Labels and supply chains

Interesting information you can get from reading product labels. And I am not talking about food ingredients. What I am talking about is how long does it take from the moment a product is manufactured until it is sold? Or even, how long can a manufacturer afford this lead time to be? Lead times are tricky and rarely reported by firms. Longer lead times mean more working capital and pose challenges for forecasting, because firms have to decide how much to produce well in advance. In fact, in this paper I argue that retail sales forecasts (and inventory budgeting) for the next year are done 6 to 12 months before it starts. Anyways, because lead times are so tricky, I always welcome first hand data that documents them.

In this case the data comes from two product labels – one from Ikea and the other is CB2. Both related to furniture bought by me in the beginning of February. It turns out that Ikea manufactured that product (it was a chair) on May 26, 2011 in Mexico. Moreover the cover for that chair was made on the 16th week in 2011 (that is around Apr. 20). The chairs from CB2 were made in Taiwan by vendor Elegant Products and shipped from there on Aug. 4, 2011. Which gives almost 9 months lead time for Ikea and 6 months for CB2. Again these are the lead times after the product is manufactured. Actual decision about manufacturing them had to be done before that.

Give or take, it seems that Ikea’s lead times are about 50% more than CB2’s. And it makes sense, given that Ikea’s assortment rarely changes (aside from seasonal items) and CB2 tries to follow the contemporary trend.

 

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