Technical Explanation: Lead Time
Lead time is the elapsed time between the decision to place an order and the moment the ordered material becomes available for use. In inventory and production planning it is one of the most critical parameters because it directly drives the reorder point and the amount of safety stock required.
This calculator breaks total lead time into four practical stages that cover the majority of industrial and distribution supply chains.
How to Use This Calculator
- Order Processing Time (T_order): Days needed to prepare, approve and transmit the purchase order.
- Production Time (T_prod): Supplier or internal manufacturing cycle time.
- Transit Time (T_transit): Transportation duration from the supplier to your receiving dock.
- Receiving Time (T_receive): Unloading, inspection, quality release and put-away into stock.
How does lead time affect the reorder point?
In the classic reorder-point formula the expected demand during lead time is simply daily demand multiplied by total lead time. Any increase in lead time therefore raises both the reorder point and the capital locked in inventory.
Can stages run in parallel?
Some activities (for example documentation and production planning) can overlap. This calculator assumes sequential stages for transparency. If you know that two stages run concurrently, reduce the corresponding times so that the sum still reflects the true critical-path duration.