As part of the inventory replenishment process, you must estimate the inventory lead time (the time that it takes from when you place a PO to the time that your receive it and put it in a bin ready for sale).
The lead times impact your order timing as well as the quantity which you order. Really for inventory planning and replenishment purposes in the majority of cases, all you need is a lead time estimate or average to do a pretty good job.
However, there are times that a vendor may be very unreliable which can be the cause of stockouts for you if they are frequently later delivering product to you than the quoted inventory lead time than they have given you.
Benefits of Inventory Lead Time + Replenishment Lead Time Management
Inventory Lead Time Forecasting calculates and forecasts your lead times by SKU, and also calculates the lead time variance. Thrive’s inventory lead time management has several benefits:
- You are using an accurate estimate of the actual lead time rather than depending on the quoted lead time. This will improve your service levels especially for your more irregular vendors
- Thrive’s safety stock calculations will be more accurate because it assumes that the lead times used are accurate. If the actual lead times are greater than the quoted lead times, you may not carry enough safety stock.
- Lead time variation can also be used to supplement your safety stock in addition to the demand variance.
- Providing visibility of the actual lead time history for each SKU to the buyers is very helpful to them in seeing if they should bump up an order quantity or not.