{"id":94904,"date":"2021-06-10T10:00:16","date_gmt":"2021-06-10T08:00:16","guid":{"rendered":"https:\/\/www.KGM Strategy.com\/?p=94904"},"modified":"2024-12-09T16:41:56","modified_gmt":"2024-12-09T15:41:56","slug":"smi-07-lead-times","status":"publish","type":"post","link":"https:\/\/www.KGM Strategy.com\/en\/insights\/magazine-07\/lead-times\/","title":{"rendered":"SMI 07 | Lead Times"},"content":{"rendered":"<div class=\"bp-module-info-wrapper\"><\/div>\n    <aside class=\"related-articles\" style=border-color:#c7ced9>\n        <span class=\"related-articles-button\" style=border-color:#c7ced9> Further articles <\/span>\n        <h3 class=\"related-articles-title\"> Further articles <\/h3>\n        <div class=\"related-articles-content\">\n            <div class=\"row horizontal-gap\">\n                                    <div class=\"article-box col-6 col-sm-4 col-md-12\">\n                        <a href=\"https:\/\/www.KGM Strategy.com\/en\/smi-07\/\" class=\"article\" target=\"_blank\">\n                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/03\/smi-title-en-325x450.jpg\" class=\"img-fluid\" loading=\"lazy\" \/>\n                            <div class=\"overlay\"><\/div>\n                        <\/a>\n                    <\/div>\n                                    <div class=\"article-box col-6 col-sm-4 col-md-12\">\n                        <a href=\"https:\/\/www.KGM Strategy.com\/en\/smi-07\/private-equity-study\/\" class=\"article\" target=\"_blank\">\n                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/03\/smi-pe-en-325x450.jpg\" class=\"img-fluid\" loading=\"lazy\" \/>\n                            <div class=\"overlay\"><\/div>\n                        <\/a>\n                    <\/div>\n                                    <div class=\"article-box col-6 col-sm-4 col-md-12\">\n                        <a href=\"https:\/\/www.KGM Strategy.com\/en\/smi-07\/foresighted-riskmanagement\/\" class=\"article\" target=\"_blank\">\n                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/03\/smi-riskmanagement-en-325x450.jpg\" class=\"img-fluid\" loading=\"lazy\" \/>\n                            <div class=\"overlay\"><\/div>\n                        <\/a>\n                    <\/div>\n                            <\/div>\n        <\/div>\n    <\/aside>\n\n\n<div class='container  py-3'><div class=\"row \"><div class=\"col-lg-12\"><h2><span style=\"color: #ee1c25;\"><strong>Stability and reliability<\/strong>\u00a0<span style=\"color: #282828;\">are the top priority<\/span><\/span><\/h2><\/div><\/div><\/div>\n<div class='container  py-3'><div class=\"row \"><div class=\"col-lg-1\"><\/div><div class=\"col-lg-11\"><p><span style=\"color: #ee1c25;\"><strong>Although rising raw materials prices, transport costs and customs duties can threaten a company\u2019s margins, nothing has a greater impact than production downtimes. As a consequence, lead times are increasingly in the spotlight. Our survey on lead times and the subsequent interviews with experts revealed that ensuring stability and reliability is more important than fast or cost-effective transport methods.<\/strong><\/span><\/p>\n<p><span style=\"color: #282828;\">For decades, we took prompt deliveries for granted, even if goods had to travel halfway around the world. Then the coronavirus hit and the ensuing changes in the transport industry are still affecting us. Some rates for sea and air freight have risen drastically, while reliability has fallen significantly. This has forced companies across all industrial sectors to rethink their existing lead times strategies and align them with possible new supply chains. <\/span><\/p>\n<p><span style=\"color: #282828;\">We have identified four particular trends:<\/span><\/p><\/div><\/div><\/div>\n<div class=\"mt-5 mb-lg-13 overflow-hidden full-width\" is=\"image-text-animated\">\n    <div class=\"container overflow-visible\">\n        <div class=\"text-center\">\n            <h2><\/h2>\n        <\/div>\n                    <div class=\"image-with-text-01\">\n                <div class=\"row justify-content-between\">\n                    <div class=\"col-md-6\">\n                                                    <div class=\"image\">\n                                <span  style=\"background-color: rgb(199, 206, 217)\" \">\n                                    <figure class=\"animate\">\n                                        <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"600\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/03\/leadtimes_teaser_1.png\" class=\"img-fluid\" alt=\"\" srcset=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/03\/leadtimes_teaser_1.png 800w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/03\/leadtimes_teaser_1-768x576.png 768w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n                                    <\/figure>\n                                <\/span>\n                            <\/div>\n                                            <\/div>\n                    <div class=\"col-md-6 col-xl-5 align-self-center\">\n                        <h3><\/h3>\n                        <h4><span style=\"color: #282828;\">1.