What is Supplier Lead Time?
Supplier lead time is the time it takes for a product to travel from the supplier/factory to the warehouse.
How to calculate Supplier Lead Time?
Supplier Lead Time = (Time of product receipt - Time of product order) / Total number of orders
What is the business impact of Supplier Lead Time?
Shorter supplier lead times reduce stockouts, improve inventory turnover, increase overall warehouse efficiency, and improves customer satisfaction.
Industry benchmark for Supplier Lead Time
The industry benchmark for supplier lead times varies depending on the industry, product type, and supplier location. In general, lead times can range from a few days to several months.
- Automotive industry - 4-6 weeks
- Consumer electronics - 4-8 weeks
- Fashion industry - 4-6 weeks
- Pharmaceuticals - 6-12 months
How to improve Supplier Lead Time?
- Streamline communication with suppliers.
- Optimize transportation routes for inbound shipments.
- Build an optimal supply chain network with accessible suppliers.
- Improve supply chain risk planning. For example, reduce dependency on one supplier, one country, or one trade route to minimize risk.
- Improve demand planning and inventory forecasting to avoid risking stockouts and backorders.