Lead Time is the amount of time between process initiation and completion. For our customers, Lead Time is the time between a confirmed customer order and its scheduled pick up or delivery based on our terms and conditions. This varies based on the customer and the product.
There are several different types of Lead Time, but there are four primary types of Lead Time for our purposes in a manufacturing or assembly environment.
- Customer Lead Time – the amount of time taken between order confirmation and order fulfillment (either pick up or delivery depending on the agreement with the customer).
- Material Lead Time – the amount of time it takes to place an order with a supplier and receive it, from confirmed order to having it on hand.
- Factory/Production Lead Time – the amount of time it takes to build and ship a product if all the materials are available.
- Cumulative Lead Time – the total amount of time it would take from confirmed order to delivery of the product if you had to order all the materials (if none were on hand). It is the summation of material lead time and factory lead time.
What is the difference between Factory/Production Lead Time and Cycle Time?
- Cycle Time is the amount of time it takes to complete a cycle of action. Completion of a specific task from start to finish. More specifically it is the measured time that explains how often a part is completed by a particular process.
- Factory/Production Lead Time is the amount of time it takes to build and ship a product if all the materials are available. This includes all the manufacturing, sub-assembly, and assembly processes that impact the ability to process the material into production.
- Lead Time is an important factor for customer satisfaction. Typically customers want goods or services as fast as possible with minimal effort.
- For manufacturing and assembly, the concept of Lead Time is married to and has a direct relationship with the amount of inventory that exists at different points in the overall supply chain.
- If Customer Lead Time is less than Material Lead Times, Production Lead Times, or Cumulative Lead Times it will result in the holding of inventory within the supply chain at some or all points. Variation and inconsistency will often compound this issue – it will cause the holding of stock or inventory to mitigate risks in the supply chain.
If you don't acknowledge lead times your shipments will be late affecting your assembly line.