<\/span> <span style=\"color: #ee1c25;\">Integrating Regional Suppliers<\/span><\/h4>\n<h4><span style=\"color: #282828;\">2.<\/span> <span style=\"color: #ee1c25;\">Increasing Inventory Levels<\/span><\/h4>\n<h4><span style=\"color: #282828;\">3.<\/span> <span style=\"color: #ee1c25;\">Alternative Transport Methods<\/span><\/h4>\n<h4><span style=\"color: #282828;\">4.<\/span> <span style=\"color: #ee1c25;\">Implementing Digitization<\/span><\/h4>\n\n                    <\/div>\n                <\/div>\n            <\/div>\n            <\/div>\n<\/div>\n<div class='container  py-3'><div class=\"row \"><div class=\"col-lg-6\"><p><span style=\"color: #ee1c25;\"><strong>Integrating regional suppliers<\/strong><\/span><\/p>\n<p>Although many companies are considering their requirements for regional suppliers, the aim is often to use these providers to supplement existing structures, not to replace them. Diversification leads to increased stability and reduces dependence on individual suppliers or regions. Nevertheless, our interviews with experts from the automotive and mechanical engineering industries have revealed that they use single sourcing strategies for key components. Companies should rely on a range of providers wherever possible, even if doing so means more work in terms of coordination and inspection.<\/p>\n<p><span style=\"color: #ee1c25;\"><strong>Increasing inventory levels<\/strong><\/span><\/p>\n<p>Before the coronavirus pandemic, many companies only had small warehouses and relied on just-in-time deliveries. As the current situation is dominated by uncertainty, the approach of building up higher inventory levels has increased significantly. At the same time, companies are investing in digital storage management systems to make sure that these inventory levels are transparent at all times. Suppliers are also facing more stringent requirements to ensure their deliveries are reliable.<\/p><\/div><div class=\"col-lg-6\"><p><span style=\"color: #ee1c25;\"><strong>Identifying alternative transport methods<\/strong><\/span><\/p>\n<p>Air freight capacities have contracted drastically and become significantly more expensive, so companies that mainly used this transport method before the pandemic have been forced to look for alternatives \u2013 and not all have been successful. To give an example, Henning K\u00f6rner \u2013 Global Strategic Buyer at Olympus \u2013 has reported that rail transport and hybrid models are out of the question for the medtech company\u2019s sensitive products. In the long term, Olympus intends to increasingly shift to using sea freight (see interview). Overall, it is clear that many companies have become more flexible in their choice of transport methods, with reliability also being prioritized here.<\/p>\n<p><span style=\"color: #ee1c25;\"><strong>Implementing Digititalization<\/strong><\/span><\/p>\n<p>In many cases, the instability in supply chains in recent months has exposed a striking lack of transparency. In order to remedy this along the full supply chain, companies are investing in digital solutions across all sectors. End-to-end supply chain digitalization is crucial to making it possible to track deliveries in real time and react to risks quickly. Integrating external sources and creating interfaces with suppliers and customers is going to be one of the major challenges in the next few years.<\/p><\/div><\/div><\/div>\n<div class='container  py-3'><div class=\"row \"><div class=\"col-lg-12\">\n    <div class=\"container authors-section fadeIn  \" is=\"authors-and-partners\">\n        <div class=\"description row\">\n            <h2>\n                                    Authors\n                            <\/h2>\n        <\/div>\n\n        <div class=\"row\">\n                            <div class=\"mb-5 col-md-6 mb-md-0\">\n                    <div class=\"author\">\n                                                    <figure>\n                                <img loading=\"lazy\" decoding=\"async\" width=\"250\" height=\"250\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2021\/08\/JM_AP-1-250x250.jpg\" class=\"img-fluid\" alt=\"\" srcset=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2021\/08\/JM_AP-1-250x250.jpg 250w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2021\/08\/JM_AP-1.jpg 