Lead time — definition

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Definition of Lead Time

Lead time is the def­i­n­i­tion of the time need­ed for a good to be avail­able for con­sump­tion from the moment it is ordered.

The lead time should there­fore include the fol­low­ing times: 

• the plac­ing of the order,
• its man­age­ment by the seller,
• its trans­port or even pos­si­ble tran­sits for the delivery,
• its recep­tion,
• pos­si­ble controls,
• and unpack­ing time.

What about cycle time?

Lead time is an impor­tant indi­ca­tor, how­ev­er it is often con­fused with the term “cycle time”: 

• Lead time is about what is rel­e­vant from a business/customer per­spec­tive. This is the ” com­mer­cial lead time” , which is what is vis­i­ble and per­ceived by the cus­tomer. That is to say the set­ting up of stocks of fin­ished prod­ucts, semi-fin­ished or raw mate­ri­als at strate­gic points by the Sup­ply Chain .
• Cycle time, also called “cycle time”, is what the team can influ­ence by chang­ing its work process. It is in a way, the abil­i­ty of the teams to keep their promis­es. This is the actu­al lead time for the prod­uct to be made avail­able. That is to say, the lead time of all the activ­i­ties to be car­ried out — with­out stock already built up — on the sup­ply chain.

To reduce lead time, we can (and must) reduce cycle time. 

Why use lead time/cycle time?

It is a major indi­ca­tor for mea­sur­ing the per­for­mance of a sup­ply chain and its respon­sive­ness. It can be an indi­ca­tor of prob­lems in the flu­id­i­ty of order/request handling. 

This indi­ca­tor is under the respon­si­bil­i­ty of the Sup­ply Chain Man­ag­er. Its var­i­ous com­po­nents are divid­ed between the pur­chas­ing, pro­duc­tion, logis­tics and sales departments. 

The greater the lead time, the greater the lev­el of resources (capac­i­ty, inven­to­ry, direct and indi­rect costs) to serve the customer. 

 

 

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