Lead Time Management: Private and Public Sector Practices

Lead time management is an important element in any materials management system. The length and variance in procurement lead time directly impacts inventory investment, demand forecast accuracy, inventory turbulence, the risk of unneeded inventories, and system responsiveness. The critical significance of lead time management, however, typically is not adequately appreciated or considered in basic Department of Defense (DOD) procurement and inventory management processes. As a result, DOD inventories relative to demand have increased, and unusable inventories continue to grow. In comparison with the DOD, leading private sector firms recognize the importance of lead time management to profitability and long‐term market success. Typically they place a much a greater emphasis on time‐sensitive procurement and materials management systems; in recent years, the just‐in‐time concept has facilitated this effort. The inherent nature of these strategies mandates active lead time management. This article examines lead time management in both the DOD and private sector environments. Drawing on data collected from private sector firms, DOD vendors, and DOD inventory managers, empirical differences in lead time profiles are developed and analyzed—and specific procurement lead time differences are developed and used to illustrate the impact on inventory investment Finally, the article highlights DOD procurement and inventory management policies that negatively impact procurement lead times and recommends revisions to these policies.