400w\" sizes=\"auto, (max-width: 250px) 100vw, 250px\" \/>\n                            <\/figure>\n                        \n                        <h3>Jan Mersmann<\/h3>\n                        <p class=\"person-position\">Principal<\/p>\n                                                    <div class=\"short-desc\"><p>is a Principal at KGM Strategy in Cologne. He advises customers from the automotive sector, medical technology and the process industry, with a particular focus on process optimization<\/p>\n<\/div>\n                                                <div class=\"contact-information\">\n                                                                                                <a href=\"mailto:Jan.mersmann@kgmstrategy.com\" class=\"mail-link\">Jan.mersmann@kgmstrategy.com<\/a>\n                                                                                                                                                <\/div>\n                                                    <a href=\"https:\/\/www.KGM Strategy.com\/en\/insights\/magazine-07\/lead-times\/\" class=\"btn btn-outline-secondary text-terciary\">Contact<\/a>\n                                            <\/div>\n                <\/div>\n                            <div class=\"mb-5 col-md-6 mb-md-0\">\n                    <div class=\"author\">\n                                                    <figure>\n                                <img loading=\"lazy\" decoding=\"async\" width=\"250\" height=\"250\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2021\/11\/emiliano-mueller-valle_350x440px-250x250.png\" class=\"img-fluid\" alt=\"\" \/>\n                            <\/figure>\n                        \n                        <h3>Emiliano M\u00fcller Valle<\/h3>\n                        <p class=\"person-position\">Consultant<\/p>\n                                                    <div class=\"short-desc\"><p>is a Consultant at KGM Strategy\u2019s Munich office. He focuses on advising automotive conglomerates and suppliers, dealing mainly with supply chain management and logistics.<\/p>\n<\/div>\n                                                <div class=\"contact-information\">\n                                                                                                <a href=\"mailto:contact@kgmstrategy.com\" class=\"mail-link\">contact@kgmstrategy.com<\/a>\n                                                                                    <\/div>\n                                                    <a href=\"https:\/\/www.KGM Strategy.com\/en\/insights\/magazine-07\/lead-times\/\" class=\"btn btn-outline-secondary text-terciary\">Contact<\/a>\n                                            <\/div>\n                <\/div>\n                    <\/div>\n    <\/div>\n\n<div class=\"componentPadding container pop-up-boxes singleLayout fadeIn  \">\n    <div>\n                <h3 class=\"title text- main-title \" style=\"color: #ee1c25\">Experts on Lead Times<\/h3>\n                        <div class=\"row row--single row-layout--\">\n                                                            <div class=\"col-12 col-xl-11\">\n                                            <div class=\"box \" aria-title=\"\" title=\"\" data-toggle=\"collapse\" data-target=\"box-8ec84d51be4aebb05c270ec98ea0bead\">\n                            <div class=\"image-container\">\n                                <div class=\"holder\">\n                                    <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/03\/leadtimes_experten_teaser-400x420.png\" class=\"img-fluid\" loading=\"lazy\" width=\"400\" height=\"420\" \/>\n                                    <div class=\"overlay\"><\/div>\n                                <\/div>\n                                <div class=\"title\" style=\"color: #ee1c25\">\n                                     Olympus: Ensuring Reliable Lead Times\n                                                                    <\/div>\n                            <\/div>\n                        <\/div>\n                    <\/div>\n                            <\/div>\n                            <div class=\"popup-box\" id=\"box-8ec84d51be4aebb05c270ec98ea0bead\" class=\"collapsed\" style=\"background-color:#2a3235;\">\n                    <div class=\"overlay\" style=\"background: linear-gradient(to top, #2a3235, transparent);\"><\/div>\n                                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/03\/leadtimes_experten_teaser.png\" class=\"bg-image img-fluid\" loading=\"lazy\">\n                                        <span class=\"close-btn\" data-toggle=\"collapse\" data-target=\"box-8ec84d51be4aebb05c270ec98ea0bead\"><\/span>\n                    <div class=\"popup-inner\">\n                                                                                    <h1 class=\"popup-title h4\" style=\"color: #ee1c25\"> Interview with Henning K\u00f6rner: Global Strategic Lead Buyer Supply Chain Management<\/h1>\n                                                                            <div class=\"popup-content-header\">\n                                                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/03\/Henning_Koerner-1-350x360.jpg\" class=\"header-image\" width=\"350\" height=\"360\" loading=\"lazy\" alt=\" Interview with Henning K\u00f6rner: Global Strategic Lead Buyer Supply Chain Management\" \/>\n                                                        <div class=\"popup-content-header-textbox\">\n                                                                    <div class=\"quote h2\" >\n                                        <span style=\"color: #ee1c25\">\n                                            \"Tracking Every Product in Real Time\"\n                                        <\/span>\n                                    <\/div>\n                                                                                                    <div class=\"quote-text\" style=\"color: #01aead\">\n                                        <p><em>The Olympus Corporation is a worldwide operation, producing medical technology as well as technical equipment for science and industry. Its products include microscopes, endoscopes and surgical devices. Transporting these sensitive items is challenging, which is why logistics costs account for 25 to 30% of the company\u2019s total indirect spend. We asked Henning K\u00f6rner, Global Strategic Lead Buyer Supply Chain Management at the OIympus office in Hamburg, about what he sees as particularly important in logistics management.<\/em><\/p>\n\n                                    <\/div>\n                                                            <\/div>\n                        <\/div>\n                        <div class=\"main-content\">\n                            <p><span style=\"color: #a0d60a;\"><strong>How much has the coronavirus pandemic affected Olympus\u2019 supply chains<\/strong><\/span><\/p>\n<p>We have had to accept significant price increases: prices for air freight went up by 55% and sea freight by 30%. But it is not as reliable as it was: we now have to wait up to two days longer for air freight and with sea freight it can be on average seven days longer.<\/p>\n<p><strong><span style=\"color: #a0d60a;\">How do you see the situation developing?<\/span><\/strong><\/p>\n<p>Although we hope that the situation will return to normal by the end of the year, the cycle will be difficult to break. Prices will remain high until the airlines increase their capacity, but more air traffic will only be possible once the global pandemic is reasonably under control. Generally speaking, I don\u2019t expect passenger revenue to return to the pre-crisis level quickly. That will probably not happen until 2024 and we may see a slow reduction in freight prices until then.<\/p>\n<p><strong><span style=\"color: #a0d60a;\">And reliability?<\/span><\/strong><\/p>\n<p>Problems here are also caused by a lack of capacity, plus the imbalances between Asia and the rest of the world caused by the pandemic. As a result, I don\u2019t expect reliable delivery deadlines to be restored until near the end of the year either.<\/p>\n<p><strong><span style=\"color: #a0d60a;\">Has the pandemic affected your logistics strategy?<\/span><\/strong><\/p>\n<p>Short lead times were and are still important to us, as they reduce the amount of capital that is tied up. Every extra day makes a huge difference with our high-quality products. Before coronavirus, however, freight methods and routes were established and reliable, which meant that we didn\u2019t really need to worry about lead times so we could focus on speed and quality in logistics. This has changed significantly. We now use a matrix that gives equal consideration to<br \/>\ncapital costs, freight costs and lead times and that switches between air and sea freight if necessary. And that approach is here to stay. Climate change is increasingly causing extreme weather conditions and ships are being built bigger and bigger, making them more susceptible to accidents, so we have to assume that unscheduled delays will continue to increase.<\/p>\n<p><strong><span style=\"color: #a0d60a;\">Does this mean that you are changing the share of freight methods that you use?