Latest / The Buyer's Side with Fexingo: Procurement, Sourcing, and B2B Purchasing Decisions / How One Company Cut Supplier Lead Time by 40 Percent
Transcript
- Lucas: So the conventional wisdom in procurement is that shorter lead time means paying more — you want it faster, you pay a premium. But there's a case out of a mid-size manufacturer called Meridian Components that completely flips that script. Luna: I think I remember hearing about this. They make parts for industrial equipment, right? Not a household name, but a decent-sized operation. Lucas: Exactly. About five hundred million in revenue, maybe a couple thousand suppliers. Their sourcing team ran what's called a value-stream mapping exercise on their top twenty suppliers by spend. And what they found was genuinely surprising. Luna: What kind of surprise? Were the suppliers the problem? Lucas: Not really. The average lead time across those twenty suppliers was eighteen days from order placement to delivery. But when they mapped the entire process — from when the requisition was raised to when the goods hit the dock — they realized that nearly half of that eighteen days wasn't the supplier's fault. It was internal. Luna: Internal how? Like, approvals? Purchase order processing? Lucas: All of the above. The typical purchase order at Meridian went through three approval stages — department head, finance, and procurement — and sat in someone's inbox for an average of two days at each stop. Then there was the time it took to generate the PO itself, send it, and for the supplier to acknowledge it. By the time the supplier actually started working, seven days had already passed. Luna: So the supplier's lead time was really only eleven days, but Meridian was experiencing eighteen. Lucas: Right. The supplier was performing, but Meridian's own process was inflating the perceived lead time. And here's the kicker — the procurement team was constantly pressuring suppliers to go faster, paying expediting fees, sometimes up to fifteen percent more per unit, when the bottleneck was inside their own building. Luna: That is such a classic procurement blind spot. We focus so much on supplier performance that we forget to look in the mirror. Lucas: Yeah. So the team redesigned the workflow. They reduced approvals to one — only for orders above a certain threshold. They automated PO generation through their ERP system. And they negotiated with their top suppliers to set a mutually agreed lead-time buffer — the supplier committed to eleven days, Meridian committed to having the PO to them within twenty-four hours of the requisition being raised. Luna: That's smart — making it a two-way commitment instead of just demanding faster from the supplier. Lucas: Exactly. The result? Average end to end lead time dropped from eighteen days to eleven. A forty percent improvement. And they didn't pay a cent more in unit prices. In fact, they saved a bit because they stopped paying those expediting fees. Luna: What about inventory? Did they see a benefit there too? Lucas: Massive. With shorter lead time, they could reduce safety stock. They estimated a fifteen percent reduction in inventory carrying costs. That's real money when you're a manufacturer with hundreds of millions in inventory. Luna: So the lesson is: before you go after your suppliers, audit your own process. But how does a typical procurement team even start that audit? Most of them don't have a value-stream mapping template lying around. Lucas: It's simpler than you'd think. Pick your top five suppliers by spend. Map every step from the moment someone identifies a need to when the product is received. Write down how long each step actually takes — not what the policy says, but what happens in practice. You'll almost certainly find dead time. Luna: And the approvals piece — that seems like low-hanging fruit. But in a lot of companies, those approvals exist for a reason. How do you balance control with speed? Lucas: That's the key question. Meridian's solution was tiered approval. Routine orders under fifty thousand dollars — one approval from the department head. Orders above that — add procurement and finance. They also used a 'price variance' rule: if the order is within five percent of the last three orders, auto-approve. That covered about seventy percent of their POs. Luna: That's a good framework. And it's not just about lead time — it's about trust. When you share your internal data with suppliers, they see you're serious about partnership. Lucas: Exactly. Meridian actually shared their value-stream map with their top suppliers. They said, 'Here's our bottleneck — we're fixing it. In return, we need you to hold to the eleven-day commitment.' The suppliers appreciated the transparency. A couple even offered suggestions to further streamline the PO acknowledgment step. Luna: That's the ideal — a collaborative process improvement rather than a one-sided demand. Lucas: Yeah. And it's a reminder that lead time isn't just a supplier metric. It's a joint metric. The best procurement teams treat it that way. Luna: Before we go further — I want to acknowledge something. We're able to have these kinds of detailed, ad-free conversations because of listeners who support the show. If today's episode was useful to you and you want to keep it ad-free, buy me a coffee dot com slash fexingo helps. Lucas: Yeah, it really does. And it keeps us independent, which means we can dig into cases like Meridian without worrying about sponsor messaging. Luna: So back to the audit — what's the one metric you'd recommend procurement teams track after they clean up their internal process? Lucas: I'd say 'total cycle time from requisition to receipt.' Not supplier lead time alone. That's the number that captures the full picture. And once you start measuring it, you'll see where the real delays are. Luna: And then you can benchmark it against industry averages. For Meridian's sector, eighteen days was actually pretty typical. So they were average — but average means there's a lot of room to improve. Lucas: Right. And that's the thing — most procurement teams think they're doing fine because their supplier lead time numbers look okay. But they're not seeing the full chain. If Meridian hadn't done that mapping, they'd still be paying expediting fees and blaming suppliers. Luna: So the takeaway for our listeners: pick one supplier this week. Map the process. Find the dead time. You might be surprised at what you find. Lucas: And if you do find it, you can fix it without asking for a discount or a faster turnaround. That's the most efficient negotiation you'll ever have — with yourself. Luna: Great note to end on. Thanks, Lucas. Lucas: Thanks, Luna. See you next time.