The US distribution arm of a large Japanese manufacturer was having a delivery problem.  They could not seem to consistently meet the delivery dates they had promised their customers.

To understand the causes of the problem, we performed a business process workshop to map out the process flow from plant release through the ports and through the US distribution warehouses to the end customer.  As we mapped out the process, we asked what the lead times were for each of the legs in the process.  Estimates were easily available for each of the legs and totaled about 17 days from plant to primary distribution center.

So this didn’t seem to be the source of the late delivery problem.  But we were suspicious  as there was no real hard data on the lead times, just estimates.   We had the client collect data on the next few receipts regarding date of manufacture.  Sure enough the lead times were more like 24 days from Japan to the US.

These seven extra days were just enough to drive a lot of late deliveries and amounted to about $20 million in extra inventory carried on the balance sheet.

Lead times are important and too many companies are using estimates when they should be relying on hard data.

Make sure you don’t make this mistake.

This entry was posted on Wednesday, August 8th, 2007 at 8:44 am and is filed under Inventory Management Best Practices. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.