What is lead time

Definition

Lead time is the elapsed time from the moment a request or order is received to the moment the result reaches the customer. It includes every wait along the way: the queue before anyone starts, the pauses between steps and the time to hand over or ship. The Lean Enterprise Institute's lexicon describes order lead time as production lead time plus the time spent getting the product to the customer, including the delays in processing orders and entering them into production and the delays when orders exceed capacity. In purchasing, the same words have a second everyday sense: supplier lead time, the time from placing an order with a supplier to receiving the goods.

Why it matters

Much of the customer's wait is often queue, not work: in the illustrative cake order below, 5 hours of hands on work sit inside 4 days. The share of work in the lead time, work time ÷ lead time, is called flow efficiency, and a low number says where to look: shorten the queue before you speed up the work. Supplier lead time matters the other way round, since it sets how early you must order stock so that you never run out.

Directly related: Cycle Time, Kanban, Throughput.

Formula

Lead Time = Completion Date - Request Date

Improvement tips

• Start the clock when the customer asks, not when your team picks the job up.
• Write down which convention you use, calendar days or working days, and keep it for every order so the numbers compare.
• Look first at the queue before the work starts: it is usually the largest part and the cheapest to cut.
• Tell customers the time most of your recent orders arrived within, rather than your fastest case.
• For stock, note each supplier's lead time and order early enough to cover it.

Common mistakes

• Reporting one average that hides the few orders that took far longer.
• Mixing very different kinds of orders in one number, so it describes none of them.
• Speeding up the work itself while orders still wait days before anyone starts.