What is the importance of lead time ?

Lead-time is the period between a customer’s order and the final product delivery. A pre-existing item with a small order may only have a few hours lead-time, but a larger order of a new item or custom-made part may have a weeks or months of lead-time or longer. It all depends on several factors, from the time it takes to make the machinery to the amount of time for the delivery. Lead-time may change according to holidays, seasons, or overall product demand.

Manufacturers are constantly looking for ways to develop a faster lead-time on their products. Lead-time can mean the distinction between creating a sale and watching a competitor sign the contract. If a company can deliver an item weeks ahead of the competition, it holds a better chance of getting future orders. In this case, management and labor teams normally hold meetings to discuss how they can improve their lead-time.

A good lead-time example is when you order a pizza. When you decided to order in your local restaurant, you already considered factors like consistency and speed. Then the restaurants must first get your custom order based on the ingredients they have on stock. They will tell you to expect you pizza in forty-five minutes to an hour, which is the lead-time. The lead-time given by the restaurant depends on the time needed for preparation, the cooking time, the delivery driver’s availability and the distance of your place.

As a customer, you can still change your mind and order your pizza in a different restaurant known for faster delivery. The products may be identical but the lead-time is different. Some restaurants may be using pre-packaged pizzas or employ many delivery drivers. However, they may be some delivery limitations on specific locations or the pizza may not be well cooked. Sometimes, shorter lead-time compromises the overall quality of an item. This is one of the top challenges of most companies.

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