93b13bc05b20ada69457977554f9a63c Types of Lead Time in Manufacturing Business | Reachschools

Types of Lead Time in Manufacturing Business

Broadly speaking, lead time is the amount of time between the initiation and finishing of any process. The term ‘lead time‘, is used in several different fields – from manufacturing, supply chain management, supplier management, project management, enterprise requirement planning, etc. It can be said that delivery lead time is the most critical aspect and indicator of an efficient inventory management system. By reducing waiting times, you can improve customer satisfaction and increase sales profits.

In business, lead time is the time difference between customer order for a service/product to delivery and completion of the order process. For example, your business produces various fashion. It takes two days to get raw materials to make the product and another two days to sew and complete 100 sets of final products. This mean lead time for your business to produce 100 products is four days. There are different types of lead time depending on business operations. However, there are four types of lead time in manufacturing business, namely:

1. Customer lead times. The time between order confirmation and order fulfillment.

2. Materials lead times. Materials lead times are calculated after the customer places an order. That is, the amount of time it takes to place an order with a supplier (if you run out of stock) and receive it. This can be affected by management information systems and low current inventory levels making it difficult for suppliers to fulfill your material orders.

3. Production lead time. After you receive the material, then you enter the production waiting time. This is the amount of time required to select, pack and ship the product if all materials are in stock which is also affected by several factors such as manpower, equipment availability, machine downtime, etc.

4. Cumulative Lead Time. Total waiting time from material waiting time and production waiting time, starting from confirmed order, production process, to product delivery.

For manufacturers, the consequences of waiting times that exceed the expected limits can be serious, especially when it comes to your company's business finances. There is a risk that you will run out of stock or have to restock more to compensate for an unreliable supplier. This will result in the emotional bond of your customer being hampered. As a result, your competitors may take your position, and introduce their new products more quickly and capture more market share.

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