Why Lead Times Are Nearly Always Underappreciated

Accurately estimating future lead times is critical for accurately estimating the amount of inventory needed to fulfill future demand. However, it is a fundamental factor that is often overlooked by companies, with a far greater importance being placed on forecasting.

On this episode of LokadTV, we explain why future lead times are critical for a strong business performance and why, if you don’t take them seriously, you might as well use a random number generator for your forecasts. We talk to Joannes Vermorel, CEO of Lokad, and get his views on why many of his customers have had a rather inexperienced approach to their lead times.

Lead Time is an important factor for customer satisfaction. It can be summarised as the amount of time between process initiation and completion. But despite its apparent simplicity, often it is not so simple to actually record lead times, with the metrics frequently being confused by companies. The devil is in the details, demanding a truly in-depth knowledge of the intricacies of your supply chain.

In this episode, we explore why there is uncertainty surrounding something that should be simple and straightforward and we try to comprehend how we can have more confidence in the lead times used to make purchase decisions.

To wrap things up, we try and understand how to account for the variation in lead times between different transportation methods and how you can keep on top of the shear number of variables that need to be taken in to account.

Timestamps

00:08 Introduction

00:34 Why are we talking about something that seems so simplistic?

02:47 Approaching lead times can be complex. What are the first steps someone should take to improve their lead times?

05:23 What are the key factors that contribute to variability in lead times?

07:01 So you’re saying that you should break down lead times into individual parts. Does this not add a new layer of complexity?

08:21 With these added complexities, how can you have confidence in your lead time predictions?

10:03 What’s a real world example of a customer improving their lead times and how did that affect their business processes?

12:37 How can unexpected delays occur in lead times? Shouldn’t a business have a better understanding of things?