Your production line is running smoothly, and your products are flying off the shelves at a pace that makes you happy. Things are going to plan when you suddenly get an urgent memo followed by a call frantic call from your production head – you are suddenly short on raw materials to run the next round of production. You suggest the simplest of all solutions, you order more. But it takes the vendor three weeks to deliver. What would you do?
This is an oversimplification of what lead time essentially is. Lead times are used every day to decide when to place orders and managing it is essential for organizing all the processes involved in your supply chain. Lead time has even crept up in the weekly grocery purchase in households!
An error of judgement of lead time can potentially cause loss of sales and idle inventory. The causes for such a situation range from partner ineffectiveness causing longer delivery schedules, time spent at incorrect location or even the shipment being delayed for reasons within and beyond the partner’s control. What this takes away from your organization is the actual sales that you would have been able to make had your product been where the consumer needs it, resulting in a competitor benefitting from a lacuna in your process.
Traditionally, companies have invested and set up teams to plan the sourcing and supply of their products. This traditional process has been based on hiring people with the right skillset to forecast and order accordingly. The Just-in-Time (JIT) approach to production pioneered by Toyota was aimed at alleviating the possibility of having too much or too little inventory. The idea behind JIT is to have a constantly running system where parts are delivered as and when needed by the production line, which in turn produces products as and when needed. The problem with taking this approach usually is in getting a credible buy-in from the supplier to support the system and the volume to necessitate the system.
The MRP (Material Resource Planning) systems have come a long way since the start. The current ERP (Enterprise Resource Planning) systems deployed by companies have matured to the point that they are able to provide lead times and assist with resource planning. Industry leaders invest significant sums of money to ensure that they can get their customers not just the products but also the spares. It isn’t surprising that customer satisfaction is tied directly with availability of products and the company’s ability to provide the necessary services. The success of such a model entails having to order the right product from the right producer chosen from a suite of producers.
We need to be cognizant of the fact that these companies have factories spread across multiple locations with suppliers that are also spread out. These companies rely not only on this complex network they have developed but also their investment in hiring and training talent that can help them achieve such business goals.
This brings us to the issue at hand, which is the inability of companies to be dynamic enough with the current scenario.
We have moved into a world where every company is trying to pursue an omnichannel model of consumer engagement. This has created a situation where orders not only come from multiple channels, they are consistently changing based on pricing and promotion strategies. Such a situation places substantial strain on the company’s resources to constantly keep engaged in managing exceptions to ensure that their products were available on the shelfs. We all saw the effects from the coronavirus-induced lockdowns and how it was next to impossible for companies to keep up with the demand, which was always changing. New sources of sales that previously did not exist have sprung up causing demand to move very unpredictably. Adding more complexity to the mix was the fact that demand for specific products such as hand sanitizers went through the roof, a really tall roof at that. The companies that were able to benefit from this demand spike were the ones that were agile, had the right systems in place and had experienced professionals to guide them.
What’s in it for me?
Now if you are reading this and wondering all of this sounds great but setting up such a system costs significant investment such as hiring supply chain experts, investment in technology systems and partners. Is this expenditure even warranted in the current tough economic scenario? What companies have quickly realized in situations such as the current pandemic is that their business processes cannot exist in a vacuum that does not take into account external factors that affect these lead times. Depending solely on historic data to direct your operations will leave you grossly unprepared for unforeseen circumstances, leading to the need to make costly decisions.
Our solution of helping companies get around the cost involved in such an endeavor is to help companies go technology first. By going technology first, you are able to reduce your investment and at the same time, accelerate your growth.
Bottom line benefit
By allowing a comprehensive Data Science based solution to help predict lead times, there are significant savings in the form of reduced safety stock. Layering the various data streams such as pending orders, order history etc., we are able to provide dynamic suggestions that help businesses take rapid decisions and deploy their strategy across the value chain quickly. This approach frees up capital for you to continue to invest in various other growth projects. It also helps companies to ensure that there is a lower possibility of a stock-out. By ensuring there is no stock-out, the resources that are spend on marketing the products can provide maximum benefit.
Another benefit of employing lead time analytics is the reduction of manual effort required in exception management i.e. re-planning. Not only does this reduce everyone’s stress levels that grow owing to the constant running around to ensure that delivery deadlines are met, but also your people to be more effective with their time to meet other daily commitments. There is also reduced effort in the case of purchase order management as the suggested lead times are more accurate. These benefits are quickly realized by companies that have to source or provide deliveries to multiple factories or locations. There no more is a need to manually calculate and identify the best partner for that specific order – your data is doing that job for you, backed by statistical analysis. Purchase order management will provide suggestions based on analytics to identify the best supplier to move forward with. The suggested lead time will be predicted with a larger degree of accuracy and at a granular level due to access to multiple data streams that previously were taken into account manually.
Human Capital Benefit
Of course, we saved the greatest benefit for the last, which is cost of human capital. Our approach of generating a lead time uses factors that a seasoned supply chain expert would take into account when placing orders. This helps us alleviate the need to hire experienced personnel that would result in a fairly high monetary outgo. By taking into account external factors ranging from weather and geo-political situation to internal factors such as open orders and recent purchases, we help you get high quality lead time analysis that’s provided by veterans with decades of experience in the industry and we provide that to you at a fraction of the cost.
We want you to think a step further. Is it possible for you to ensure that your marketing spend is maximized? We are able to provide a granular view of your lead times to help you ensure that the right amount of stock is available in the stores to get the maximum bang out of the promotional buck. Companies need to be dynamic and make tweaks in demand planning based on the sales feedback. Our solution will provide you with intelligent suggestions that are based on external and internal factors layered on top of the lead times.
We’ll do all this to help you spend less time dealing with frivolous changes such as exception management and instead, spend more time making decision that are truly impactful. We have built a dynamic system that can work for raw materials as well as production. By integrating outside data streams to provide the right lead times, we want to enable you to focus on growing your business and less on partner management. So instead of the question “Do you need it?” the question you should be asking is “How you will be able to leverage all these benefits for your company’s growth?”
Anirban is a veteran in the IT space with 20+ years of experience in working with customers and providing them solutions and products that meet their needs. His current passion is to enable enterprises to derive value out of their data. His idea of relaxation is reading books or catching up with the news from the world of football.