What strategies can you use to manage high lead time variability in logistics?

1 1. Forecast demand accurately

One of the main sources of lead time variability is the mismatch between demand and supply. If you overestimate demand, you may end up with excess inventory that increases your holding costs and wastes your resources. If you underestimate demand, you may face stockouts, backorders, lost sales, and unhappy customers. To avoid these scenarios, you need to forecast demand accurately and regularly, using historical data, market trends, customer feedback, and other relevant information. You also need to communicate your demand forecasts to your suppliers and partners, so that they can align their production and delivery schedules with your needs.

2 2. Diversify your supply sources

Another way to reduce lead time variability is to diversify your supply sources, especially if you rely on a single or a few suppliers for your critical inputs or products. By having multiple supply sources, you can mitigate the risk of disruptions or delays caused by supplier failures, capacity constraints, quality issues, or geopolitical events. You can also leverage your bargaining power and negotiate better terms and prices with your suppliers. However, diversifying your supply sources also entails higher coordination and monitoring costs, as well as potential quality and compatibility issues. Therefore, you need to evaluate the trade-offs and select the optimal number and mix of suppliers for your logistics needs.

3 3. Optimize your transportation modes and routes

Transportation is another major factor that affects lead time variability, as it involves the movement of goods or services across different locations and modes. To optimize your transportation modes and routes, you need to consider the cost, speed, reliability, flexibility, and environmental impact of each option. For example, air transportation is fast and reliable, but also expensive and carbon-intensive. Sea transportation is cheap and eco-friendly, but also slow and prone to congestion and weather disruptions. Road transportation is flexible and accessible, but also subject to traffic and regulatory issues. You may also use multimodal transportation, which combines two or more modes, to balance the advantages and disadvantages of each mode. Additionally, you need to plan your transportation routes carefully, avoiding unnecessary detours, bottlenecks, or hazards.

5 5. Adopt agile and lean principles

Agile and lean are two principles that you can adopt to improve your responsiveness and efficiency in dealing with lead time variability. Agile principle focuses on enhancing your flexibility and adaptability to changing customer needs and market conditions, by using short and iterative cycles, cross-functional teams, customer feedback, and continuous improvement. Lean principle focuses on eliminating waste and improving quality in your processes, by using value stream mapping, just-in-time production, pull systems, and error-proofing methods. By applying agile and lean principles, you can reduce your lead time, increase your customer satisfaction, lower your costs, and improve your productivity.

6 6. Monitor and evaluate your performance

Finally, you need to monitor and evaluate your performance in managing lead time variability, by using appropriate metrics and tools. Some of the metrics that you can use are lead time, lead time standard deviation, service level, fill rate, inventory turnover, and inventory carrying costs. You can also use tools such as dashboards, reports, analytics, and simulations to track, analyze, and visualize your performance data. By monitoring and evaluating your performance, you can identify your strengths and weaknesses, benchmark your performance against your competitors or industry standards, and take corrective or preventive actions to improve your results.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?