Lead time
Master lead time concepts and calculations that help organizations optimize ordering, production, and delivery schedules while improving operational efficiency.
Sarah Dotson
What is lead time?
Lead time is the total time between the initiation of a process and its completion. In business operations, this typically refers to the time from when an order is placed until the product or service is delivered. Lead time is a crucial metric that impacts inventory management, production planning, and customer service.
Understanding lead time components
Lead time encompasses multiple phases depending on the business context. For manufacturing, it includes processing, production, and delivery times. For purchasing, it covers order placement, supplier processing, shipping, and receipt. Each component affects the total lead time and requires careful management.
Key lead time elements
Organizations must manage several types of lead time:
- Procurement lead time
- Manufacturing lead time
- Customer order lead time
- Shipping and delivery time
- Setup and processing time
Business applications
Lead time analysis helps organizations:
- Optimize inventory levels
- Plan production schedules
- Set customer expectations
- Manage supplier relationships
- Improve operational efficiency
Implementation considerations
Effective lead time management requires:
- Accurate time tracking
- Regular supplier evaluation
- Process optimization efforts
- Buffer time allocation
- Performance monitoring
Operational impact
Understanding and optimizing lead times helps organizations reduce costs, improve customer satisfaction, and maintain efficient operations throughout their supply chain.
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