Blog · Territory, capacity and quota planning · Supply chain
How a supply chain team measures actual lead time and its variability per supplier per site per item from purchase orders and receipts, why the spread drives safety stock more than the mean, the suppliers whose variability rose while their average held, and the inventory that a tighter supplier or a corrected lead time parameter would release.
A supply chain team sets safety stock from a lead time parameter in the ERP that was entered when the item was created. The receipts say what the lead time actually is, per supplier, per site, and how much it varies. This guide sets out actual lead time and its spread, the comparison to the parameter, and the inventory the difference is costing.
Per supplier, per site, per item, per period:
Actual lead time = receipt date − order date, per PO line Mean, median, interquartile spread, standard deviation Parameter gap = planned lead time in the ERP − median actual
Per item, per site:
Safety stock at current spread, at target spread, and the difference in units and value
Supplier identifiers only.
every receipt joins to exactly one PO line, and receipt date ≥ order date
Receipts before orders, which are usually keying errors, fail it and are excluded from the lead time with a count.
One item, two sites, same supplier.
| Site | Lines | Median actual | Spread (IQR) | Planned | Parameter gap | Safety stock now | At target spread | Released |
|---|---|---|---|---|---|---|---|---|
| Plant A | 48 | 21 days | 4 days | 21 | 0 | 380 units | 380 | none |
| Plant B | 52 | 24 days | 15 days | 21 | −3 | 1,410 units | 420 | 990 units, $61,000 |
Same supplier, same item. Plant B's lead time is a little longer and four times as variable, and it is carrying a thousand units of safety stock that a steady supplier or a different lane would release. The planned parameter is also three days short, which is why Plant B expedites.
| Supplier | Site | Median now | Median trailing 4 | Spread now | Spread trailing 4 | Reading |
|---|---|---|---|---|---|---|
| S-0217 | Plant B | 24 | 23 | 15 | 6 | Spread rose; average held |
| S-0442 | Plant C | 31 | 27 | 5 | 5 | Average rose; steady |
Supplier S-0217's average looks fine and its variability has more than doubled. That is the supplier conversation, and the on-time scorecard would not have raised it for another quarter.
Supplier-level only. Plant B's problem is averaged into Plant A's.
Mean without spread. The safety stock driver is unmeasured.
Parameter never compared. The ERP plans on a number nobody has checked since the item was set up.
Released inventory reported as saving. It is an estimate at a stated service level. Say so.
Mapped once, PO lines, receipts and the item master produce actual lead time, spread, the parameter gap and the released-inventory estimate every month. Covirage builds this from the exports as they are. The supply chain page describes the setup, and the OTIF trend guide covers the companion measure from the same receipts.
The same supplier ships to different sites on different lanes with different carriers and receiving practices. A supplier's lead time to one plant can be steady and to another erratic, and a supplier-level figure averages the erratic one away.
Safety stock at the current spread against safety stock at the target spread, for the same service level, times unit cost. The formula and the service level are stated on the report. It is an estimate of what a change would free, not a promise.
It is a parameter someone set at item creation. The report shows planned against actual per item and site, and the items where planned is well below actual are the stock-outs waiting to happen; where planned is well above, the inventory is sitting for no reason.