Activities of Somerset Furniture Company’s Global Supply Chain
| Activity | Location | Lead Time |
| 1. Order preparation and processing | ||
| · Receiving customer’s orders | US | 7-14 days |
| · Purchase order development | US | 12-25 days |
| · Purchase order processing | China | 10-20 days |
| 2. Manufacturing | China | 60 days |
| 3. Port Logistics | ||
| · Transportation of finished furniture from the manufacturing plant to port | China | Several days |
| · Arrange shipping containers and prepare shipping paperwork | China | 5-10 days |
| · Loading containers | China | 6 days |
| · Random security checks | China | 1-3 weeks |
| · Shipping | China-US | 28 days |
| · Customs clearance | US | 1-2 weeks |
| 4. Receiving orders by warehouse | ||
| · Transport from port to warehouse | US | 1-3 days |
| · Offloading trailer | US | 1day-a month |
Significance of Lead Time Reduction
In supply chain management, lead time refers to the time it takes for the supplier to fulfill an order, thus encompassing the time an order was made to the time it was delivered (Darko et al., 2018). Lead time is an important aspect of the supply chain, affecting its performance (Boute & Van Mieghem, 2015). Reducing lead time is beneficial in various ways. For instance, it leads to increased customer satisfaction. According to Darko et al. (2018), the modern-day customer is concerned about product quality, fair price, and fast delivery time. Consequently, the authors opine that reduced lead time will satisfy clients.
Another benefit of reduced lead time in the supply chain is that it offers an avenue for differentiation. As modern-day customers demand faster delivery, companies respond by facilitating a reduced lead time. The reduced lead time improves efficiency by cutting storage costs. As a result of the reduced costs, businesses improve their profitability, thus enabling them to offer competitive prices to customers, which is a means of differentiation (Li et al., 2019; Ghaderi et al., 2016)). For many companies, especially those in competitive sectors, reduced lead time is becoming a common competitive advantage for some businesses over their competitors (Darko et al.,2018). Thus, many companies differentiate themselves from the highly-competitive and saturated markets by offering a reduced lead time.
Besides enhancing customer satisfaction and being a means of differentiation, reduced lead time also reduces inventory costs. According to Li et al. (2019), reduced lead times mean that a business will store products for a shorter time before delivery, thus reducing the costs required to facilitate that storage. On the other hand, the increased lead time will require businesses to store products longer, thus incurring storage costs. Thus, the lower the lead time, the lower the inventory costs; the higher the lead time, the higher the inventory costs.
There are several ways through which Somerset Furniture Company can reduce the lead time in its global supply chain. One way is through lean manufacturing, which strives to reduce wastage in the production process while maximizing productivity through increased responsiveness to customers (Chang & Lin, 2019; Vanichchinchai, 2019). For Somerset, lean manufacturing would include a quality control system. The company has had quality issues that led to a back-and-forth between it and customers, thus causing increased lead time. To counter this, the company should implement control measures in various phases of the production process to ensure that the furniture meets the required standards. Consequently, the final product will be of high quality, thus eliminating return orders from clients and reducing the lead time.
Another way Somerset Furniture Company can reduce the lead time in the supply chain is by outsourcing logistics. The company is having logistical problems characterized by the transport of furniture to a Chinese port for shipping to the US being dependent on trucking availability and schedules. The shipping process also depends on how soon the cargo ship gets enough containers. There also tends to be a shortage of containers at the port as big importers often reserve most of them. However, most of these logistical problems would be resolved if Somerset outsourced the function to a specialist company, which would easily navigate these hurdles.
References
Boute, R. N., & Van Mieghem, J. A. (2015). Global dual sourcing and order smoothing: The impact of capacity and lead times. Journal of Management Science and Engineering, 61, 2080–2099.
Chang, W. S., & Lin, W. T. (2019). The effect of lead-time on supply chain resilience performance. Asia Pacific Management Review, 24(4), 298-309. doi:https://doi.org/10.1016/j.apmrv.2018.10.004
Darko, S. M., Terkper, V. D., Novixoxo, J. D., & Anning, L. (2018). Assessing the effect of lead time management on customer satisfaction. International Journal of Developing and Emerging Economies, 6(1), 1-22.
Ghaderi, H., Dullaert, W., & Amstel, W. P. (2016). Reducing lead-times and lead-time variance in cooperative distribution networks. International Journal of Shipping and Transport Logistics, 8(1), 51-65. doi:10.1504/IJSTL.2016.073316
Li, Z., Fei, W., Zhou, E., Gajpal, Y., & Chen, X. (2019). The impact of lead time uncertainty on supply chain performance considering carbon cost. Sustainability, 11(22). doi: https://doi.org/10.3390/su11226457
Vanichchinchai, A. (2019). The effect of lean manufacturing on a supply chain relationship and performance. Sustainability, 11(20).
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