Lead time is essentially the total time it takes to get a particular task done. The clock starts ticking as soon as the process starts and ends when the job is complete. Lead time could be applied to any process or activity and helps determine how efficiently things are getting done. For example, in a restaurant, lead time can be calculated to ascertain how long it takes customer orders to arrive. It would start right when the customer orders the food and end once the food is served. The time needed to prepare the food and make it ready for service is the chef’s cycle time.
Within lead time lies cycle time, transit time, build time, etc. Unlike cycle time, lead time is not completely under the manufacturer or seller’s control since there are external parties (suppliers, logistics firm, etc.) contributing to lead time. To reduce lead time or maintain consistency, the stakeholders must be in sync with each other.
Lead Time Breakup
Generally, within a manufacturing sector, lead time is broken down to order processing and procurement, production, and delivery time. Order processing time is the total duration between order placement and the commencement of production work on the order. Production lead time is the time needed to build the product. Delivery lead time is the time a product takes to reach the buyer once its packaged and shipped out.
Also, lead times vary across industries and companies. For instance, an Internet-based seller’s lead time is likely to be longer. Also, any delay from the vendor side with regard to raw material procurement or reordering delay inflates lead time. Companies therefore must calculate reorder schedules based on their average lead time.