Lead Time
Lead time is the total time elapsed from when a customer places an order to when they receive the finished product.
Lead time measures the full duration of an order's journey. It begins when a customer order is confirmed and ends upon final delivery. This period includes all administrative, procurement, manufacturing, and shipping activities. For example, it covers order entry, material purchasing, production on the shop floor, quality checks, and transit to the customer.
Reducing lead time is a primary goal in many manufacturing operations. Shorter lead times improve customer satisfaction and increase responsiveness to market changes. They also reduce the amount of capital tied up in work-in-progress (WIP) and finished goods inventory. Consistently long or unpredictable lead times can indicate underlying problems like supply chain disruptions, production bottlenecks, or inefficient processes.
Manufacturers manage lead time by analyzing each component of the order-to-delivery cycle. Strategies include improving supplier reliability, optimizing production schedules, and reducing changeover times between jobs. Some companies use value stream mapping to identify and eliminate non-value-added activities, such as waiting for materials or unnecessary transport, which directly shortens the overall lead time.
A customer orders 500 custom-molded plastic parts. It takes 1 day to process the order and release it to production. Manufacturing the parts, including machine setup and quality inspection, takes 4 days. It then takes 2 days to package and ship the order to the customer's facility. The total lead time is 7 days.
What is the difference between lead time and cycle time?
Lead time is the total time from a customer order to delivery. Cycle time is the time it takes to produce one unit from start to finish on the shop floor.
Does lead time include shipping and delivery?
Yes, customer lead time includes all activities up to the point of final delivery. Internal metrics may focus only on manufacturing lead time, which ends when a product is ready to ship.
How can we accurately measure lead time?
Measure lead time by recording the timestamp of the customer order and the timestamp of the final delivery confirmation. The difference between these two points is the lead time for that order.
Why is our lead time so variable?
Variability often comes from supplier delays, unexpected machine downtime, quality rejections, or fluctuating order volumes. Tracking the root causes of delays helps identify areas for improvement.
What is procurement lead time?
Procurement lead time is the time it takes from placing an order with a supplier to receiving the materials. It is one component of the total manufacturing lead time.
Cycle Time
Cycle time is the total time required to complete all the steps of a process for one unit of production.
Takt Time
Takt time is the rate at which you need to complete a product to meet customer demand.
Just-In-Time
JITJust-In-Time is a production strategy where items are created or delivered only as they are needed, minimizing inventory.
Work in Progress
WIPWork in Progress (WIP) is the inventory of partially finished goods waiting for completion and final inspection.
On-Time Delivery
OTDOn-Time Delivery (OTD) is a performance metric that measures the percentage of orders shipped to customers on or before the promised delivery date.