Logistics and Supply Chain Management, 4th Edition

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‘Time is money’ is perhaps an over-worked cliché in common parlance, but in

logistics management it goes to the heart of the matter. Not only does time repre-

sent cost to the logistics manager but extended lead times also imply a customer

service penalty. As far as cost is concerned there is a direct relationship between

the length of the logistics pipeline and the inventory that is locked up in it; every

day that the product is in the pipeline it incurs an inventory holding cost. Secondly,

long lead times mean a slower response to customer requirements, and, given

the increased importance of delivery speed in today’s internationally competitive

environment, this combination of high costs and lack of responsiveness provides a

recipe for decline and decay.

Time-based competition

Customers in all markets, industrial or consumer, are increasingly time-sensitive.

1

In other words they value time and this is reflected in their purchasing behaviour.

Thus, for example, in industrial markets buyers tend to source from suppliers with

the shortest lead times who can meet their quality specification. In consumer mar-

kets customers make their choice from amongst the brands available at the time;

hence if the preferred brand is out of stock it is quite likely that a substitute brand

will be purchased instead.

Strategic lead-time

management

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Time-based competition

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Lead-time concepts

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Logistics pipeline management

Customers in all markets, industrial or consumer, are increasingly

time-sensitive.

In the past it was often the case that price was paramount as an influence on the

purchase decision. Now, whilst price is still important, a major determinant of

choice of supplier or brand is the ‘cost of time’. The cost of time is simply the addi-

tional costs that a customer must bear whilst waiting for delivery or whilst seeking

out alternatives.

There are many pressures leading to the growth of time-sensitive markets, but

perhaps the most significant are:

1 Shortening life cycles

2 Customers’ drive for reduced inventories

3 Volatile markets making reliance on forecasts dangerous

1 Shortening life cycles

The concept of the product life cycle is well established. It suggests that for many

products there is a recognisable pattern of sales from launch through to final

decline (see Figure 6.1).

A feature of the last few decades has been the shortening of these life cycles. Take

as an example the case of the typewriter. The early mechanical typewriter had

a life cycle of about 30 years – meaning that an individual model would be little

changed during that period. These mechanical typewriters were replaced by the

electro-mechanical typewriter, which had a life cycle of approximately ten years.

The electro-mechanical typewriter gave way to the electronic typewriter with a four-

year life cycle. Now personal computers have taken over with a life cycle of one

year or less!

In situations like this the time available to develop new products, to launch them

and to meet marketplace demand is clearly greatly reduced. Hence the ability

to ‘fast track’ product development, manufacturing and logistics becomes a key

element of competitive strategy. Figure 6.2 shows the effect of being late into the

market and slow to meet demand.

LOGISTIC S & SUPPLY CHAIN MANAGEMENT

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Introduction

Growth

Maturity

Saturation

Decline

Time

Sales (£)

Figure 6.1 The product life cycle