In This Episode…
We discuss reducing lead times from suppliers in China or other countries in Asia like Vietnam.
Lead times are the time you can expect the process of getting your order from a supplier to take, from placing the purchase order, for the supplier to obtain and check materials, manufacture the goods, and then ship them to you. There are many separate elements involved here on the supply chain and manufacturing sides and so plenty of opportunities to make improvements and reduce lead times.
Many importers out there would like to get their orders faster than before, so let’s get started…
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✅ Introduction & chat about the COVID-19 situation in South China which does have a hand in delayed shipments and increased lead times.
✅ Why should importers be striving to reduce lead times? The longer your lead times, the more you need to rely on forecasts, and the higher your risks of making the wrong ‘bet.’ This could mean having too much stock of an item you can’t sell or being left short of a hot-selling product.
Covid is very relevant here as it used to be easier to forecast accurately, but now with all of the disruption since 2020, it’s a lot more difficult to guarantee continuity of supply in such an unstable environment.
✅ Another reason why… If you have 2 sources of a product where one is very far from you and the other local, let’s use China and Poland as examples for a buyer in the UK, you’ll have a long lead time of around 60 days from China, for example. However, from your Polish supplier, you’ll get a far lower lead time which reduces your need to keep inventory and its associated costs. So finding a balance between Chinese or Asian suppliers for some items that you can wait for and local suppliers for more urgent items is beneficial.
This is especially important in the fashion business, as the season simply won’t give you enough time to reorder hot sellers and wait for them to be delivered.
✅ Some of the common causes of lengthy lead times.
- Where the manufacturing is taking place. This includes both your supplier and sub-suppliers of key components in particular. If they’re in different countries, such as China and Vietnam, this has an effect due to transport time between the countries.
- The time it takes for the supplier to start production (your order might be in a queue).
- Your order size.
- Incoming and outgoing QC checks on materials/components and products.
- Customs delays or time spent waiting to get a container (especially relevant these days in summer ’21).
- The shipping time itself where the products are in transit on the water or in the air.
And these might also cause delays…
- Poor communication with the supplier.
- Processing time is affected by how busy they are or their systems and efficiency.
- How much inventory they keep.
- Having a large number of components from different sub-suppliers causes inconsistent lead times, as not every sub-supplier will be able to deliver on time.
All of these elements together can add up to as much as 80 days to get from purchase order to your warehouse in the West from a Chinese or Asian manufacturer! Compare this with a more local supplier…the time will be slashed. Also, if there are problems you can return the products, whereas sending a consignment back to China or Vietnam would take too long to be practical in most cases (and may not even be possible).
If you use a supplier in a free trade zone, shipping your defective goods there for repair or rework will be a lot more straightforward as no official import is required, but there is still the waiting time for shipping to contend with.
✅ Renaud’s key strategies for reducing lead times.
- Assess which products are stable in sales and can be made in Asia (therefore, you can accept longer lead times for them). For others that are more urgent and time-sensitive, you can look into structuring your supply chain which allows you to produce them closer to home to reduce lead times.
- Analyse how to structure your supply chain and work with your suppliers. Break down the steps required to make your products and work with suppliers to assure they have the necessary components or materials in stock to enable them to change course and produce in-demand products quickly.
- If you’re a key customer of a supplier you can meet with your manufacturer and examine their planning systems to reduce interruptions and increase efficiency (as it affects their capacity when interrupted).
- Work on reducing batch sizes. Many purchasers believe that a larger order for a reduced cost is best, but the size of the order can increase lead times and, in any case, there are additional costs involved in QC checks, shipping, and storage among other things.
- Reduce the working process inventory. Minimize the ‘just in case, I’ll push everything to the next process’ mindset. Look out for if the supplier is padding inventory ‘just in case’ there are quality problems, or increasing estimated lead times ‘just in case’ there’s a problem. These situations need to be eliminated. Strive to become ‘lean.’
- Investigate why the supplier is so worried about quality and machines going down that they pad lead times. Can processes be improved or preventive maintenance be implemented?
- Are they managing their staff well, or do they push overtime on them and end up with a high turnover? Losing their best staff isn’t sustainable and will affect lead times negatively.
- Improve forecasting by working closely with your key customers to be able to know earlier whether you need to reorder or not. This can be shared with suppliers and helps them to cater to your needs more efficiently without being unprepared.
✅ The role of vetting suitable suppliers in obtaining good lead times. You’ll look at their planning system, if they use production and material control modules in an ERP, for example. Look for bottlenecks in their internal operations (when calculating their maximum capacity). Are they reducing working process inventory? These can be checked in a factory audit if the auditor has been tasked with doing so.
- How to reduce lead times
- Better sales forecasts and more flexible supply chains
- Production in large batches in China: top 5 problems
- Manufacturing Issues Communication Problems With Chinese Suppliers Cause And Their Solutions
- IFE (Initial Factory Evaluation) Audit
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