Lead time measurement

[subpad]

Hi all,
i have a question over which lead time do we have to consider for calculating inventory calculation. here is the situation,

A manufacturer receive 1 order every week from the supplier. Actualy average supplier lead time(order lead time) is 8 weeks. if we are going to measure the safety stock for that particular item, do we have to consider lead time as 8 weeks or else 1 week(time between 2 deliveries)

in advance, thanks.

[Neo]

Originally Posted by subpad

Hi all,
i have a question over which lead time do we have to consider for calculating inventory calculation. here is the situation,

A manufacturer receive 1 order every week from the supplier. Actualy average supplier lead time(order lead time) is 8 weeks. if we are going to measure the safety stock for that particular item, do we have to consider lead time as 8 weeks or else 1 week(time between 2 deliveries)

in advance, thanks.

subpad,

Who is the customer/supplier?
Inventory Planning have to follow order lead time stipulated in the sales / purchase contract unless you have other supply arrangement or agreement with the supplier.

[subpad]

Neo,
thanks for your reply.

Its from raw material(polyester) supplier to us. As per contract, lead time required for the supplier to deliver an order is 8 weeks. from sale order, purchase dept will issue an averaage of 1 order(22T) per week. in the other way, we can say every week one full load will be received.

when i measured Std. deviation of lead time i observed its is 72 days. actually i have to plan the safety stock and also to review the EOQ.

[Starbucks Junkie]

Originally Posted by subpad

Neo,
thanks for your reply.

Its from raw material(polyester) supplier to us. As per contract, lead time required for the supplier to deliver an order is 8 weeks. from sale order, purchase dept will issue an averaage of 1 order(22T) per week. in the other way, we can say every week one full load will be received.

when i measured Std. deviation of lead time i observed its is 72 days. actually i have to plan the safety stock and also to review the EOQ.

Subpad,

How reliable is this supplier to deliver on the day required?

Is there ever a time when Purchasing would be interupted, and lead time would default to 8 weeks?

I am assuming that at any given time you have upto 8 weeks worth of purchase orders open with this supplier is this correct?

With the 22t that you purchase each week, do you use all this in your production, oe are you left with inventory each week?

SJ

[subpad]

Originally Posted by Starbucks Junkie

Subpad,

How reliable is this supplier to deliver on the day required?

Is there ever a time when Purchasing would be interupted, and lead time would default to 8 weeks?

I am assuming that at any given time you have upto 8 weeks worth of purchase orders open with this supplier is this correct?

With the 22t that you purchase each week, do you use all this in your production, oe are you left with inventory each week?

SJ

1.at present the supplier will send us one full truck of material(22t) and their delivery performance is 80- 85% (limits -7/0 days).average material consumption/week is 22.5 t and std. deviation of material consumption is 5.5t.

2.not completly 8 weeks. sometime, due to production delay, few order might get postponed ..but still i m sure 6-8 weeks PO remains open for the supplier.

3, the entire 22t will be stored and issued on day to day requirement.

[Starbucks Junkie]

Originally Posted by subpad

1.at present the supplier will send us one full truck of material(22t) and their delivery performance is 80- 85% (limits -7/0 days).average material consumption/week is 22.5 t and std. deviation of material consumption is 5.5t.

2.not completly 8 weeks. sometime, due to production delay, few order might get postponed ..but still i m sure 6-8 weeks PO remains open for the supplier.

3, the entire 22t will be stored and issued on day to day requirement.

Subpad,

Am I correct in my assumption from your answer to 1. above that the supplier delivers early but never late?

[subpad]

SJ,
for pt no 2 - we got poor forecasting tool. this is the main reason for maintaining open orders at supplier side.

do you think is there any other approach which may sort this present situation.

[Neo]

subpad,

Would like to have more information.

1. Is the polyester grade that you are using a standard grade from the manufacturer.
2. Is this a common grade available in the market
3. Is this a common grade used in your production and any possibility of this grade discontinue using.
4. You mention delivered 22mt weekly, is the manufacturer local or overseas supplier.
5. What is the accuracy level of your sales forecast

[Starbucks Junkie]

Originally Posted by subpad

SJ,
for pt no 2 - we got poor forecasting tool. this is the main reason for maintaining open orders at supplier side.

do you think is there any other approach which may sort this present situation.

Subpad,

Answer Neo's questions so we can have more information, with regards to forecasting I have a tool that may be able to help you.

How are you getting on with the Safety Stock tool?

[subpad]

Originally Posted by Neo

subpad,

Would like to have more information.

1. Is the polyester grade that you are using a standard grade from the manufacturer.
2. Is this a common grade available in the market
3. Is this a common grade used in your production and any possibility of this grade discontinue using.
4. You mention delivered 22mt weekly, is the manufacturer local or overseas supplier.
5. What is the accuracy level of your sales forecast

1.its not a standard type polyester. if the material is defective, the new material will take 5-7 days to reach us.
2.its not a common grade available in market. right now, we got only 2 suppliers approved to supply to all the plants in the world.
3. there is no chance for discontinuing the material. but R&D is working on improving the test method and specification parameters as well...
4. its located overseas to all the plant. right now i m woking to optimize the inventory level in northern europe region. for Northern europe region,the material is shipped from norway/france/finland to denmark.
5. accuracy of forecast will be 25- 40%