Lead times and replenishment policies

A supply order has two dates that must not be mixed up. One is when we release it. The other is when its goods can be used. Between those dates, work must happen. Northstar needs a part ready at the start of working day ten. The source needs two days. Travel needs one day. The receipt check needs one day. Those steps are in a row, so the total is four working days.

Under our start of day rule, release at the start of day six. Four days later is the start of day ten. This sounds easy because we have made the clock clear. In real work, ask when the first step starts. If a source begins only the day after release, the result changes. If the truck runs on Sunday but the store is shut, the last step must use a different calendar. A date without a calendar can give false comfort.

Suppose the order cannot be released until day eight. With four days of lead time, it will be usable on day twelve. That is two working days late. Moving a cell to day ten does not make the goods move faster. The plan needs a real choice. We might get a firm faster route, use an approved source, split the shipment, or agree a later date. Each choice needs a cost, an owner, and proof.

A mean lead time is useful, but it is not the same as a firm date for this order. Keep the normal time, the current promise, and the actual time apart. Then we can learn what went wrong. Was the standard out of date? Was this one order held? Was the truck late? Did the check take longer? A clear record points to a useful fix.

Now turn from dates to the rule for when to buy. We will use inventory position. In this lesson it means stock on hand plus open supply less backlog. Northstar has twenty on hand, thirty on order, and five still owed. Its position is forty five. That does not mean forty five can ship now. Some of it is still on the way. We still need the date view to protect today's demand.

One policy checks the position after each event. Mean demand is ten a day. Lead time is three days. Mean need while we wait is thirty. Add a buffer of ten and the reorder point is forty. Our stated rule orders a fixed lot when position is at or below forty. At forty five, it does not yet order. The equality rule matters. Put it in the policy so two people get the same answer.

A second policy checks only every four days. It must cover the time until the next check as well as lead time. Four plus three is seven days. At ten a day, that is seventy. Add the stated ten unit buffer and the target is eighty. At position forty five, the new order is thirty five. We buy the gap to the target, not the full target each time.

For this example we kept the buffer fixed to show the role of review time. In a full risk model, a longer wait may need more buffer too. If goods come in packs of twelve, thirty five rounds up to thirty six. The new position becomes eighty one. Note the extra unit rather than hiding it in the formula.

When the thirty already on order arrives, move it from open supply to stock. Position does not jump just because a receipt changes status. That is a useful check. In the lab, follow daily demand, receipts, stock, position, and new orders for both rules. Keep the base case, then test a demand spike and a longer lead time. See which event first puts service at risk.

The final choice is not just a formula. It is a rule that a buyer can use and a team can check. State the review day, the lead calendar, the lot size, the trigger, and the path for an urgent exception. Then connect the rule back to the dates on which customers need the goods.

As a last check, say what changes if the receipt check takes one more day. The release must move one day earlier to hold the same usable date. If it cannot move, show the later date and the demand at risk.

1. Work backward

   Four sequential day blocks end at day ten

   • 2 source
   • 1 transit
   • 1 check
2. Past release

   Required and feasible date lanes

   • Release day 6
   • Late release 8
   • Usable day 12
3. Position

   Three arithmetic cards form position forty-five

   • 20 on hand
   • 30 open
   • 5 backlog
4. Continuous rule

   Position marker against forty trigger

   • Daily events
   • Point 40
   • Fixed lot
5. Periodic rule

   Seven-day protection bracket

   • Review 4
   • Lead 3
   • Target 80
6. Policy trial

   Two twelve-day stock paths

   • Keep base
   • Test spike
   • Check dates