elapsed time from:
• When deciding to place an order for a product
• to when the ordered item becomes available to satisfy
customer demands.

19. One Supply Chain: Total Supply Lead Time
PROCUREMENT
TO STOCK
Yarn Fabric Garment
Manufacturer Manufacturer Manufacturer
30 + 20 10 + 2 35 + 20 5 + 2 20 + 20
DELIVERY TO
CUSTOMER
Retailer Warehouse
= 175 + 20 + 13
15 + 20 2 + 2
33 + 5
5 + 2
106?

20. 175
Retail Store
120 10
Distribution Centre
15
95
20 FG Garments Warehouse
5 Bulk FG
5 Cut Work WIP
10 Fabric RM
5 FG Fabrics
55
Grey
15 Fabric WIP
MANUFACTURER
5 Yarn RM
GARMENT
PRODUCTION
Cumulative
30
Inventory
10 Yarn FG
FABRIC
RETAILER
YARN
20 Fibre
10 15 20 10
Process
Lead Time
55

21. Supply Lead Time
Involves all of the following:
•The materials movement times
•The information flow times
•The storage and static times
•And for some: the payment and credit times
•Many individual items involved.e.g.:
-production preparation ,processing
-in stock time

22. Supplier lead time
Is only one part of total supply lead time
Supplier Lead time is:
•Time order is received
•Time order is dispatched
•Time order is received

23. Impact of order processing
Time decide need
Time place order
Time order received
Time product despatched Supplier LT
Time product received

24. Impact of receipt operations
Time order received
Time product despatched Supplier LT
Time product received
Time available for issue

25. Total Supply lead time
Time decide need
Time place order
Time order received
Supplier LT Supply LT
Time product despatched
Time product received
Time available for issue
Time payment is available to supplier

26. Supply lead times
Internal
Time decide need
Time place order
External
Time order received
Time product despatched Supplier LT Supply LT
Time product received
Internal
Time available for issue
Time payment is available to supplier

27. Supply lead time (SLT) and risk
Key: Must understand how the overall SLT has been derived.
Too often only the external supplier lead time is considered
Key: Supplier lead time must be challenged
Too often customers take the supplier lead time provided by
suppliers as given

28. Lead Time
•Lead times are critical
•Lead times must be measured
•Lead times must be controlled
For example:
If use 70 items per week,and supply LT is 2 weeks
Then,maximum stock is 140 items
But if supply LT is variable by +/- one week
Then,maximum stock is 210 items
minimum stock is 70 items
We may “play it safe” and hold 210 items

29. Lead time and customers
Lead time provided to our customers, does not impact our
inventory levels.
It is only the supply lead time that impacts inventory.
Clearly, the lead time to our customer, impacts their inventory
level. They will be keen to ensure it is both minimised and is
reliable; just as we should be with our suppliers.

30. Case Study 1
•300,000 SKU’s ; with demanding inventory availability
targets
•Supply lead times were both long and unreliable.
•Project to work with suppliers to improve the situation.
•One supplier was asked: is it possible to reduce your
current 20 week lead time?

31. Case Study 1
•Supplier said sure, what would you like it to be?
•We suggested 18 weeks and immediate yes
•Surprised by quick response, so we asked, what they could
provide?
•The supplier said 2 weeks.

32. Case Study 1
•So why was 20 weeks used when 2 weeks could be
achieved?
•Discovered initially, the customer’s buyer had dealt with the
supplier’s sales manager.
•For the supplier this was a new account and a significant
one. Hence the initial order was larger than they could
supply from stock.

33. Case Study 1
•A lead time of 20 weeks had therefore been quoted to allow
sufficient time.
•No one had then thought to ask what the lead time would
subsequently be for the replenishment orders from stock.
• If they had asked they would have been told 2 weeks.

34. Case Study 2
•Remotely located gas production facility in Middle East.
•Purchasing in local market and globally.
•Rising stock values, yet the demand was flat.
•We called in to investigate: asked what problems do you
have with supply lead times?
•Answer was none (?), so we asked why?
•Answer was when placing orders used supplier LT for local
market @ 3 months and global market @ 6 months.
•Reality was, never as long as this

35. Case Studies 1and2: Conclusion
•No control of lead time.
•Used longer lead time than was necessary.
•Carried more stock than was needed.
•Financial penalty.

36. Case Study 3
•300 retail shops selling wine, spirits etc drinks in UK.
•New inventory software system introduced.
•This was calibrated with historic demand and supplier data,
process etc.
•Went live but in a few weeks, were many out of stocks.
•Discovered that software suppliers default settings for
supplier lead time had not been changed (all set at 10 days).
•Suppliers were located from New Zealand to Europe with
various lead times from days to months.

37. Case Study 3: Conclusion
•No understanding at all of SLT.
•No availability.
•Financial penalty.
•“Heads rolled”.
Many issues can arise when lead times are not properly
considered.

