Lead time is the total elapsed time from when an order is placed to when the goods are received by the buyer. It includes every step: order processing, manufacturing or sourcing, quality checks, packaging, shipping, customs clearance (for international orders), and final delivery.
A product with a 6-week lead time takes 6 weeks from the moment you order it until it arrives.
You’ll hear this when…
Lead time is a fundamental planning metric in supply chain management, procurement, and inventory control. “What’s the lead time on that?” is one of the most-asked questions in purchasing departments.
Shorter lead times mean less inventory to hold, faster response to demand changes, and better customer satisfaction. Longer lead times require larger safety stock (extra inventory held as a buffer) and more advance planning.
“Lead time variability” — how much lead times fluctuate — is often more problematic than long lead times themselves. A consistent 8-week lead time is easier to plan for than one that swings between 4 and 12 weeks.
Types of lead time
The term is used at different levels. Manufacturing lead time is how long it takes to produce the goods. Shipping lead time is transit time from origin to destination. Total lead time encompasses everything from order placement to delivery. Make sure you know which one someone is referring to — the number changes dramatically depending on scope.
Source: ASCM (Association for Supply Chain Management) — supply chain terminology