Question One Lead-time in supply chain contextLead-time in supply chain management is the time taken when the customer places his order to the time the products or the goods are delivered the customer. Lead time can vary from several hours to many months. Lead-time in publishing is the amount of time that a journalist gets the writing assignment and submission of the written. In manufacturing, in the absence of work in progress inventory or finished goods; it is the time it takes in manufacturing the order without any inventory apart from raw materials.
Lead time is the time from when the process starts until when it is completed (Chen, 2000, p. 437). For retailers, it describes the time they places the order to the manufacturers until when the ordered goods are delivered to the premises of the retailer. For a manufacturing company, lead time will involve the time for supplies to arrive from suppliers, the processing time and the moment of delivering of the good to the customer. When a retailer orders goods from the manufacturer, the manufacturer produces the goods and delivers them to the retailer according to the specifications.
The manufacturer’s lead time is the time it takes to secure supplies, process the goods, and deliver the goods to the customer (Movahedi, Lavassani & Kumar, 2009). On the other hand, lead time of the retailer is the time when the retailer places the order to the manufacturer until when he received the ordered goods as specified. Desire for lead-time reductions in the supply chain by companiesValue creation is a result of successful supply chain management. Lead time reduction is one of the goals that are at by a company that what to realize value creation in supply chain management.
Accomplishment of value creation means that there is efficiency in production and shipment of products to the customer in the market. Companies desire to reduce lead time in supply chain with the target of reducing costs (Lee, 2010, p. 7). When the lead time is longer it means that cost of holding raw materials or unfinished products within the warehouses of the company will automatically increase. Expanses that accrue owing to holding work in progress, inventory or finished goods bring down the profit of the company.
For companies which want to increase its profit, there should be an aim of reducing the lead time. Goods have to be delivered in the market on time to pave way for other goods to be manufactured. Companies that want to increase their turnover ratio aim at reducing lead time. Reduction in lead time indicates efficiency in production of the company processes. The chances or risks of products getting spoilt while still in the hands of the manufacturer are great when the lead time is long.
In order to reduce expenses and provisions for unnecessary contingencies, companies strive to ensure that their lead time is shorter (Cox, 1999). Short lead time indicate efficiency in production which leads to high profit margins being realized. A competitive advantage is realized when the company reduces its lead time.