In an article that impacted the InforChannel portal, Marcos Roig, Commercial Manager at Mercadoe, addresses the key points that must be taken into account when analyzing and calculating lead time in procurement.
Knowing how to calculate lead time in procurement is a practice that can bring several benefits both to company operations and customer service teams. Knowing how to analyze processes, understand gaps and keep the whole product cycle under control, until delivery time to the customer, is extremely beneficial, so an effective strategic planning can occur in the company.
However, before companies can calculate lead time correctly, some assumptions must be made. According to Marcos Roig, “first of all, you must create a list with the requested products – that is, a document with all the raw materials purchased to manufacture each item that will be sold. This table should also contain repair or installation services, if such procedures will be needed for product completion”. In other words, you must discriminate, in a table, all required supplies and services to make the end product.
“You should know the required procurement period of each listed item” – Marcos Roig
Another important point for Mr. Roig, which directly affects lead time calculation in procurement, is knowing the required period to purchase each listed item, always in an organized and strategic manner. According to Mr. Roig, “an ordered item may take about 5 days or more to be delivered. You should calculate a safety margin of a few days, taking into account unpredictable transport events”.
It’s worth being attentive also to the work mode of each supplier, as some of them operate in business days only. In this case, you can’t include weekends in your planning. You must also remember to record waiting time accurately, until the arrival of inputs.
In this scenario, all records and analyses can make a difference. You should understand the required time for the company’s employees to create a batch of a particular product, upon receipt of the essential supplies for its production. Then map unforeseen events, possible delays, maintenance activities and – if you are a service provider – the time schedule of your employees.
Finally, Mr. Roig alerts that you shouldn’t forget to add, to the period required to manufacture a product or complete a job, the required waiting time of inputs.
This entire flowchart, from the time it takes to receive any ordered items to the manufacturing period of the end product, represents the lead time to make an item available for delivery to the customer.
Read also about the key influences of lead time on procurement, in an article written by Alexandre Moreno, Director of Services at Mercadoe.