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What is Lead Time?
Lead time is a term that refers to the time between the beginning of the beginning and completion of a process. For example, in a manufacturing company, lead time is the time the company begins to manufacture a product and the time manufacturing is completed.
How is Lead Time Used?
The term lead time can be used in various aspects of life to describe the time period between starting and completing a process. For example, in the health sector, it can be used to refer to diseases.
The term is also commonly used in the supply chain management environment to mean the time between the placement of an order by the customer and the time the order becomes ready for delivery.
The term is used similarly in the manufacturing environment to mean the time the customer places an order for a product and the time the product becomes ready for delivery. However, in a manufacturing environment, it includes the time used for shipping the product to the customer. This time is included because the manufacturing firms need to know the availability of the materials to make a plan of the production and delivery.
In the supply chain the lead time is categorized into five aspects such as order lead time, order handling time, manufacturing lead time, production lead time, and finally the delivery lead time.
Order lead time refers to the time an order is received from the customer and the time the order is delivered to the customer.
Order handling time refers to the time the order is received for the customer and the time the ordered sale is created.
On the same note, manufacturing lead time refers to the time between the creation of sales order and the time the production is completed.
Similarly, the production lied time is the time between the beginning of production and the time of completion of the production.
Lastly, the production lead time refers to the time the production is completed and the time the product is delivered to the customer.
In other words, lead time refers to the total time that is needed for product manufacturing. The product manufacturing time includes preparation for the order, inspection time, move time and run time. In the situation of make-to-order, lead time refers to the time taken to move the order from the production after the completion of the manufacturing and the shipment of the product.