What Are Long Lead Times Costing You?
In 1988 George Stalk coined the term ‘time-based competition’ in his Harvard Business Review article “Time—The Next Source of Competitive Advantage.” The premise of this strategy is that companies that meet the needs of their customers and respond to market changes faster have a competitive advantage in the market. More than 30 years later, the principles of time-based competition still hold true. It may be cliché, but time is money.
Many companies have implemented components of the time-based competition strategy, such as just-in-time production or other operational measures that reduce bottlenecks and eliminating time delays. However, the most competitive companies evaluate their entire supply chain to uncover challenges. Long lead times is one area that often creates challenges.
In his article, Stalk says that traditional manufacturing requires long lead times because various jobs or activities require the same resources. The traditional model relies on sales forecasts to assist with production planning. Forecasts are, by definition, guesses and, despite the best intentions, inevitably wrong, increasing lead times further. Unscheduled jobs are then expedited, pushing out the scheduled jobs. To compensate for lead time delays, companies often over stock inventory.
In the corrugated packaging industry, prospects and customers told us that their lead times were very long (averaging 8-weeks) or had been pushed out by previous vendors, particularly larger integrated suppliers. The lower volume pricing these types of packaging companies offer can be an enticement for some manufacturers. However, the spike in e-commerce over the past year and a half and an increased need for corrugated packaging have driven demand and impacted some packaging companies’ ability to deliver. For example, on their latest earnings calls, large integrated suppliers have discussed long backlogs and expressed challenges with determining when lead times will return to normal levels. So, what once seemed like a great deal, suddenly wasn’t.
The Cost of Long Lead Times
When you look at the concept of time-based competition, you can see that any lead-time delays in your supply chain reduce your competitiveness in the market. It creates a snowball effect with production downtime and packaging line inefficiencies, and you pass the delay on to your customers, where you risk customer attrition and brand devaluation. When you do ship, you may have to pay for expedited shipping to placate your customer.
To prevent this, increasing your inventory is an option, but there are costs associated with this, as well, such as the upfront investment in inventory, storage space, and inventory management costs. This leaves you with reduced cash flow and possible losses associated with obsolescence if not used and weakened boxes through improper storage (time, humidity). No matter how you view it, long lead times are impacting your bottom line.
The Axis Corrugated Solution
We understand the value of your time and strive to help you maintain your competitive advantage. Through operational efficiency and flexibility, we can provide you with faster lead times than the bigger guys. We reduce lead times through:
- Our streamlined job workflow, which minimizes production costs and speeds job processing
- Quick response to urgent orders and unusual packaging challenges
- Our enormous inventory of corrugated boards and materials, which enable us to fulfill short turnaround and specialty orders quickly
- Just-in-time delivery and next day turnarounds in many cases
- Inventory management, ensuring you always have the boxes that you need
- Improved logistics with our extensive fleet of trucks and dependable logistics partners
Being a privately held company, we take great pride in every business relationship and will work hard to earn your trust. Contact us today to learn how we can reduce your lead times.