Utilizing contract manufacturing to make your products in China can be very economically efficient – but only if you keep tight control of production deadlines. If you can’t do this, managing inventory levels and avoiding stockouts at either your brick-and-mortar stores or online shop will become difficult.
For most businesses, especially eCommerce companies, the ability to anticipate and respond to consumer demand promptly is paramount. In this post, we will look and the basics of lead time and give you some tips on how to reduce manufacturing lead time in China and optimize your supply chain in the process. Let’s get started.
What is the Manufacturing Lead Time?
Typically, the manufacturing lead time is defined as the length of time between when an order is placed and when it’s finished.
Lead time is an important measure of how well a manufacturer uses its resources and optimizes production. Typically, a manufacturing supplier will give an approximate production time before cooperation. This way, you can plan ahead based on your inventory levels.
Difference Between Lead Time and Cycle Time
Lead time and cycle time are critical measurements for the manufacturing industry, but many individuals confuse them with one another. If you want to outsource your production project to China, you must fully understand the difference between these two terms.
The primarily come down to when the clock starts ticking. Cycle time is calculated from when work begins on making the product while lead time starts from when the order arrives in the factory. This way, make sure your supplier is on the same page with you for the time duration. Otherwise, both parties could make costly mistakes.
Why Reducing Manufacturing Lead Time Vital?
Other than lowering costs, reducing manufacturing lead time is also a major goal when it comes to running an efficient eCommerce business. Here are some of the most significant benefits of reduced manufacturing lead time.
1. Avoiding Stockouts
A Stockout is probably the worst nightmare for any eCommerce sellers because it leads to lost sales and profits, more importantly, it results in lowering customer satisfaction with your brand, which makes it even harder to reach these buyers again who are willing to return to your online store.
So, make sure you always have enough inventory available. Also, think about the manufacturing lead time very carefully. The shorter your lead time, the more effectively you can run your business because there is less chance of being out of stock. If you don’t plan early and wait until all your stock is sold, there would consequently be a gap as you ordered and awaited shipment of the next lot of stock.
2. Maintaining Flexibility
An eCommerce entrepreneur always hopes to create more value for more customers, whilst making more profits in their process. However, with an increasingly changing landscape due to new customer expectations and digitalization for online stores, it is necessary to be flexible with your business and responsive to changes quickly.
If you find an opportunity in the marketplace but don’t have a way to respond fast enough, those products will soon be sitting unused in your warehouse space.
3. Saving on Storage Costs
Storage costs are a major expense for any business, especially when it comes to e-commerce. Lowering the lead time on manufacturing means you can reduce your storage costs by purchasing less inventory upfront. Plus, with shorter lead times, you don’t have to worry about stocking too much inventory in case of a drop in sales. You’ll always be able to get what you need because your suppliers will be able to deliver quickly. The bottom line is that reducing the lead time on manufacturing is vital for running an efficient and profitable e-commerce business.
4. Boosting Sales by Offering Limited Edition Items
Limited edition items are a great way to create buzz around your products. They offer exclusivity, meaning that they’re only available for a limited time and limited target customers. This is appealing to those who are loyal to your brand because it gives them the sense that they’re getting something rare and special. And since people love variety, offering something with a different design or colorway of the same product will help differentiate you from competitors who are also selling products in the same category. If you work with a manufacturing factory that can deliver items in a shorter lead time, you will be comfortable making improvements to your products more easily.
How To Reduce Manufacturing Lead Time?
To ensure proper inventory, it is important to develop an efficient production process. Here are some tips on how to implement lead time reduction strategies for your own business.
1. Being Open and Honest
Being open and honest about your needs should be the key point when you’re working with a factory in China. Consider what will work best for your company and constantly communicate with your supplier so they can have a better understanding of your requirements. For example, if you need a few products by Christmas to take some pictures and post them to your online store, just negotiate with your supplier honestly for a lower MOQ and faster production time.
2. Setting Deadlines
Every time you have a conversation with your Chinese supplier, you should be clear and precise about the lead time. Due to the sweeping effects of COVID-19 in China, some areas are on lockdown or experiencing shifts. It would be wise for you to stay informed about what is happening so that you can plan accordingly.
3. Performing a Sales Analysis
If you want to keep reaching your sales goals month after month, then relying on guesswork isn’t the best way. To accurately place your next order, data analysis and forecasting customer demand with historical sales will help. Researching the needs of your season and ordering as early as possible will decrease the amount of time it takes for an order to ship.
4. Work with a Reliable Supplier
Shortening the manufacturing lead time can help to minimize stock-outs, maximize efficiency, and reduce rework. When you plan to identify a new manufacturing partner with flexibility and professionalism, don’t focus solely on the best price.
It can be frustrating when things don’t go according to plan but remember that all you need is a little patience and perseverance. China 2 West would love to help, providing quality one-stop-shop manufacturing service for your newest project. If you want to know more about how we can help your project, don’t hesitate to contact us today.
