Business case on lead Time Gap:

Procurement Manufacturing Delivery

Logistics lead time

Customer order cycle

Lead Time Order fulfilment

Suppose the Total lead time from Order to Delivery is 60 days in the above case. Whereas customer order cycle time is 30 days. To cover up the Lead Time gap
Company need at least 60 days demand forecast and minimum 30 days safety stock of inventory.
In the analysis of data it was found that for 60 days demand forecast the forecast accuracy is 65%. And due to 60 days Order Cycle Company could not able to
repose about 20% of their customer order.

The following are the other information of the company:

1) Total customer order received last year Tk. 100 core
2) Total safety stock value Tk. 20 core
3) Stock out value due to poor demand forecast- Tk. 5 core
4) Potential order increase not possible due to high Order cycle time is about 5%. If order cycle improved by 50%.
5) Inventory obsolete cost is about 5%.
If the company reduce the Lead Time Gap from 60 days to 45 days then what would the positive potential impact on the organization performance.
Solution:

Improvement or reduction of lead time: 15/60 days= 25%

1) Customer order response improved by 25% . In value = Tk(100*20%)=Tk ( 20*25%)= Tk. 5 Core
2) Safety Stock can be reduced = Tk. 20* 25%= Tk 5 core
3) Stock out loss can be reduced: Tk. 5 * 25%= Tk. 1.25 core
4) Potential order value can be increased= (100*5%*25%)= Tk. 1.25 core
5) Inventory obsolete cost can be reduced= Tk. (20*5%*25%)= Tk. 0.25 core.

Other indirect non-financial benefit:

1) Improve working capital management

2) Customer retention will be high
3) Overall operation planning will be improved due to improved forecast accuracy.
4) Company Top and Bottom line will be improved.
5) Company image will be stronger which will help for new customer attraction.