Supplying your customers with what they want, when they want it—and accomplishing that while spending as little money as possible…. That’s the goal of any optimized supply chain—from Fortune 50 multinational corporations to the standalone entrepreneur.
For small businesses with limited back office resources, what’s the best way to balance the need to supply customers on-time with spending as little money as possible?
The Supply Chain Challenge
On the one hand, a small business owner needs to create the best product possible (which takes money) and then make enough of those best products possible that it can sell (which takes even more money) and then make sure that the small business understands its customers’ demands and other logistics needs (which takes even more money).
Managing supply chains is a complex, Herculean task and large companies may have anywhere from a single supply chain pro to entire teams of pro’s working toward supply chain optimization. But small business owners, you can relax, we are here to help.
Most supply chain experts will describe a supply chain as a process that flows from your suppliers, through your company and then on to your customer. But supply chains flow in both directions. While your products typically flow from your suppliers to your customers, information and money flow in both directions. So if you’re optimizing your supply chain, you have to understand the balance of product, information, and money.
Lead Times, Lead Times, Lead Times!
One of the hardest questions for a supply chain to answer is “What is your lead time?” That’s not because the supply chain pro doesn’t know the lead time, it’s that the supply chain pro knows too much about the lead time. As a small business owner, you could probably talk forever if you were asked, “What can you tell me about your business?” You would go on and on about what inspired you to come up with the idea for your business, how you labored to get it up and running, how you spent endless hours designing your products and yadda yadda.
Supply chain pros are the same way about lead times. There is a delivery lead time your customers can expect when they order the product from you (which is usually what the question “What is your lead time?” is asking). But is that the time it takes to pick, pack and ship the product? Or is that the time it takes to physically ship the product out your door to your customer? And isn’t that dependent upon the mode of delivery, which the customer pays for? (Yes.)
But there’s also the lead time it takes your suppliers to deliver their products to you (and all of their associated supply chain pro’s caveats). And the manufacturing lead times at every step in the process. And the raw material and component suppliers’ lead times. Not to mention inspection, receiving and other lead times that can add 12 or 24 or 72 hours to your “lead time.”
Understanding and managing lead times is crucial to achieving balance in your supply chain. If you know that you can’t deliver an order to a customer for 6 weeks (because of the aggregate of all of those lead times mentioned above), then you know that you can’t accept a customer order unless they want it in six weeks.
And so, to keep the “accomplishing optimized supply chain by spending as little money as possible” side of your supply chain balance upright, you need to understand, that yes — you can improve lead times by spending more money on express shipping and paying expedite fees to move products from point A to point B or paying overtime to push products through inspection. But that tips the scales.
The trick is to get your customers what they want, when they want it—and spend as little money as possible getting that done. And that means lead time management.
Is that it? Is that all it takes to find the balance in your small business supply chain?
No. And yes. By understanding, managing and optimizing your company’s lead times, you can keep costs contained, receive shipments from your suppliers on time, manage production and inventories and deliver your customers what they want. It really is that simple. And that difficult, at the same time.