Lead time

The time between placing an order and receiving it.

Lead time is the time between placing an order and having the stock in hand. It includes the supplier's handling, shipping, and the time you spend receiving and putting goods away.

Why it matters

Lead time decides how early you must order. If demand is steady at ten units a day and lead time is five days, you need at least fifty units in the pipeline before the stock runs out. A longer lead time means a higher reorder point and more working capital tied up in stock.

Measuring lead time

Track it from purchase order date to the date goods are available to pick, not the date they arrive at the dock. The receiving step is part of the wait. Review it per supplier; a single average across all suppliers hides the slow ones.

Use lead time in the reorder point calculator and when setting safety stock.