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Fincash » Lead Time

Lead time

Updated on May 25, 2024 , 2916 views

Lead Time Definition

The lead time meaning is considered to be the time between which the customer confirms an order and the time the delivery is made, or say the scheduled pick up based on terms and conditions. Lead time might vary based on the customers and the product.

Types of Lead Time

There are several types, but the most important ones are discussed below:

  • Customer Lead Time: This is basically the amount of time taken between ordering and the delivery the order, depending on the agreement made with the customer.

lead time

  • Factory or Product Lead Time: With the availability of the materials, this indicates how much time does it take to build up the product and shipping of the product.

  • Material Lead Time: The amount of time taken to place an order along with a supplier to the time taken to receive it in-hand.

  • Cumulative Lead Time: Suppose you had no material in hand, so starting from the base the time taken to place an order and after aligning all the materials from scratch, the time taken to the delivery of the product from a confirmed order. It is in a way the combination of factory lead time and the material lead time works.

Importance of Lead Time

As we all know customer satisfaction is of utter importance, hence lead time is important. The basic criterion of customers is to get a service or goods as fast as possible while putting minimal efforts.

For the assembly and Manufacturing, the very concept lead time has a direct relationship with the number or say the amount of inventory which co-exists at different points in the whole of the supply chain management.

If the customer lead time is less than production lead time, material lead time, or cumulative lead time it will have a direct result in the inventory holdings at some or all points within the supply chain management. Being inconsistent and having variation will mostly compound the matter. This will lead to the holding of the inventory or the stock, hence risks will rise in the supply chain.

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Reduction of the Lead Time

There are several ways to reduce the lead time, some of them are enlisted below:

  • Having or say holding the stock, basically the right stock.
  • Reduction of cycle times will automatically reduce the production lead times.
  • Vertical Integration is the sum up of the ability to manufacture, source and being able to assemble internally. Our business can become internally vertical or the suppliers can be integrated vertically.
  • The possibility of having the best employee availability and having better equipment. Having a solid background in preventive maintenance, and autonomous maintenance, as a whole having a sound productive maintenance can give a kick start leading to reduction of lead time on a larger scale.
  • Proper hierarchy being followed and robust quality management in place can make a big difference.
  • Being vocal about local is the mantra. Focusing on longer lead time materials. Improvements in supply management, etc.
Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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