📉 Measuring Risk: Understanding Lead Time Deviation
The Lead Time Deviation is a powerful metric calculated by Optiply that measures the unreliability of a supplier's delivery schedule. It indicates the expected number of days that a purchase order is likely to arrive late compared to your agreed-upon delivery time (Expected Lead Time).
Why the Deviation is Calculated
Lead time deviation is one of the most important factors for calculating the required safety stock to meet the desired service level. You must order enough extra safety stock to cover the period of time your supplier is typically late.
• Low Deviation: Indicates the supplier is reliable. Safety stock for lead time will be low.
• High Deviation: Indicates the supplier is unreliable. Optiply's algorithm will increase the safety stock buffer to cover the extended, unplanned delay, protecting you from stockouts.
How Optiply Calculates Deviation
The deviation is calculated by analysing your historical purchase orders:
Optiply looks at all closed purchase orders from that supplier.
It compares the Expected Lead Time (the time you entered) against the Actual Delivery Time (the date the order was processed in your warehouse).
The calculation determines the average and variability of the lateness, providing a statistical measure of risk—the deviation.
Locating the Lead Time Deviation
This crucial reliability metric can be found on the Suppliers Page:
Navigate to Suppliers: Go to the Suppliers page in Optiply.
Select the Supplier: Click on the specific supplier you are reviewing.
Find the Metric: Navigate to the Information tab and locate the Additional Info section.
The Lead Time Deviation will be displayed as a percentage.
❓ Frequently Asked Questions (FAQs)
What is the difference between Measured Delivery Time and Lead Time Deviation?
Measured Delivery Time is the simple average time it takes for an order to arrive (e.g., 8 days). Lead Time Deviation is the measure of the variability or risk around that average (e.g., the order might be 2 days late 90% of the time). Optiply uses both to calculate safety stock.
If the Lead Time Deviation is 0, what does that mean?
A deviation of 0 days can mean one of 2 things:
The supplier is perfectly consistent and delivers exactly on the expected lead time. This is rare but indicates the lowest possible risk, allowing Optiply to use a minimal safety stock buffer for delivery variance.
A deviation of 0 can also mean we don't have enough data to calculate an accurate lead time deviation. As you log more buy orders over time, this will update.
My configured lead time equals my measured lead time, but my lead time deviation is very high. Should I increase my lead time setting?
No. You do not need to manually increase your lead time setting. Optiply's algorithm automatically accounts for high deviation by factoring it into your safety stock calculations.
Instead, the best course of action is to investigate why the deviation is so high and address the root cause. Typical reasons for high lead time deviation include:
Slow or inconsistent fulfilment from your suppliers.
Transit delays caused by shipping providers or freight carriers.
Bottlenecks or delays within your own warehouse's receiving and inbound processes.
Does a positive number for deviation mean the supplier is often late?
Yes. Since the deviation is calculated in relation to the set delivery time, a positive number indicates that, statistically, you should expect the order to arrive later than promised.
If I manually override my Expected Lead Time, does the deviation change?
No. The deviation is calculated based on historical deliveries, not your manual input. If you update the Expected Lead Time, the deviation will still reflect the historical variability of the supplier's actual delivery performance.
My reliability is low, but my safety stock is still high. Why?
Lead time reliability is an important factor that determines safety stocks, but by no means the only one. Other factors include demand uncertainty and unrealised sales.