Impact of Lead-Times

Does lead-time influence how much inventory you maintain? What about order frequency? Safety stock? The reality is the relationship between lead-time, order frequency, and safety stock is different for every distributor.
What isn’t different, however, is the fact that higher-frequency orders and shorter lead-times positively influence how much total inventory and safety stock you need to carry, which, in turn, positively impacts your cash flow. So what are the real effects of reduced lead-times and how will they benefit you? Read more.

In most cases, Dot’s lead-time from order date to delivery date is significantly less than what you would experience when ordering direct from a manufacturer. (We talked about manufacturer minimums last time.) Shorter lead-times benefit you in the following ways:

  • Inventory turns – With shorter lead-times a company doesn’t have to carry as much selling inventory. This decreases costs and improves inventory turns.
  • Safety stock – Most procurement systems factor in lead-time when calculating how much safety stock a company must maintain. Less lead-time means a reduction in inventory needed for safety stock.
  • Service level – There will be times when a buyer has more demand than available inventory. Shorter lead-times allow the distributor/wholesaler to quickly recover from inventory deficits, improving their service level to customers.
  • Operators’ satisfaction – With shorter lead-times, a company is more easily and efficiently able to fulfill customers’ special requests, boosting overall customer satisfaction.

To take a closer look at how reduced lead-times can positively impact your business, contact your Dot Foods rep today for more information.

By Kevin Baum, Dot Foods Customer Marketing Manager

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