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What Is Lead Time? How To Calculate Lead Time In Different Industries

Peter Landau
Publication date:
May 24, 2022
Article Summary: 

What Is Lead Time? How To Calculate Lead Time In Different Industries

Lead time is the period between the start of a process and its conclusion, which is the amount of time it takes to make a product or service usable for the customer. It is used in various industries from manufacturing to supply chain management and project management, and the average lead time differs across industries. Lead time allows businesses to schedule work and give their clients or end-users a deadline by which they'll receive the product. To better manage lead time, project management software such as ProjectManager can help track work in real time and provide multiple project views. The six components of lead time are not set in stone and can vary from one industry to the next.

Preprocessing time is the time it takes to receive a request for replenishment or the development of a project, while processing time is after receiving the purchase order and waiting time is the period between procuring the necessary resources and the time when item production takes place. Storage time refers to inventory, transportation time is for moving the product from the warehouse or factory to the customer, and inspection time is for the product to be looked over and approved by the customer after it's delivered. Calculating lead time is an important metric when managing a project, supply chain or manufacturing process, as it helps to order the right amount of raw materials and have enough stock on hand to fulfill orders. Lead time is the balance of inventory between supply and reordering delays. It is calculated by subtracting the order request date from the order delivery date.

In manufacturing, lead time is the time it takes to process, prepare materials, manufacture and deliver an order. In inventory management, it is calculated by adding the supply delay to the reordering delay. Lead Time in Manufacturing is made up of material lead time, production lead time and customer lead time.


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Source Citation: 
Peter Landau
What Is Lead Time? How To Calculate Lead Time In Different Industries
May 24, 2022
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