To be defined in its simplest form, lead time is the number of minutes, hours, days or months that a business allows for the completion of a certain operation or process. In some cases it refers to the duration of time that should pass by before a desired action takes place.
Lead time itself has a several distinct meanings depending on the industry in which the term is being used. The term is used in a variety of different sectors, but it is best known for being closely examined in engineering, procurement and supply chain management.
How Does Examining Lead Time Benefit Businesses?
Often the main reason for analysing lead time is to minimise the overall time it takes to distribute goods to the marketplace. Achieving a better lead time means that companies can maximise their selling potential, which in turn is why they make it a priority to minimize the lead time as much as possible.
What Processes Are Undertaken During Lead Time?
During lead time, there are several different steps that are undertaken. Of course in each company this may differ and most businesses will have an individual structure for what work needs to be carried out during this time. In the majority of cases lead time can be broken down into numerous constituents.
The first component would be pre-processing, which is the step that involves actually determining the requirements needed to process a product or material on the product line. This step is sometimes skipped when companies have pre-processed materials or products a number of times already. Pre-processing is most relevant but not limited to start-ups or businesses who are manufacturing a new product.
The second constituent is processing. Processing is the step that is taken to actually manufacture a product or in other cases it is simply the creation of an order.
The final step, post processing, involves the actual distribution of goods to the marketplace or consumer.
How Do You Measure Lead Time?
Like we mentioned before, a company’s aim is often to minimize the lead time altogether in order to speed up the delivery of a product to the market. The faster they are able to do this, the more they are likely to be able to sell. There are many ways in which companies measure lead time, but to put it in simple terms they will scrutinise all individual components (pre-processing, processing and post processing) and then compare them against set targets in order to determine where stoppages are happening.