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Effectively manage lead time

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Time is a critical element in service delivery and needs to be effectively managed. It is a finite resource like all other inputs of production and its control has an impact on the quality of the service delivered to the customer.

PURCHASING & SUPPLY: NYASHA CHIZU

The effectiveness of measures established by organisations to manage time are evaluated by considering the time supplies are delivered for the organisations to perform necessary activities to satisfy their own customers.

The measure of how delivery schedules are met reflect on how supplier lead time is monitored and how the procurement process that resulted in the contract was managed.

Lead time in general refers to the time between when a need in the organisation has been identified and the time that need is satisfied. Lead time is, therefore, in two parts.

There is internal lead time that reflects the effectiveness and the level of bureaucracy in an organisation to approve the need identified, approach the market and conclude a contract with the supplier.

On the other hand, external lead time refers to the time that suppliers take to deliver the product or service after award of the contract.

It is, therefore, necessary to manage time since many philosophers relate time to money and take a step further to illustrate that the speed at, which needs are satisfied translate to profits.

Timing in procurement is initiated when a needs are planned. Procurement planning is a critical element of supply chain management. A procurement plan is the basis of a procurement budget and is a critical tool for managing procurement activities, production schedules and scheduling customer deliveries.

An effective procurement plan answers the questions — what needs to be bought; how much is required; when are the items required; when should the procurement start; and what is the effective procurement method?

In managing time in a procurement process, a review of the procurement plan would assist to establish whether the procurement manager is effectively managing time.

During the planning stage, the procurement manager must plan the start time of a procurement process in consideration of the necessary bureaucracy, systems and standards provided in any organisation.

Such a review can extract information as to whether the manager fully appreciates the internal dynamics of an organisations or the market environment.

If deliveries are always coming late, it’s a reflection of poor planning of the start time that would have ordinarily failed to capture the market lead times appropriately.

Data on procurement start dates planned need to be captured to assess whether actual deliveries are on time or delayed.

This assessment would measure if the procurement manager considered effectively the minimum amount of time required to approve a purchase requisition and the minimum time allowed to approach the market by the organisation in the case where procurement thresholds are used to determine the minimum times suppliers are given to submit responses.

When planning the start time of procurement, there is generally a consideration of the average time the market would take to satisfy requirements.

This is normally in consideration of the likely production method for every procurement. There are generally three production methods that are used in theory. There is mass production, where products are pushed in stock in anticipation of consumptions and stock is always available ex-stock.

Others, with a range of products, may adopt batch production that pushes in batches stock to the market at specific intervals.

Some markets adopt job production, where the customer requirements are produced on demand. In all these three scenarios, the procurement manager must understand the production methods employed by their suppliers to effectively plan the procurement start date that take into account the suppliers’ lead time in relation to the production method.

A contract is then awarded on the terms and conditions agreed by the parties. A procuring entity normally demands the minimum delivery period at the time of inviting quotations.

Suppliers respond with their delivery periods that may in some cases be counter offers that would be subject for acceptance or rejection.

The actual delivery time agreed by the suppliers would need to be effectively monitored and under proper management, late delivery would attract penalties. Those accepted delivery periods would need to be reviewed in line with the overall project plan to assess whether the organisation is effective in managing time.

A review of the time that was planned during the lead time of every procurement is only effective when the organisation has mechanism to collect the performance data since you can only control what you can measure.

Nyasha Chizu is a fellow of the Chartered Institute of Procurement and Supply writing in his personal capacity. Feedback: nya.chizu@gmail.com Skype: nyasha.chizu

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