Understanding Lead Time in Shipping: Formulas, Best Practices, and Advantages

Opening an eCommerce store is only just the beginning of an arduous journey.

Not going to lie — it is going to be a bumpy, roller coaster of a ride, but if you get it right, the profits will be well worth your while.

But while the demand for online retail continues to rise, and showing no signs of slowing down, the manufacturing definitely is. In fact, studies project a significant supply chain disruption to occur every 3.7 years.

With that in mind, you should be proactively working on developing a strong supply chain strategy and an even stronger shipping process. The time taken between receiving and delivering an order — the lead time — should be at the forefront of your strategic improvements.

That said, let us first understand all there is to know — right from lead time’s meaning and definition to managing it effectively for your eCommerce store, with the help of this infographic.

Factors Affecting Shipping Lead Time

Now that you have seen a detailed visual overview of lead time, and the ways it can affect your business, let us discuss a few more aspects related to it. Once you understand what is lead time in shipping and what it is in terms of overall order fulfilment, you can tweak the process with much more clarity.

With that in mind, we shall now look at some of the primary factors that impact shipping lead time.

Production/Manufacturing

More often than not, increased shipping lead times result from production or manufacturing delays. This can happen regardless of whether you are running a dropshipping business or an up and running eCommerce store.

If your product takes too long to produce or manufacture, it is inevitably going to delay your order fulfilment processes. During such times, it is important to ensure that you strictly follow the timelines and production schedules in order to avoid such delays.

Inventory Management

Your inventory management processes can determine what your shipping lead time is going to be in several ways. One of the primary inventory-related issues that can lead to higher lead times is stock-outs.

We already mentioned the importance of having an automated inventory management system and a major reason for doing so is to avoid stock-outs and other inventory-related issues. Maintaining transparency can ensure smoother warehouse operations, which will then define the performance of your inventory.

Supply Chain

It is no surprise that your supply chain operation is an integral factor to consider when we talk about shipping. Having an efficient supply chain process can help you minimise the time taken for processes such as production or packaging and speed up all the tasks right up to shipping.

You can then focus on expediting your shipping process with the help of your strong supply chain process. Never underestimate the importance of lead time in your supply chain strategy.

Packaging Processes

Another important factor to consider when we talk about shipping lead time is the process you follow for packaging. More often than not, processes that may sound quite simple, such as — packing the right items for the order, cause an increase in lead time.

Having an efficient process to deal with gathering the required packaging material and getting the orders packed in advance is important. This can reduce order lead time and your shipping lead time to a large extent.

So, these are the factors that you should consider for managing your shipping lead time more effectively. With all these aspects considered, let us now look at a few effective ways to reduce the shipping lead time.

4 Effective Ways to Reduce Lead Time

Now, if you went through the infographic and all the information, ‌you already know a lot about what is lead time in shipping, and how to manage and prevent them. Unfortunately, prevention is not an option sometimes. Before you know it, you are already dealing with higher shipping lead times in multiple orders.

For such instances, you should have a few proven tactics that you can use to reduce the lead time, even if you can’t completely avoid it. 

1. Remove Unreliable Suppliers

As an eCommerce store, you can get a lot of things done if you have a strong network of suppliers backing your operations.

Suppliers that cannot contribute much to your business operations may eventually become a liability. After all, you will need to invest in maintaining supplier relationships. 

Instead, conduct regular supplier evaluations and remove unreliable ones from your network.

Even though the transition can be tricky, if you maintain enough inventory to fulfil orders for a certain time span, you can easily do the switch. You can then have more control over the supply lead times as well as the delivery lead times.

2. Have Suppliers Closer to Your Warehouse

When you conduct those supplier evaluations, ensure that most of your key suppliers are in a closer geographical vicinity than your warehouse. In case you are a dropshipper, ensure ‌your suppliers are situated in the regions, bringing the most amount of sales to your store.

This will give you the flexibility to scale your operations and reduce the shipping costs and lead times significantly. You can reduce the overall lead time in the supply chain significantly by doing so. 

3. Constantly Improve Internal Communication

If you understand the process of order fulfilment well, you may know the crucial role that communication plays in it. Internal communication, especially, can make or break your order fulfilment process.

Any hiccups in communication will lead to unnecessary delays in processing orders.

Having a centralised system or process that streamlines and organises all the internal communication will help.

When shipping lead times go out of control, a strong internal communication strategy will help you mitigate the situation effectively.

4. Maintain Proactive Communication with Customers

It is not just internal communication that will make a considerable difference to your order processing operations; it is also the external communication.

Once you realise that the shipping lead time on an order is already too high, you need to plan how you will communicate this to your customers.

It is then important to calculate lead time, and communicate any delays to customers in advance. 

Keep your customers up-to-date with the status of their orders — this will go a long way in proving your loyalty towards customers.

Also, automation can be your best friend here too, with the help of triggered order notifications as the order is getting processed.

Conclusion

It is important to understand and address lead times, meaning you should control how you conduct your order fulfilment process, which is why it is a metric worth paying attention to. By deploying some of the proven strategies and best practices that we have discussed here, we hope you can successfully prevent and handle lead times effectively.