The Critical Role of Lead Times in Retail

Lead times are the invisible clockwork that keeps retail operations running smoothly. They influence how much stock to order, when to reorder, and how to balance inventory levels to avoid both stockouts and excess inventory. 

In this article, we’ll break down what lead times are, how you can use Shelf Planner to optimise your inventory, and their role in the global supply chain. Most importantly, we’ll share actionable strategies to help you avoid stockouts and keep your business running smoothly.

Understanding Lead Times in Retail

What Is Lead Time?

Lead time is the total time from placing a purchase order to receiving the products in your warehouse or store. 

It includes supplier processing time, production time (if applicable), and shipping time. For retailers, lead time determines when you need to reorder stock to meet customer demand without overstocking.

Types of Lead Times

Lead times can be broken down into three main components:

These components add up to your total lead time, which dictates how far in advance you need to place orders.

Why Lead Times matter for your business

Mismanaged lead times can lead to two major problems:

• Stockouts: Running out of products when customers want them, resulting in lost sales and damaged reputation.
• Overstocking: Holding too much inventory, which ties up cash and increases storage costs.

For example, if you underestimate a supplier’s lead time, you might place an order too late and miss out on sales during peak periods. On the other hand, overestimating lead times can leave you with excess stock that’s costly to store and risks becoming obsolete.

External factors - like global supply chain disruptions, natural disasters, or geopolitical events - can also extend lead times unexpectedly. The COVID-19 pandemic, for instance, caused widespread delays, with many retailers facing stock-outs due to prolonged lead times.

How Shelf Planner helps you master lead times

Key Features to Optimise Your Inventory

Shelf Planner is designed to take the guesswork out of lead time management. Here’s how it helps:

• Automated Reorder Points: Shelf Planner calculates the ideal time to reorder based on your lead times, sales velocity, and safety stock levels. No more manual calculations or last-minute panic orders.
• Dynamic Lead Time Tracking: The system monitors supplier performance and adjusts reorder points automatically if lead times change, so you’re always prepared.
• Demand Forecasting: By analysing your sales history and seasonal trends, Shelf Planner predicts future demand, ensuring you order the right amount at the right time.
• Weeks of Stock (WoS) Parameter: This feature helps you determine how much stock to keep on hand based on your sales rate and lead time, so you’re never caught off guard.

How Shelf Planner Calculates Lead Times for you

A few simple steps will help you to automate your reordering in Shelf Planner:

1. Input Your Supplier Lead Times: Enter the lead times provided by your suppliers for each product, or apply a default lead time for the supplier. 
2. Integrate Sales Data: Shelf Planner analyses your past sales to forecast future demand.
3. Set Safety Stock Levels: The system calculates a buffer to protect against unexpected delays or demand spikes.
4. Automate Reorder Points: By calculating your Ideal Stock for each SKU in your store, we calculate the perfect reorder point for all your products. If you use the built in Purchase Order Feature in the app, we will also track lead times for each individual product based on your completed PO's'. This helps us to refine the reorder points over time.
5. Receive Alerts: Get notifications when it’s time to reorder, so you never miss a beat.

Benefits of using Shelf Planner

When you manage your lead times accurately, Shelf Planner can automate your reordering and support you in growing your business. The result:

• Fewer Stock-outs: Businesses using Shelf Planner reduce stock-outs by up to 30% by relying on data-driven reorder points.
• Better Cash Flow: Avoid overstocking and free up capital for other areas of your business.
• Stronger Supplier Negotiations: With accurate lead time data, you can negotiate better terms and hold suppliers accountable.
• Seasonal Adjustments: Shelf Planner adapts to changes in demand, so you’re prepared for holidays, promotions, or slow periods.

FAQs

How do I calculate lead time for a new product? 

Add up the time for procurement, production (if applicable), and shipping. Ask your supplier for their estimated lead time and factor in any potential delays.

What’s a reasonable lead time for my industry? 

Lead times vary widely. Fast-moving products (e.g., groceries, fashion) typically have shorter lead times (1–4 weeks), while custom or imported goods may take 8–24 weeks. Check industry benchmarks and supplier quotes for guidance.

How can I reduce lead times without increasing costs? 

Focus on improving communication with suppliers, streamlining internal processes, and using tools like Shelf Planner to automate and optimise inventory management.

What if my supplier consistently misses lead time deadlines? 

Have a backup supplier in place, maintain safety stock, and consider switching to a more reliable partner if delays persist.