Leadtime

Lead time is the amount of time that elapses between the initiation of a process and its completion. In manufacturing and supply chain contexts, it typically refers to the period from when a customer places an order or a purchase requisition is created to when the product is delivered or the service is completed. Lead time differs from cycle time, which measures the time to complete a unit once work has begun; lead time includes waiting, queues, handoffs, and transportation.

Lead time can be described in several forms, including procurement lead time (from supplier confirmation to receipt), manufacturing lead time (from release of work to finished goods), and delivery lead time (from order release to customer receipt). The total lead time for a fulfilled order is the sum of all sub-lead times involved in the process.

Measurement and use: lead time is commonly calculated as the date of delivery minus the date of order. It is a key performance indicator for responsiveness and customer satisfaction, and it influences inventory decisions, safety stock, and service levels. Longer lead times increase risk of stockouts and capital tied in inventory, while shorter lead times improve agility.

Factors affecting lead time include supplier reliability, capacity constraints, demand variability, process complexity, order quantities, scheduling practices, transportation modes, and regulatory or customs requirements. Strategies to reduce lead time involve process optimization, closer supplier collaboration, parallel processing, standardization, accurate forecasting, and inventory strategies such as decoupling points and just-in-time practices.