If you're looking to check how to calculate lead time in your company, our lead time calculator is the perfect place! Do you have a store, and you want to know the lead time of your supply delivery? Or maybe you ordered something, and the producer sent you an email saying that the lead time is 60 days, and you have no idea what it means?
Worry no more - you're in good hands! We will give you the lead time definition and explain why companies use it. We will also tell you how to calculate lead time in different fields.
Lead time definition 🕒
What is lead time?
|💡 Lead time is the period between the initiation and completion of a process.|
The lead time definition becomes more specific depending on which industry we use it in. In the next paragraphs, we will describe the differences between lead time used in manufacturing, supply chain management, and a few others.
Manufacturing lead time formula
In manufacturing, lead time means the time necessary for processing, preparing materials, manufacturing, and delivery of an order. Generally, it consists of three periods:
Lead time = pre-processing + processing + post-processing,
Pre-processingis a time needed for, handling the order, making sales order, and preparing supplies;
Processingis a period when you make or collect the order. You may also know it by cycle time; and
Post-processingis the time of delivery.
Lead time processes are also categorized in a different, more detailed way:
- Order lead time (OLT) - the time from receiving to delivering a customer order (you can calculate it by subtracting the dates of these two events or adding pre-processing, processing, and post-processing).
- Order handling lead time (OHLT) - the time from receiving a customer order to creating a sales order.
- Manufacturing lead time (MLT) - the time from creating a sales order to having it ready for delivery.
- Production lead time (PLT) - the time from starting the physical production to having a finished product ready for delivery.
- Delivery lead time (DLT) - the time from having a finished product to having it delivered to a customer.
To understand how all these categories overlap look at this scheme:
Manufacturing lead time calculator
As there is more than one way to approach calculating lead time, our calculator has three modes:
Manufacturing lead time;
Order lead time; and
Supply chain management lead time.
The first two are connected to manufacturing. Which one should you choose? Let's look at a lead time calculation example. If you own a restaurant, select the first option, and estimate three periods:
Pre-processing- the time it takes a waiter to take an order and type it into the cash register;
Processing- the time it takes the chef to make the food; and
Post-processing- the time it takes the waiter to pick up the food from the kitchen and get it to you.
To make any conclusions from estimated lead time, measure it a few times, and calculate the average. Then, you can compare how fast your employees work or check which dishes take the longest. Based on that, you will know which employee deserves a raise and which dishes should be removed from the menu or have a higher price.
Choose the second option - calculating order lead time - if you're a customer. If a company gives you their lead time, you can estimate the delivery date by inputting into the calculator two things:
- The day you placed an order; and
- The lead time of a company.
You can also check if their lead time was longer or shorter by inputting the day of placing an order and delivery day.
Go to the next paragraph to find out when and how to calculate the supply chain management lead time.
How to calculate lead time in supply chain management? 📦
In supply chain management (or inventory management), we tie the lead time to the amount of stock the company needs. It consists of two periods:
Lead time = supply delay + reorder delay,
supply delayis the time between ordering and getting the supplies; and
reorder delayis the time you have to wait before reordering the supplies. That's because some suppliers carry out orders once a day, a week, or a month.
Let's say you own a restaurant where you use a rare and expensive ingredient. The person who sells it takes orders once every two weeks, and the delivery takes a day. To calculate lead time, input the correct numbers into our calculator:
supply delay = 1 day
reorder delay = 14 days
Input that to the lead time formula, and you'll get:
Lead time = 1 + 14 = 15 days
Next to reorder point, it's one of the most important factors to consider, to prevent shortages or overstock. If you already know the lead time, you can check in our date calculator the day you'll get supplies.
What is lead time in other fields?
When we talk about lead time in project management, we mean the period when two (or more) activities overlap. If you schedule some tasks at the same time, you could accelerate the end of a project.
In journalism, lead time is the time it takes you to work on a piece. That includes doing research, writing, and editing.
In medicine, it's the period between detecting disease through screening and the time the symptoms would lead to a diagnosis. For example, tests such as mammography, or cytology cause long lead time for detection of cancer.
Cycle time vs. lead time
You now know what lead time is. But you may not know that it is associated with two other terms: takt time and cycle time. Takt time is the time which you can spend on a product, so you meet the demand. Cycle time is the time it takes you to finish one product. What's the difference between cycle time and lead time? Well, cycle time only refers to processing, making, or collecting an order. So, in manufacturing, it's synonymous with processing.
We hope you enjoyed our lead time calculator! We highly recommend exploring our other time and productivity calculators!