Lead Time
Also known as: Order Lead Time, Delivery Lead Time
Definition
Lead time measures the complete duration from order placement to delivery. It encompasses every step: order processing, manufacturing (if applicable), picking, packing, and shipping.
Lead Time Components
| Component | Description |
|---|---|
| Processing time | Order entry and verification |
| Production time | Manufacturing (if made to order) |
| Handling time | Picking and packing |
| Transit time | Carrier shipping duration |
Total Lead Time = Processing + Production + Handling + Transit
Lead Time Examples
| Business Type | Typical Lead Time |
|---|---|
| E-commerce (in-stock) | 2-7 days |
| Made-to-order | 2-6 weeks |
| Dropshipping | 7-21 days |
| Custom manufacturing | 4-12 weeks |
Reducing Lead Time
- Keep popular items in stock
- Optimize warehouse layout
- Use faster shipping services
- Position inventory closer to customers
- Automate order processing
- Pre-stage components for kitting
Lead Time vs. Transit Time
Lead time includes everything; transit time is just the shipping portion. A 5-day lead time might include 2 days handling + 3 days transit.
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