What is “Total Lead Time” in Terms of Logistics and Supply Chain?
In logistics and supply chain, total lead time is the sum of all processing time, transit time, and time spent as inventory. It represents the time a part needs to travel from the beginning of the stream at the supplier, through operations into a finished SKU, and on to the end consumer. Processing time and transit time can be measured in minutes, hours, or days. Total lead time in logistics and supply chain is calculated with the following components:
Inbound (Supplier) Lead Time: The amount of time from the point of ordering materials from a supplier to the point the material is received and available for use.
Manufacturing Lead Time: The amount of time it takes to send an order to production planning and for the goods to be manufactured and made available for shipping.
Outbound (Customer) Lead Time: In logistics and supply chain, outbound time is the amount of time it takes for a customer order to be received, processed, and shipped to the customer. Outbound lead time is important because it gives an accurate measure of how long the supply chain as a system takes to respond to customer demand. This is different from more frequently used measures, such as how long it takes to respond to a customer from a distribution center near the customer end of the supply chain.
Raw Material Inventory: The amount of inventory that sits as raw material in front of the manufacturing process, measured in average days on hand (ADOH).
Finished-Goods Inventory: The amount of inventory that sits in finished goods (measured in ADOH).entory: The amount of inventory that sits as raw material in front of the manufacturing process, measured in average days on hand (ADOH).
These figures are then added up to determine the total lead time in logistics and supply chain:
Inbound Lead Time
+ Raw Material Inventory ADOH
+Manufacturing Lead Time
+Finished-Goods Inventory ADOH)
+Outbound Lead Time
Total Lead TimeShare