Shipping Lead Time: How to Optimize Your Supply Chain
November 17, 2021
The global supply chain continues to dominate headlines as we experience delays and disruptions on a global level. As an eCommerce seller, you’ve probably experienced delayed shipments from suppliers. You may have had to provide customers with slower than average fulfillment options. Consumers feel the impact of these interruptions more than ever as they struggle to find high-demand products and wait longer for packages to arrive at their doorsteps.
To stay competitive during this time of low inventory and long delivery windows, focus on your shipping lead time. The buyer’s perspective of what constitutes fast delivery has changed as retail giants like Amazon commonly offer one-day and same-day shipping. In a 2018 Consumer Trends Report, 40% of consumers said they wouldn’t make an online purchase if delivery took more than two days. If customers believe your fulfillment time is too long, they won’t hesitate to move to the competition.
Below, we walk you through what you need to know about shipping lead time. It’s time to to optimize your logistics so you can stay competitive and scale your business.
What Does Lead Time Mean in Shipping?
Shipping lead time refers to the amount of time between placing an order and its final delivery. This includes pre-production, production, packaging, shipment, and delivery.
As an eCommerce seller, you experience this both when you purchase from a supplier, and when a customer places an order from your online store. You need inventory on-hand to ship to your customers, so knowing when to initiate the process with your supplier is critical.
How Is Lead Time Calculated for Shipping?
Calculating your shipping lead time is a simple formula, but it requires reliable information from your suppliers. From order placement, pre-production, production, shipment, and delivery. With accurate data, you add how much time it takes for each step of the logistics process. The total is your shipping lead time.
Our free growth planning platform provides a complete picture of your supply chain. This allows you to implement improvements and respond to disruptions just as they arise.
7 Ways You Can Reduce Delivery Lead Times
In a competitive retail space, buying decisions can come down to how quickly the consumer receives their order, and expectations are high. According to a 2018 survey, 63% of buyers want 3-day shipping, and 76% have re-evaluated purchases based on a lack of fulfillment options.
We’ve outlined seven ways you can reduce your shipping lead time and give yourself a competitive edge.
1. Use Software to Map Out Your Supply Chain
Building a comprehensive plan of your logistics process gives you insights you wouldn’t be unable to see otherwise. This allows you to streamline your supply chain while also adapting more quickly to interruptions.
The easiest and most efficient way to create a plan is by utilizing software. The 8fig growth planning tool allows you to forecast sales, optimize cash flow, and simplify operations in just a few clicks.
2. Automate Order Processing & Data Entry
Manual data entry and order processing can be burdensome and time-consuming. Free up your schedule and put your brainpower towards business growth and innovation by embracing technology and automation.
Online tools allow you to manage the entire ordering process through a simple and convenient digital platform. Keep yourself, your team, and your customers updated while improving your delivery lead time.
3. Streamline Suppliers & Prioritize Reliability
Focus on building relationships with a small group of reliable suppliers to accelerate your logistics lead time. While disruptions are inevitable, you need to trust that your partners are doing their part to avoid interruption, and know they’ll communicate with you if delays occur.
The Institute for Supply Management reports that 53% of U.S. businesses struggle to get insights on their supply chain from suppliers overseas. Gain a competitive edge with end-to-end visibility so you can accurately calculate your shipping lead time.
4. Offer a Bonus Structure to Suppliers
You can incentivize suppliers by offering rewards for meeting or exceeding your service agreement. This is a great way to strengthen your relationship. It can also encourage efficiency and enhanced communication.
Of course, there are different ways you can approach incentivizing your suppliers. For example, you can offer financial bonuses for on-time or early delivery. You can also agree to a contract extension based on the supplier’s performance.
5. Consider Domestic Suppliers When Possible
While domestic suppliers can be more costly than their international counterparts, there are benefits to these partnerships. With local partners, your workdays align, and there will be less chance of communication barriers, improving quality control.
Closer proximity to your supplier also speeds up your shipping lead time, as your product will have less distance to cover. This is especially helpful with congested cargo ports around the globe. Working with domestic suppliers can also boost your marketing efforts as you can promote your products as “Made in America.”
Even with all the benefits of finding quality domestic partners, you shouldn’t rule out international suppliers either. Global manufacturing offers lower prices and more variety, saving you money and allowing you to diversify your product line-up. Having a combination of reliable domestic and international suppliers helps you stay competitive while keeping your supply chain moving.
6. Forecast Future Product Demand
To scale your business, you’ll need to accurately forecast the demand for your products. Forecasting software monitors trends and utilizes data to form their predictions.
Consider these insights when planning your inventory. Figure out how much you could sell to meet the demand of your target market if cash weren’t an issue. Plan for your future sales potential, not your past transactions.
7. Maintain a Healthy Cash Flow to Fund Your Supply Chain
It’s no secret that you need money to make money. However, traditional bank loans can limit you based on your past sales data, and waiting for inventory to become cash can take too long due to lead time. Finding a reliable and growth-minded source of capital will ensure you have cash continuously coming into your business. This can also help you place larger batch orders to meet growing demand.
8fig’s equity-free capital considers your potential so that you can plan for possibilities. Stop chasing cash and focus on optimizing your business and scaling profitably.
What Shipping Lead Time Means for Your Business
Calculating and optimizing your lead time results in a quicker turnaround, increased sales, more satisfied customers, and a healthier bottom line.
Shipping lead time is simply the amount of time that passes between an order being placed and the product being delivered. Make sure you implement these tips to improve your supply chain and optimize your lead time.
- Use software to plan and map your supply chain.
- Embrace automation and technology for data process and order management.
- Vet and partner with reliable suppliers.
- Incentivize suppliers to improve performance.
- Partner with domestic suppliers when possible.
- Plan your inventory based on future demand forecasts.
- Maintain a healthy cash flow.
8fig is here to help you plan your supply chain and provide continuous capital based on your growth potential. Our free growth planning tool offers a bird’s eye view of your entire logistics process. You’ll be able to see each step in your supply chain, so you can plan, optimize, and adapt to disruptions, which is vital given the current shipping crisis.
We also infuse capital continuously to match your supply chain demands and fund future growth projections. Accelerate your path towards being an 8-figure seller today.
Karlyn is an eCommerce writer and Content Marketing Manager for 8fig. She's on a mission to democratize online retail by empowering small and medium-sized businesses with resources and tools they need to compete in dynamic marketplaces.