Welcome back to the last BLOG on our series about the importance of delivery times!
Last week we learned the definition of the “replenishment lead time” (RLT), a crucial concept in the procurement world that could help your processes get so much more efficient if you know how to take advantage of it. We also briefly mentioned the factors that influence its calculation and some really important things and notions that you should keep in mind before diving into the topic.
If you have not read our previous BLOGs on the series you can find the first one here and the last one here. Make sure to check those out in order to get all the juicy information we have for you.
And without further ado, let's start with the RLT calculation, the benefits of thoroughly calculating it, and some bonus tips from us.
You already got to know the 5 key determinants for the RLT calculation, and you understand the first three (if you don't find them here). But what about the last two?
Your supplier’s production time
Transportation time: this one seems to be pretty straight forwards, but remember that traffic, changing weather, road repairs, accidents or even changing customs (#brexit) can potentially influence the time.
Goods receipt processing: think about your unloading process, the bureaucracy surrounding the reception and acceptance of the batches and whatever specific step applies to your business (e.g. incoming goods inspections). In any case, a well-organized and standardized process simplifies the logistics and has a positive effect on the RLT.
Replenishment lead time
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Great! Now you know why you would want to be on top of your supplier management, and you have the basic tools to know how to get it done. Let’s review some of the amazing benefits that your enterprise will experience once you start prioritizing these crucial part of procurement:
Lower needed inventory levels: because you actually trust that your new material will arrive when you predict it to, you won’t need as much safety inventory which off course means lower inventory costs.
Adjusted number of orders: different companies can benefit from different sourcing strategies when it comes to orders. You could benefit from ordering just a few times every once in a while, or you could prefer to have many smaller orders coming very often. You also might be working with materials that you rarely order. No matter which case fits your business, trusting your suppliers and the calculated RLT will allow you to adjust the orders however it's better stress-free.
Avoid extra/unexpected costs: add-on orders, extra shipping costs, extra working hours … you name it. An organized process will allow you to have everything under control and avoid all kinds of inconvenient last-minute expenditures.
More sales and better reputation: just like you will lose clients if you cannot deliver on time, being that one company that always manages to fulfill their commitments will create a great reputation for you. Combine that with all the above-mentioned, and you have a process that will positively impact all of your finances and sales!
*Bonus tips from our team:*
If you are reading this article you are probably interested in improving your company. And here at Statistance we make process optimization easy! So here are some extra things that you could do if you are committed to taking your processes to the next level:
Assess your supplier’s performance. Being aware of how efficient, trustworthy, punctual, eco-conscious … your suppliers are, will not only allow you to keep the best suppliers in your close circle and to work with the ones that could improve in a win-win situation to achieve and maintain high on-time delivery rates. It will also make your life easier when it's that time of the year, and you have to get your supplier assessment done. Stay lean!
Measure and control every step of your process: imagine calculating your RLT, and finding out how slow your internal processes are. Attempting to change one RLT as a whole is a very difficult task. But what if you could measure how much the unloading of the deliveries takes vs. the quality check. What if your employee Ralph is way faster than Thomas and could therefore help training Thomas? Would you be able to say right now if and why your night shift is faster than the day one? Keeping an eye on all of these details is no easy task, but it is definitely worth it.
Find a personalized and efficient tool: we are experiencing the fourth industrial revolution , and we can take advantage of all the benefits that digitization, automatization, and AI have to offer. You do not need 100 employees tracking every single movement and time anymore. Here is where experts (wink, wink) could help leverage all the benefits easier than ever.
So yes, being on top of your supplier management and achieving a higher On-Time Delivery percentage is going to take a bit of effort and investment at the beginning. But as you have seen, the results will be more than worth the effort.
We hope you enjoyed these BLOGs and found it useful. Stay tuned for more on this topic.
Contact us if you are interested in how to set up an easy-to-use monitoring tool for your suppliers performance or just want to check if the RLT that your ERP uses for planning is up-to-date.