<\/span><\/strong><\/p>\n<p>Before the pandemic, air freight in inbound transport accounted for 75%, sea freight for 10%, and road transport for the remaining 15%. In future, we intend to expand sea freight to up to 60% for intercontinental freight, creating a \u201cswimming inventory\u201d, in order to save on logistics and storage costs. How long it takes us to achieve this goal depends on when the sea route situation stabilizes again. Adherence to delivery deadlines is even more important than short lead times and this unfortunately cannot currently be guaranteed on sea routes.<\/p>\n<p>We\u2019ve trialed rail traffic via the New Silk Road as well as hybrid models such a combination of air and sea, but these options are not suitable for our products. The devices that we produce are very sensitive, so every time the goods are transferred, the risk of damage increases. Minimizing this risk is our top priority, so our tenders include stringent requirements and we have a demanding onboarding procedure for new service providers.<\/p>\n<p><strong><span style=\"color: #a0d60a;\">Could local-for-local production and nearshoring be suitable solutions?<\/span><\/strong><\/p>\n<p>I think that would be difficult because our plants are highly specialized and all locations ultimately need to have the same skills for local-for-local and nearshoring to be effective. That doesn\u2019t really work.<\/p>\n<p><strong><span style=\"color: #a0d60a;\">How do you want logistics to evolve at Olympus in the next few years?<\/span><\/strong><\/p>\n<p>This is included in our End2End Supply Chain strategy and has two strands: first, continuing digitalization and second, focusing on intensifying the vertical integration of suppliers. Here in Europe, for example, we no longer manage 100% of our transport operations ourselves as we have handed these activities over to our warehousing service provider as part of a 4PL soluti on. The fact that we just have an interface to the service provider simplifies things significantly for us.<\/p>\n<p>We want to use digitalization to make everything as transparent as possible, so that we have an overview of risks and always know exactly where our products are. That means we can provide our customers with the information they need whenever they need it. This has been underpinned by creating the corresponding interfaces so that customers are also integrated into the supply chain. The long-term goal is to have live tracking throughout the supply chain from raw materials to customer delivery, including incorporating our rental devices and repair services. We want to use this to make the service and repair processes as efficient as possible as well, minimizing downtimes. We are currently at the brainstorming stage: what the design for a control tower should look like and which dashboards are most suitable for managing the flow of goods and information. We are planning a gradual implementation over the next two years.<\/p>\n\n                        <\/div>\n                    <\/div>\n                <\/div>\n                        <\/div>\n<\/div>\n<\/div><\/div><\/div>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":10,"featured_media":63676,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_seopress_robots_primary_cat":"none","_seopress_titles_title":"rioritizing Reliability: The Significance of Lead Times","_seopress_titles_desc":"Diversification of suppliers enhances stability and reduces dependence on specific regions or suppliers. \u25b6 KGM Strategy, A BCG Company","_seopress_robots_index":"","footnotes":""},"categories":[702,717,394],"tags":[],"class_list":["post-94904","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-magazine","category-supply-chain-resilience","category-general-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.KGM Strategy.com\/en\/wp-json\/wp\/v2\/posts\/94904","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.KGM Strategy.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.KGM Strategy.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.KGM Strategy.com\/en\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/www.KGM Strategy.com\/en\/wp-json\/wp\/v2\/comments?post=94904"}],"version-history":[{"count":1,"href":"https:\/\/www.KGM Strategy.com\/en\/wp-json\/wp\/v2\/posts\/94904\/revisions"}],"predecessor-version":[{"id":107241,"href":"https:\/\/www.KGM Strategy.com\/en\/wp-json\/wp\/v2\/posts\/94904\/revisions\/107241"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.KGM Strategy.com\/en\/wp-json\/wp\/v2\/media\/63676"}],"wp:attachment":[{"href":"https:\/\/www.KGM Strategy.com\/en\/wp-json\/wp\/v2\/media?parent=94904"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.KGM Strategy.com\/en\/wp-json\/wp\/v2\/categories?post=94904"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.KGM Strategy.com\/en\/wp-json\/wp\/v2\/tags?post=94904"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}