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hi everyone i'm ryan from lending loop and today we'll be covering lead times for ecommerce businesses we'll be covering topics like how to estimate lead times how to optimize lead times as well as what factors impact lead times for your ecommerce business without further ado let's get started so you might be wondering what is lead time simply put lead time is the time it takes between ordering a restock of a product and when the product slash inventory is received by you lead time is an important part of inventory management as it impacts the level of stock you will have at any given time and can determine what products you have available to sell calculating lead time is rather easy process you just need to establish two things your supply delay which is the delay in which it takes for your supplier to provide you with your respective product and your reordering delay which is the time it takes for your supplier to accept and begin processing your order once you have both these numbers it's as easy as summing them up to establish your lead time i.e supply delay plus reordering delay equals lead time to walk through an example of this we'll go on to the story of an e-commerce business so we're looking at an e-commerce business that sells a variety of slippers that look like popular collectible sneakers they drop limited edition sets each thursday and they know every week they will sell approximately 10 000 pairs of slippers when they're doing their ordering they know that their supplier typically takes about one day to accept and turn around the order two days to manufacture the slippers and three days to ship them out to their respective business in this example the lead time would be six days meaning to maintain the appropriate levels of stock to meet the customer demand the store will need to order at least ten thousand pairs of these limited edition slippers a minimum of six days prior to their expected thursday drop so you may be wondering how we got to those numbers well if you look at the example you can see that we have a one day time to accept and process two days to manufacture and three days to ship when we look at the manufacturing and shipping well we can see that we clearly have our five day supply delay and then when you look at the time it takes to accept and process the order you can see that we clearly have a one day reordering delay when added up it's very clear we have a six day lead time now this is a rather rudimentary example but there are a number of other factors that can impact lead time and cause longer lead times for your e-commerce business these factors can include but aren't necessarily limited to the order approval process within your business customs and border services checks and delays expanding your supply chain i try to generate more money for your business via acquiring more more inventory broader skus working with a broader range of suppliers and disorganized inventory you know not really knowing how much you have in any given skew at any given time can also impact your ordering process and further slow things down for your business and then lastly but not least there's also supply chain delays you know i think right now we've seen a lot of issues with kobit where a lot of businesses that were previously securing a lot of their inventory from china are now facing very long delays sometimes months or longer just to get products into their respective countries these are all things to consider when you're factoring in you know what impacts your lead time so how do lead times impact your ecommerce business well you know long story short they impact your sales volume your revenue and the customer experience i if you don't have a product in stock that your customers have come to expect your business to hold at any given time you're creating a disjointed customer experience for your clients and you're you're losing out on sales which ultimately impacts your bottom line so having a really good understanding of how to estimate how to optimize your lead time for your commerce business can really help drive your business forward so with that being said how can you optimize lead times for your e-commerce business well it's not too hard and there are a couple things that you can start thinking about to really kind of decrease the time or get a better understanding of it so you can work around the lead times within your business to get started you can change to more efficient shipping methods whether it's using air instead of freight or any kind of combination there's a lot of ways that you can drive efficiency via your shipping providers you can also try and source materials and the labor to build your products locally having less of a delay between your production of your product and receiving your product whether it's you know shipping delays border delays can really help you decrease your lead time and can move the needle the one thing to weigh here is how will the sourcing of materials and labor locally impact the cost of your respective product you do want to look at the costs of sourcing that labor locally and the impacts of the decreased lead times versus sourcing the labor potentially overseas and sourcing the product potentially overseas and the cost associated with that as well you can also automate your ordering process so a lot of suppliers now will provide a system that connects into your inventory and will actually check for when a sku is low in a given stock and automatically reorder that for you based on your given agreement with that supplier this will ensure that you always have stock on hand when are always ordering it prior to being out of stock helping you maintain solid levels of inventory without bloating your stock per se and generating the revenue that you need to generate to keep your business up you can also reduce non-value added activities that potentially impact lead time so how you order processes around ordering who can order any steps that you can take there to drive efficiency and decrease the amount of time it takes to get orders through can also improve your lead time overall and with that being said we hope that you found this video helpful we hope to have more videos around inventory management and e-commerce businesses coming out in the near future if you're more interested about what loop is up to today go check out getloop.ca ecommerce and try out our new product we're building a new financing product for e-commerce businesses to help support their inventory management needs