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UT Knoxville BUAD 331 - Chapter 4

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Slide 1Planning Horizon and UncertaintyLead Time Gap ConceptLead Time GapDemand Penetration Point and InventoryBalancing Supply and DemandVelocity & Visibility Drive ResponsivenessBA331-Supply Chain ManagementChapter 4Shay Scott, Ph.D.Department of Marketing and SCMManaging Director, Global Supply Chain InstituteUniversity of [email protected] Chain ManagementPlanning Horizon and Uncertainty2•The time it takes to procure, make and deliver the finished product to a customer is often longer than the time the customer is prepared to wait.Lead Time Gap = SC Lead Time - Customer’s Order Cycle Time–Supply chain lead time: procurement, manufacturing and delivery of order–Customer’s order cycle time: time that the customer is prepared to wait on order•In conventional organizations, the only way to close the lead time gap is to attempt to forecast the market’s requirements and carry just-in-case inventory.•Ideally, a reduction in the gap can be achieved by shortening the SC lead time (pipeline time) while simultaneously trying to gain earlier warning of requirements through improved visibility of demand.Lead Time Gap ConceptLead Time Gap4Demand Penetration Point and Inventory 5Balancing Supply and Demand6Velocity & Visibility Drive


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UT Knoxville BUAD 331 - Chapter 4

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