Skip to content
Dictionary / Lead time

Lead time

Last updated August 14, 2023

What is lead time?

Lead time is a crucial metric that represents the duration between the initiation of a process and its completion. In the context of supply chain management and , lead time refers to the time it takes from placing an order with a supplier or manufacturer to receiving the finished goods.

Factors influencing lead time

Several factors can influence lead time, including:

  • Supplier's production capabilities and capacity.
  • The complexity and volume of the order.
  • The transportation method and distance between the supplier and the customer.
  • Customs and regulatory procedures, if applicable.
  • Unforeseen disruptions or delays, such as natural disasters or labor strikes.

Calculating lead time

Lead time can be calculated using the following formula:

Lead Time = Production Lead Time + Transportation Lead Time

  • Production Lead Time: The time it takes for a supplier to produce the ordered items.
  • Transportation Lead Time: The time it takes for the finished goods to be transported from the supplier to the customer.

Reducing lead time

Reducing lead time is often a priority for businesses, as shorter lead times can improve inventory management, enhance customer satisfaction, and reduce stock outs. Strategies for reducing lead time may include:

  • Streamlining the production process to minimize bottlenecks and inefficiencies.
  • Developing strong relationships with suppliers to ensure timely communication and order prioritization.
  • Implementing just-in-time (JIT) inventory management practices.
  • Using faster transportation methods or optimizing logistics networks.

Lead time in the Hakio platform

The Hakio platform allows users to analyze and manage lead times effectively. By understanding lead time patterns and trends, businesses can make informed decisions on inventory management, supplier selection, and overall supply chain optimization. This insight helps companies reduce , minimize excess inventory, and enhance customer satisfaction.