Lead Time in logistics: what does it entail?

In the world of logistics, Lead Time is a crucial concept that can determine the success or failure of an operation. In this article, we will explore in detail what Lead Time is, the factors that affect it, its impact on the supply chain, and strategies to reduce it, including how appropriate shelving can benefit this process.

What is Lead Time?

Lead Time is the period that elapses from the start of a process until its completion. In logistics, this term can be applied to different contexts, such as production, which is the time needed to manufacture a product, or delivery, which is the time it takes for a product to reach the customer from the moment the order is placed.

There are several types of Lead Time, including:

Production LT: The time required to complete the manufacturing process of a product.
Delivery LT: The time that elapses from when an order is placed until the customer receives the product.
Procurement LT: The time it takes to receive the raw materials or components needed for production.

Calculating Lead Time

Calculating Lead Time is essential for efficiently planning and managing logistics. In some cases, Lead Time may include the product preparation time, but this is not always the case.

The basic formula for determining Lead Time is:

This calculation encompasses all the activities necessary to complete the order, from receiving the order to shipping the product. For example, if it is a product that is already in stock, Lead Time will only include the time needed to pack and ship the product. On the other hand, if it is a custom-made product, Lead Time will be longer and will take into account all stages of the manufacturing process.

Factors influencing Lead Time

Lead Time can be affected by a variety of factors, both internal and external. Understanding these factors is crucial for identifying areas for improvement and optimising the logistics process.

Internal factors:

Production processes: The efficiency of manufacturing and assembly processes can significantly influence Lead Time. Well-organised and automated processes tend to reduce the time needed to complete production.
Operational efficiency: A company's ability to manage its daily operations, including inventory management and inter-departmental coordination, can affect Lead Time.

External factors:

Suppliers: The reliability and speed of suppliers in delivering raw materials or components can impact Procurement Lead Time and, consequently, the total Lead Time.
Market conditions: Factors such as market demand, competition, and economic conditions can influence Lead Time. For example, a sudden increase in demand can extend production and delivery times.

Impact of Lead Time on the supply chain

Lead Time has a direct impact on the efficiency and costs of the supply chain. A long LT can result in higher storage costs, delivery delays, and lower customer satisfaction. Conversely, a short LT can improve operational efficiency, reduce costs, and increase a company's competitiveness.

Positive impact:

Cost reduction: Optimising LT can reduce storage and transportation costs, as products move more quickly through the supply chain.
Improved customer satisfaction: Delivering products quickly and efficiently can increase customer satisfaction and loyalty.

Negative impact:

Increased costs: A long LT can increase storage and inventory handling costs, as well as generate potential penalties for delivery delays.
Loss of competitiveness: Companies with long Lead Times may lose customers to competitors who offer faster delivery times.

Strategies to reduce Lead Time

Reducing LT is a priority for many companies seeking to improve their efficiency and competitiveness. Here are some effective strategies to achieve this:

Improving internal processes:

Production optimisation: Implementing lean manufacturing techniques and automation can significantly reduce manufacturing time.
Inventory management: Using real-time inventory management systems can help reduce waiting time for replenishing materials and products.

Collaboration with suppliers:

Strategic relationships: Establishing strong and strategic relationships with reliable suppliers can ensure a constant and rapid supply of raw materials and components.
Service contracts: Negotiating service contracts with suppliers that include delivery time clauses can help ensure shorter procurement times.

Use of technology and automation:

Process automation: Using automation technologies in warehouses and distribution centres can speed up order processing and inventory management.

Optimising storage and workflow

Optimising storage and workflow in warehouses is essential to reduce LT and improve operational efficiency. Here are some strategies and types of shelving that can significantly contribute to optimisation.

Quick access to products: Appropriate shelving allows quick and efficient access to products, reducing the time needed to locate and pick items.
Improved prganisation: A well-designed shelving system can improve warehouse organisation, facilitating inventory management and reducing product search time.
Increased storage capacity: Optimised shelving can increase warehouse storage capacity, allowing a greater quantity of products to be available for immediate shipment.

Industrial storage systems that benefit Lead Time

Appropriate shelving can play a crucial role in optimising LT by improving storage efficiency and workflow in warehouses. Here are some types of industrial shelving and how they can benefit Lead Time:

Types of industrial storage systems:

Adjustable Pallet Racking: Ideal for storing palletised products, it allows quick and easy access to products, reducing search and handling time.
Cantilever Racking: Perfect for storing long and bulky products, such as pipes and profiles, it facilitates access and handling of these materials.
Push-Back Racking (LIFO): Uses roller or gravity systems to move products to the front of the shelf, reducing picking time and improving inventory rotation.
Double-Deep Pallet Racking: Allows products to be stored in two rows, one behind the other, optimising space and reducing access time to the nearest products.
Drive-In Drive Through Racking: These racks allow high-density storage, as products are stored in depth. This reduces the space allocated to aisles and improves LT by facilitating quick access to large volumes of products.

Tools and technologies to optimise Lead Time

The adoption of advanced tools and technologies can be key to reducing LT and improving operational efficiency. Some of the most effective technologies include:

Supply Chain Management (SCM) Systems: These systems provide real-time visibility of the entire supply chain, enabling better planning and coordination.
Warehouse Automation: The use of robots and automated systems for picking and storing products can significantly speed up order processing.
Inventory Management Software: Tools that allow real-time management of inventory levels, preventing both overstocking and stockouts.
Tracking and Traceability Technology: Systems such as RFID and GPS that allow tracking of products at every stage of the logistics process, improving accuracy and reducing search times.
Data Analytics and Big Data: Using advanced analytics to predict demand and optimise logistics processes based on historical data and trends.

Conclusion

Understanding the factors that affect Lead Time and applying strategies to reduce it can result in substantial improvements in the supply chain. Additionally, the implementation of appropriate shelving can optimise storage and workflow, contributing to a reduction in delivery time.

At AR Racking, we know that, due to the increasingly demanding business environment, effectively managing LT is essential to maintaining competitiveness and meeting customer expectations.

Contact us, and we will advise you on the appropriate storage systems to ensure your operations reach their maximum potential.