Purchase Order Lead Time

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Purchase Order Lead Time (POL) refers to the amount of days in which a business places an initial order for manufacturing inputs it requires, from the time that those items actually arrive at the production plant to the time that the company ships them to their customers. Simply put, a POS is the estimate time it actually takes to get an order filled after it has been placed. In today's ever-busy world, companies find themselves in a position where they must place orders quickly and move on to the next customer - often by only providing a partial fulfillment service.

While some have argued that eliminating the lead times associated with purchasing is a desirable outcome - especially if you expect to see immediate savings in your profit margins or your monthly inventory turnover - most manufacturing managers view this as a necessary part of today's complex supply chain. Without eliminating purchase order lead times, manufacturers are subject to the false belief that lower inventory costs translate into lower profits. In reality, the opposite is true. Eliminating these lead times results in increased inventory costs that result in higher inventory turnover costs, higher product prices, and so forth. Eliminating these unnecessary costs, therefore, can directly impact the bottom line.

To recognize the importance of eliminating these lead times and maintaining accurate lead times for all of your manufacturing activities, take a close look at how your suppliers operate. Often, suppliers function like middlemen, passing your requests to other vendors who then pass the request on to the manufacturer. This means that if you have poor polt timing - if your raw materials or parts are not delivered on time, or if your manufacturer does not have the necessary inventory to support your orders - you could be out of luck. By allowing your suppliers to act like middlemen, you might also be limiting your ability to negotiate favorable price deals with those larger entities that could provide your company with the raw materials it needs.

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