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What is Lead Time in Inventory Management?

Nov 14

 It is very important that you take efficient steps for the management of the inventory of your business. Because it is only the inventory that will establish your business or burn it down to the ground. You must be careful about what inventory management system you are using for the operations of your business. Expedient services should be employed to strictly monitor all the management sectors and make sure whether the lead time of your inventory is as minimized as possible, and all the orders are processed and forwarded efficiently or not. 

Understanding Lead Time:

In simple words, the lead time could be referred to as the period within which you place the order to your supplier to the time till it reaches you and is ultimately delivered to the customer. In every business, it is preferable that the lead time should be as minimum as possible because as much longer it would be, it will create impatience in your customers which will disturb the activities of your company. 

Furthermore, it could be understood as when you have decided to cook something unique at home, the time that you will be required to go to the grocery store and shop for the things that you will require for cooking till the time you come back and make that dish at your home. This will be referred to as the lead time. 

What is the Formula of Lead Time?

It is very important to take effective steps for the correct management of the lead time of your inventory. All the operations that affect the supply chain of your business are also related directly or somehow indirectly with the inventory lead time of your company. Therefore, when an order is received, you must alert your supplier right away to avoid any mishap in the future. Correctly calculated lead time will also prove very helpful for the supply chain management of your business. Below is stated the correct formula of lead time;

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

It is no secret that in order to run your business smoothly, you should make sure about 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. 

Why Lead Time is Important in Inventory Management?

As discussed above, inventory lead time is of major importance when it comes to matters of your business. You must be thinking why the lead tie is being considered so crucial in your business, simply because it is the basis of managing orders. Moreover, lead time also plays a vital role in the correct estimation of demands of the customers about the future. In addition to this, the lead time in the supply chain also helps a lot to deliver the order at the time to the customers. Good suppliers mean happy customers and happy customers lead to profit and a rise in the sales of your business. 

  • Lead time helps in the effective order management of your business.
  • Lead time also when communicated correctly will build good relations with suppliers.
  • Inventory lead time will also guide you about the demand estimation in the future.  

Ways to shorten the Lead Time in Inventory Management

It is no secret that inventory lead time affects all the activities of your business if not managed efficiently. However, as far as technology has been improving with each day, you could always use the help of an automated inventory management software like Inventooly, for the management of the inventory lead time of your business as well as the lead time in the supply chain also. 

In addition to this, there are some ways below, discussed briefly for the efficient management of the lead time of your business’s inventory; 


  • Hiring reliable suppliers:


It is the golden rule of the business that if your suppliers are happy and working in a time of need, you will not have to be worried anymore! In order to do so, make sure you hire the correct and expedient suppliers to carry out your orders at once when you have forwarded them. On the other hand, hiring inexperienced suppliers can cause delays in the shipment of your orders which in turn will increase the lead time of your inventory.


  • Automation in inventory management:


Using the latest and improved inventory management system could help you in managing the lead time of your business’s inventory as well. It can be understood in the way of introducing automated software for the effective management of your inventory so that the orders are correctly assembled, accepted, and forwarded to the suppliers at the right time. Which will in turn lower down the lead time of your inventory as well as the supply chain. Similarly, employing automated technologies in your business will reduce manual efforts so you can focus on the other tasks of your business as well.


  • Build good relations with the supplier:


It is very essential that your supplier is satisfied with you and not just working with you as a formality. He should be devoted to you and likewise, you should give him a full priority in each and every case. A good communication relationship with the supplier will help you a lot in decreasing the inventory lead time of your business. Keep him happy, offer him incentives and communicate as soon as the orders are received from the customers so that he may also respond quickly.


  • Communicate with your customers:


Surveying the market, and communicating with the customers as well as the general public could prove very helpful in maintaining the lead time of your inventory. As we all know that customers are the basis of any business’s success, happy customers lead to a prosperous business! Therefore, when you communicate with your audience devotedly and learn about their current as well as future needs, you can work accordingly and order those products. It will help you reduce the lead time also because your supplier will already be aware of what you are going to need in the future. 

Last but not least, using an inventory management software like Inventooly could assist you to a great extent in order to manage the inventory lead time of your business. You could further visit the site of this software to gather further information regarding its features and services. It helps you to manage the orders as well as it will prevent the overstocking situation in your business. In other words, Inventooly is a complete package if you want to smoothly run the inventory-related operations of your business.