Imagine you are trying to choose between two new pairs of shoes. One pair will be delivered within 2 days and the other pair will be delivered to her within a week. Style-wise, I prefer the shoes that will arrive in a week, but I want to wear my new shoes to dinner this weekend. You decide to choose shoes that will arrive quickly.
Even though the second shop had a great product, the long order lead time (time between order and delivery) was causing sales to drop. Here’s how to reduce order lead times to compete with other e-commerce sites and avoid lost sales.
What is order lead time?
Order placement lead time (POLT) is the interval between when a company places an order and when the supplier delivers that order. For example, if you place an order with a supplier on his 1st of the month and the item arrives on his 14th of the month, the lead time for the order will be his 13th.
Order lead times can vary widely due to unpredictable factors such as raw material shortages and supply chain disruptions. With a little preparation, these eventualities can be mitigated. Understanding the basics of lead time is essential to timely achieving promised delivery dates and meeting customer demand.
Order lead time types
There are several types of order lead times.
- Actual lead time: Actual lead time is the number of days from when an order is placed until it is completed.
- Requested order lead time: The requested order lead is the period between the customer’s order and the expected delivery date.
- Lead time for confirmed orders: Confirmed order lead time is the number of days between the purchase order and the confirmed delivery date.
- Customer lead time: Customer lead time is the number of days between a shopper placing an order and receiving that order (ideally by the promised delivery date).
- Material lead time: Material lead time is the interval between when supplies are ordered and when they are ready for production.
- Production lead time: Production lead time is the total time it takes for a product to be produced.
Factors affecting purchase order lead time
From the time you click to the time it arrives at your door, several factors affect the lead time for your order.
Availability of raw materials
Supply shortages can lengthen a product’s material lead time, the time between when a manufacturer orders raw materials and when they arrive ready for the manufacturing process. To keep the daylight out of your production process, maintain open communication with your manufacturers and ask them to alert you when raw material inventory levels are running low.
use inventory management software Maintain up-to-date records and enhance your company’s ability to keep production lead times and overall lead times on schedule. Always maintain safety stock (backup stock on hand) in case of an emergency.
delivery time
Ordering goods from a foreign company may save on labor costs, but it can also complicate shipping and lengthen lead times. Domestic suppliers are one of the solutions.
Another option is to automate logistics and warehouse management to ensure processes such as packaging and handling run smoothly and reduce the time and errors associated with manual handling and processing.
supply chain management
goal of supply chain management It is about seamlessly coordinating e-commerce logistics and managing the flow of goods from raw material sourcing to product delivery.Strategies under this umbrella include: procurement, Inventory control, Order processing, Warehousingand logistics. Optimizing all these operations can increase profits and keep lead times competitive.
Also consider seasonality. Ask yourself, is now the perfect time to launch a new clothing line, or is every T-shirt manufacturer ordering cotton for fall fashion this month? Making demands on suppliers during peak season, when orders are already pouring in, can cause production backlogs.Instead, please use Demand forecast You need to plan ahead and order enough inventory in advance.
external factors
To be honest, these are tough times for shipping. Supply chain disruptions join a never-ending list of external factors that affect how quickly products reach their final destination. Natural disasters such as fires and floods, labor unrest, labor shortages, and human error are just some of the obstacles to meeting customer demand.Reduce external influences supply chain issues Hold more safety stock (if possible) and diversify your suppliers.
How to improve purchase order lead times
Here are some tips to improve order lead times and, as a result, customer satisfaction.
shop from local suppliers
Look for local suppliers or manufacturers whenever possible to avoid delivery delays and reduce lead times. Waiting for shipments from overseas increases costs and increases worker idle time.
Prioritize customer service from suppliers
When adding a new supplier, the primary deciding factor is the ease of contacting that supplier. In other words, know who you’re working with, says Vicky Pasche, co-founder of her body-inclusive fashion label Dapper Boi. “Connect with people. Who in your industry can you talk to?” says Vicki Shopify Master podcast.
In her case, it took six months to find the right manufacturer. “It was a ton of research, but the manufacturer was very helpful in showing me the different brands and types of fabrics I wanted to use. It was a very immersive learning experience,” says Vicki.
It’s worth the effort: A Good relationship with suppliers Reduce unpredictable slowdowns.
Understand supply chain logistics infrastructure
Understanding supply chain management Best practices can help your supply chain function properly. Each shipping method, such as USPS, Freight, Sea Freight, and Air Freight, has a time and place. Explore available distribution networks to find the shortest path to your customers.
Learn demand forecasting
Demand forecasting is the supply chain’s weather forecaster and a forecasting method for understanding customer demand. Use past sales to create a database of information to share with your suppliers and warehouse team. Using this information, you can implement automation software, for example, automatic ordering to avoid delays in raw materials.
Frequently asked questions about order lead times
What is order lead time?
Order Placement Lead Time (POLT) is the time between when a manufacturer or manufacturer places an order with a supplier and when that order arrives for assembly.
How do you calculate order lead time?
To calculate the actual order lead time, subtract the delivery date from the order date. The answer is usually measured in days.
How do you reduce order lead time?
In many ways, shortening your lead time and increasing your customer’s lead time will yield the more profitable results you desire. To reduce order lead times, build good working relationships with trusted suppliers, consider supply chain management best practices, prioritize supply chain efficiency by ordering from local companies, and Automate manual processes.
