Thursday, 5 January 2017

What are the benefits of time compression?

As a general rule of thumb, the longer time that it takes in a supply chain, the greater the risk of under or over forecasting demand. There’s a big risk of markdowns with large stocks of inventory and a risk of losing sales due to lack of stock in small inventories. Time compression works on the premise that if the lead times are compressed, the cycle stock is also reduced and the forecasting period is reduced too. This improves forecast accuracy and reduces the risk of over and under stocking.

There are other benefits of time compression, which are as follows:
  1. Productivity increases thanks to reduced cycle times
  2. Work in progress reduces thanks to reduced cycle times
  3. Business turnover is increased
  4. Potential to increase prices thanks to improved lead times for the customer
  5. Reduced number of cancellations caused by lengthy time cycles
  6. Increased cash flow
  7. Changed orders decrease
  8. Market share can be increased thanks to being faster and more reliable
  9. Attracting profitable customers thanks to having a response advantage in the marketplace
Time compressed suppliers benefit from growing faster than their competitors. They are able to increase profits and cope with the level of demand. Their competitors are the ones left with the customers who want to pay less and who are prepared to wait in order to save themselves money.  Time compression gives companies the ability to create an agile and a lean supply chain.


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