Calculating lead times: why is it so difficult?
So understanding end-to-end lead times is a necessary step towards supply chain efficiency, but how do you calculate lead times? With some difficulty, is the usual answer.
Supply chains are multifaceted, highly complex systems consisting of multiple processes across sourcing, procurement, production, transportation, warehousing, order management, and more.
These processes are managed by people in different teams, in different places, using different systems — so supply chain processes are decoupled, meaning there is no direct event-to-event or event-object relationship.
Say you’re a company that sells caps for toothpaste tubes. Your customers need their orders in a week, but it takes you two weeks to source materials and manufacture the caps. In order to avoid stock-outs (and disgruntled customers, because you’ve failed to meet your all-important service levels), you need to keep some inventory on hand to plug any gaps. Enough — but not too much — excess.
Due to the decoupled nature of the toothpaste tube supply chain, the dependent processes cannot be captured end-to-end using traditional process mining techniques, which look at single cases, such as purchase orders and production orders — instead of objects (more on those shortly). As a result, you can’t achieve end-to-end visibility, you can’t understand your end-to-end lead times, and you can’t strike the right balance in inventory management.