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What is Lead Time?

Michael Pollick
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Updated: May 16, 2024
Views: 97,563
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Lead time is the period between a customer's order and delivery of the final product. A small order of a pre-existing item may only have a few hours lead time, but a larger order of custom-made parts may have one of weeks, months or even longer. It all depends on a number of factors, from the time it takes to create the machinery to the speed of the delivery system. It may change according to seasons or holidays or overall demand for the product.

Manufacturers are always looking for ways to improve the lead time on their products. It can mean the difference between making the sale and watching a competitor sign the contract. If a company can deliver the product weeks ahead of the competition, it stands a better chance of receiving future orders. Because of this, management and labor teams routinely hold meetings to discuss timing improvements.

For a real world example of lead time in action, let's order a pizza. When you as the hungry customer decide on a preferred local pizza restaurant, you may have already considered such factors as speed and consistency. The selected restaurant must first receive your custom order, based on their pre-stocked ingredients. Once you've placed your order, the restaurant may tell you to expect the finished pizza in 45 minutes to an hour. This would be considered lead time. The restaurant bases this time on several factors: the time it takes to prepare the pizza, the cooking time, the availability of delivery drivers and the distance to your home.

As the potential customer, you could still change your mind and place an order with a different restaurant known for its speedy delivery times. The same style of pizza may arrive in 30 minutes. It's an identical product, but the lead time is different. This other restaurant may use prepackaged pizzas or hire more delivery drivers. There may be some limitations on delivery areas, however, or the pizza may not be cooked well. Sometimes a shorter lead time is no guarantee of overall quality. These times may also change according to the day of the week -- demand may be higher on weekend nights, for example, creating a longer lead time.

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Michael Pollick
By Michael Pollick
As a frequent contributor to SmartCapitalMind, Michael Pollick uses his passion for research and writing to cover a wide range of topics. His curiosity drives him to study subjects in-depth, resulting in informative and engaging articles. Prior to becoming a professional writer, Michael honed his skills as an English tutor, poet, voice-over artist, and DJ.
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Discussion Comments
By browncoat — On Mar 06, 2013

@anon1690 - I think that's a difficult thing to answer, but generally with fashions I think they develop them about a year apart. So, next year's summer fashion is being developed around this summer.

Unless you are talking about actual clothes ordered from a store, in which case it really depends on the store, or the person making the clothes if you're getting handmade clothes.

By pleonasm — On Mar 06, 2013

@anon274354 - I'd say it's probably about the same thing. The time between the customer order and the delivery of the final product.

So, say a company wants a particular kind of software to manage their ordering system. The lead time would be the time period between them placing the order with a software development company and the company delivering the final product.

I imagine it depends on whether they want something wholly original, or if they don't mind it being based on another program. It also depends on how complicated they want it to be and how much work they expect the software company to do in designing it (i.e. do they expect the company to figure out all the details, or have they already done that).

Lead time management is really important on both ends of the deal, because you can't just order a piece of software two days before you need it and expect that to happen.

By anon274354 — On Jun 11, 2012

What is the meaning of lead time in case of software development?

By anon45958 — On Sep 22, 2009

Re order:- Re order label is normally used to maintain the fill ratio of inventory. the purchase department or category team and software team sets the reorder level to maintain the MBQ (minimum order quantity). it is difficult to generate purchase orders when you deal with more then 10000 SKU. so the system automatically generates a purchase order with the help of reorder. Regards --Vikas arya

By anon41878 — On Aug 18, 2009

What is a re-order label?

By anon36990 — On Jul 16, 2009

who wrote the article on lead time and the year?

By sunilkapoor — On Feb 03, 2008

How do you distinguish between Lead time and cycle time, can you support with example pl.

By anon1690 — On Jun 12, 2007

how long is the lead time for summer sport wear usually?

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Michael Pollick
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As a frequent contributor to SmartCapitalMind, Michael Pollick uses his passion for research and writing to cover a wide...
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