How Do I Shorten Lead Times?

Many small businesses rely on other small suppliers when they start. As these companies grow, they sometimes overwhelm their suppliers. In this situation the supplier’s lead times may increase limiting your growth.

In general there are four approaches to shortening lead times; encourage your supplier to increase capacity, find another supplier to handle the increase, find a new supplier with larger capacity, or bring the work in-house. Each of these strategies has issues and advantages.

Your supplier may want to grow with you. That’s great if they do, but they may have to find additional capital to expand. There are sometimes other issues that are non-monetary like getting the permits to expand, buying new real estate, or hiring additional employees. Encouraging the supplier to add a shift is usually the easiest way to achieve a short term increase in supply.

You may want to find a second supply for several reasons. One, to help with growth, but also a second supplier will make you less susceptible to work stoppage disasters that may happen to one supplier. In industries like the automotive industry where there are penalties for late delivery you might want to consider adding new suppliers. The downsides are 1) you may not get additional cost reductions from a supplier if you split the business 2) you need to ensure that each supplier has exactly the same revisions of drawings, and 3) even with this control you will complicate your inventory control.

If you select the strategy of finding a supplier with much greater capacity you can get the benefits of volume pricing and ease of managing fewer suppliers, but single supplier issues still remain. You might ask the larger supplier to address these concerns as they may have multiple production locations that can be used in the event of a local disaster.

By bringing the production of outsourced parts in-house, you can put resources where they need to be to keep production growing. And, if this expertise is critical to your product you may well consider doing this. However, if this is not a critical part of your IP you may just spend time and money in places that will not grow your business if you had spent them elsewhere.

If you would like anyone to discuss your lead time shortening options, contact the Kentucky Innovation Network at our website and follow us on Twitter