Lead Time

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Lead Time - short version

Sum of all the cycle times and wait times for a particular process; or the length of time it takes a good or service to go through the entire process.

Lead Time - long version

A lead time is the latency (delay) between the initiation and execution of a process. For example, the lead time between the placement of an order and delivery of a new car from a manufacturer may be anywhere from 2 weeks to 6 months. In industry, lead time reduction is an important part of lean manufacturing.

In the manufacturing environment, lead time has the same definition as that of Supply Chain Management, but it includes the time required to ship the parts from the supplier. The shipping time is included because the manufacturing company needs to know when the parts will be available for material requirements planning. It is also possible for lead time to include the time it takes for a company to process and have the part ready for manufacturing once it has been received. The time it takes a company to unload a product from a truck, inspect it, and move it into storage is non-trivial. With tight manufacturing constraints or when a company is using Just In Time manufacturing it is important for supply chain to know how long their own internal processes take.

Lead time is made of:

* Preprocessing Lead Time (also known as "planning time" or "paperwork"): It represents the time required to release a purchase order (if you buy an item) or create a job (if you manufacture an item) from the time you learn of the requirement.

* Processing Lead Time: It is the time required to procure or manufacture an item.

* Postprocessing Lead Time: It represents the time to make a purchased item available in inventory from the time you receive it (it includes quarantine, inspection, etc.)


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