38. Analysing Lead Times
• We must manage inventory on an item by item basis,
therefore, analysis also must be on individual items.
• Identify the stages in total SLT.
• May sound simple; but is often difficult.
• Not thought this way before = rethinking?
• Likely SLT is managed by different functional
departments/silos.

39. No internal “joined up” thinking
Procurement Production Logistics Marketing

40. “Win the home games first”
Procurement Production Logistics Marketing

41. Analysis
Order Decide Place Receive Despatch Deliver Available Total
to order Order Order Order Complete for issue
Number Days
1 14 14 15 29 07 08 26
March April April
2 20 21 22 10 27 30 42
March April April
3 25 25 27 17 15 15 52
March April May May

42. LT stage analysis
If lengthy, or considerable variability indicated by a high
standard deviation, then analyse further.
For example, the stage from supplier despatch to customer
receipt could be split further into:
Time supplier despatched order
Time order is loaded onto ship at port
Time order arrives at destination port
Time order is cleared customs
Time order arrives at customer warehouse.

43. SLT & Planning Horizon
•SLT is also a main determinant of the horizon over which we
need to plan. For example, if the supply lead time is 10 weeks, then it
will mean that we have to produce forecasts for the item that extend into
the future by 10 weeks.
•More complicated when we make product ourselves.
•Here there is also a production lead time, after the raw material
SLT.
•Planning horizon is now the production LT plus SLT.

44. Production Planning horizon
Supply LT Production LT
Planning Horizon

45. Planning Horizon
The longer the planning horizon, then the more inaccurate is the
forecast.
Therefore reduced and stable lead times:
•delivers a direct impact on stock levels
•contributes to an improvement in forecast accuracy
•reduces safety stock

46. Controlling/Reducing lead times
“Uncertainty is the mother of inventory”
• Measure it, (many do not e.g. “handed over” by procurement)
• Analyse it, especially the “plus/minus" and the “10-12 weeks”
• KPI it. E.g. agreed standard is then compared to the actual.
“Unless suppliers get their act together on lead times, then simply, we
will change supplier”
• Collaborate and work together; internally and externally
Key: Reducing the SLT variability is the priority, next, we can
look to reduce the length of the lead time

47. LT Variability; an example
Supply Lead time (SLT) is halved from 12 to 6 weeks but the
supply lead time variability (SLTV) stays the same at 4 weeks
Current SLT New SLT
SLTV SLT SLTV SLTV SLT SLTV
-4 12 + 4 -4 6 +4
Total LT = 8 to 16 weeks = 2 to 10 weeks
(Index 100 to 200) (Index 100 to 500)
So, if SLTV stays the same and only SLT is reduced, then
there is actually a higher disruption factor.

48. LT Variability; another scenario
Supplier quotes 12-16 weeks delivery time
•Is it 12 or 16 weeks; does anyone ask?
•Do people “play it safe” and use 16 weeks then add 10% for
“contingency”; so we finish up with 18 weeks?
•Eventually order is received in 12 weeks
•Who measures/checks/monitors/reviews/makes changes?

49. Summary of the Key Aspects in SLT
•Supply Chain is about Movement, therefore we must “Manage
the flows.”
•All flows are affected by Time; the lead times are therefore critical
in our management of supply chains.
•Inventory is the common concern of all in supply chains, internal
and external collaboration is needed.
•A mission of supply chain management is the reduction/
elimination of inventory whilst optimally balancing costs, service
levels and availability.

50. Key Aspects in SLT
Lead times must be measured/be controlled.
•How long will the supply replenishment take?
•How has the overall SLT been derived?
•Supplier lead times must be challenged.
•The longer the lead-time, the more stock.
•Reducing lead times not only delivers a direct impact
on stock levels, but an improvement in forecast
accuracy and hence a reduction of stock.
•Reducing the SLT variability is more important than
reducing the length of the lead time.

51. Key Aspects in SLT
•Many issues can arise when lead times are defined in an
arbitrary fashion.
•Analysing lead times can be fertile improvement territory.
Aims:
•Fixed known reliable lead times.
•Supply lead time predictability.

52. Please: Beware of the Time wasters
Four types:
Internal to our-self; e.g. we do not see it as a problem
Lack of planning; e.g. do not know the SLT’s
Lack of self management; e.g. we do nothing
Lack of control at work e.g. “its up to them”

53. Please never forget:
Lead time is not just External
Internal
Time decide need
Time place order
External
Time order received
Supplier LT Supply LT
Time product despatched
Time product received
Internal
Time available for issue
Time payment is available to supplier

54. In our experience,
a weak link
in the supply chain,
is nearly always,
supply lead time

56. Lead Time-
Getting it Right
Was presented by
Stuart Emmett
Inspired by the book
“Excellence in Inventory Management”
by Emmett & Granville (2007)