Lead Time is King
Over the years I have seen lead time be the most important factor in many product decisions. Often architects, general contractors or project owners that were adamant about keeping to the specifications, finishes and styles will quickly make changes when product availability is an issue. Even price becomes secondary when lead times become critical. I don’t know how many times after spending months negotiating price, it was quickly forgotten when I got the call, “How fast can we get this?”
As businesses continue to open it is important that you don’t take lead times for granted. Suppliers are facing the same issues we all are because of COVID-19, working to make their businesses safe for their employees. Some are having to cut back on staff and supply chains are changing as some products become in high demand. You want to make sure that you are checking with your suppliers to see if the lead times you are accustomed to have changed. This could be a good time to reach out and expand your supply base to be able get the products you need, when you need them.
It is also important to communicate to your customers any supply chain issues as quickly as you can. This is an opportunity for you to show them that you are a solutions company by offering alternatives. Make sure that you present alternatives as comparable or equal products. Take the time to include spec sheets and drawings that will support this. By offering alternatives you may not be successful in convincing your customer to make a product change, but the effort will give them something to offer to their customers, making them part of the decision to accept extended lead times.
Long distance and expedited freight always comes into play when lead times become critical. It could make sense to use a supplier that will add freight cost to the product if this will reduce the lead time. You want to make sure that you include any freight costs in your quote. Again, it makes sense to give your customer a choice, quoting multiple suppliers and lead times. For example, let them know that you can get the product faster from an out-of-state supplier, but the cost will be higher. If possible, you want to include any transportation costs in the price of the product and not as a separate charge that could be challenged later. If your customer insists on expedited freight, make sure that you get this confirmed in writing by requesting a revised PO from the customer reflecting any new charges. This will prevent any misunderstandings when the invoice comes due. You want to make it clear to your customer when the lead time begins, not when you get a verbal, but when you receive the revised PO.
It is also important that you do the same with your supplier and understand when the clock starts on an order. You want to get a confirmation that the order has been placed, including the agreed upon lead time and freight costs, remember to account for shipping time. Many contractors will try to place penalties or fines for not meeting completion dates. Make sure that by agreeing to such terms you understand these are things you alone are committing to as many suppliers will not support you financially if they come up short.
Excellent article. Lead times are still the king. This is why so many people in colleges major in supply chain nowadays. Think about some of the biggest and greatest companies like Coke and Home Depot and you will find unmatched supply chains. But they also offer alternative products. I believe the redevelopment of the US manufacturing market is critical to our future success to help us shorten lead times even if it costs more. Thanks
All good points Neil.