Question 1

What is freight lead time?

Accepted Answer

Freight lead time is the total time from placing a purchase order to receiving goods at the destination port or warehouse. It includes origin handling, ocean or air transit, and destination customs clearance. For sea freight from Asia to Europe, typical baseline lead times range from 18 to 35 days depending on the origin port.

Question 2

How does the Suez Canal disruption affect lead times?

Accepted Answer

The Suez Canal disruption, driven by Houthi attacks in the Red Sea since late 2023, has forced many carriers to reroute vessels via the Cape of Good Hope. This adds approximately 10–14 days to Asia-Europe transit times and significantly increases fuel and operating costs, typically adding $1,200–$2,400 per TEU in additional freight surcharges.

Question 3

What is the difference between sea freight and air freight lead time?

Accepted Answer

Sea freight from Shanghai to Hamburg takes approximately 28–35 days, while air freight covers the same route in 3–5 days. Air freight is roughly 7–8x faster but costs 6–8x more per TEU equivalent. Rail freight sits in between, taking 14–20 days from China to Europe via the China–Europe rail corridor at 2–2.5x sea freight cost.

Question 4

How do port strikes affect supply chains?

Accepted Answer

Port strikes can add 14–20 days to lead times as vessels queue, divert to alternative ports, or wait for strike resolution. They also trigger emergency rerouting costs and demurrage charges. Major port strikes at Hamburg, Antwerp, or US East Coast have historically caused widespread supply chain disruption lasting weeks to months.

Question 5

How do you calculate safety stock?

Accepted Answer

Safety Stock = Z-score × Standard Deviation of Lead Time Demand. For a 95% service level, Z = 1.65. For a 99% service level, Z = 2.33. Example: Average daily demand = 100 units, lead time standard deviation = 3 days, average lead time = 10 days → Safety Stock = 1.65 × 3 × 100 ÷ √10 ≈ 157 units. Reorder Point = (Average Daily Demand × Lead Time) + Safety Stock. Higher service level targets require significantly more safety stock — moving from 95% to 99% service level typically increases safety stock by 40%.

Question 6

How do you calculate the reorder point?

Accepted Answer

Reorder Point (ROP) = (Average Daily Demand × Lead Time in Days) + Safety Stock. Example: Average daily demand = 50 units, lead time = 14 days, safety stock = 100 units → ROP = (50 × 14) + 100 = 800 units. When inventory drops to 800 units, place the next purchase order. With disruption-extended lead times (e.g., Red Sea rerouting adding 14 days), the ROP increases to (50 × 28) + 100 = 1,500 units — nearly double.