Lead Time

Inventory & Logistics

Definition

The elapsed time between placing an order and receiving the goods.

Explanation

Lead time drives reorder points and safety stock: longer or more variable lead times require larger buffers. Reducing and stabilising lead time is a key way to cut inventory while maintaining service.

Example

The supplier's lead time is 14 days, so orders must be placed at least two weeks before stock runs out.

Related terms

Reorder Point (ROP) — The inventory level at which a replenishment order should be placed to avoid running out before it arrives.
Safety Stock — Extra inventory held as a buffer against variability in demand or supply, to reduce the risk of stockouts.
Expediting — Proactively chasing a supplier to ensure an order is delivered on time, especially when a delay would disrupt operations.
On-Time In-Full (OTIF) — A delivery metric measuring the share of orders delivered both on the promised date and in the complete quantity.

Frequently Asked Questions

What is Lead Time?

The elapsed time between placing an order and receiving the goods. Lead time drives reorder points and safety stock: longer or more variable lead times require larger buffers. Reducing and stabilising lead time is a key way to cut inventory while maintaining service.

Can you give an example of Lead Time?

The supplier's lead time is 14 days, so orders must be placed at least two weeks before stock runs out.

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