Glossary
Total Sourcing Lead Time (95% of Raw Material Dollar Value)
Tags: Glossary
Cumulative lead time refers to the total average time required for various processes such as inside-plant planning, supplier lead time (whether external or internal), receiving, handling, etc., starting from the identification of demand at the factory until the materials are made available in the production facility. This lead time is necessary to source 95% of the dollar value (per unit) of raw materials from both internal and external suppliers.
What is Total Sourcing Lead Time (95% of Raw Material Dollar Value)?
Total Sourcing Lead Time (95% of Raw Material Dollar Value)
Total Sourcing Lead Time is a crucial concept in logistics that refers to the average time required for various processes involved in sourcing raw materials for production. It encompasses activities such as inside-plant planning, supplier lead time, receiving, handling, and more. The goal of Total Sourcing Lead Time is to ensure that 95% of the dollar value per unit of raw materials is sourced from both internal and external suppliers within a specified timeframe.
In today's globalized economy, businesses often rely on a complex network of suppliers to meet their raw material requirements. These suppliers can be located both within the organization's own facilities (internal suppliers) or external to the organization (external suppliers). Managing the lead time associated with sourcing these raw materials is crucial to maintaining a smooth and efficient production process.
The Total Sourcing Lead Time starts with the identification of demand at the factory. This involves forecasting and understanding the quantity and type of raw materials needed for production. Once the demand is identified, the inside-plant planning process begins. This includes activities such as determining the required quantity of materials, creating purchase orders, and coordinating with various departments involved in the procurement process.
Supplier lead time, whether external or internal, is a significant component of Total Sourcing Lead Time. External supplier lead time refers to the time it takes for materials to be delivered from external suppliers to the production facility. This includes activities such as order processing, manufacturing, packaging, and transportation. Internal supplier lead time, on the other hand, refers to the time it takes for materials to be transferred from one internal department to another within the organization.
Receiving and handling activities also contribute to the Total Sourcing Lead Time. Once the materials arrive at the production facility, they need to be inspected, unloaded, and stored appropriately. These activities ensure that the materials are in good condition and ready for use in the production process.
The ultimate goal of Total Sourcing Lead Time is to ensure that 95% of the dollar value per unit of raw materials is sourced within the specified timeframe. This metric is important as it allows organizations to maintain a steady supply of materials and avoid production delays. By effectively managing the lead time, businesses can optimize their production processes, reduce costs, and improve customer satisfaction.
In conclusion, Total Sourcing Lead Time is a critical concept in logistics that encompasses various processes involved in sourcing raw materials. It involves inside-plant planning, supplier lead time, receiving, handling, and more. By effectively managing this lead time, organizations can ensure a smooth and efficient production process while meeting the demand for raw materials.