Lead time

A lead time is the latency (delay) between the initiation and execution of a process. For example, the lead time between the placement of an order and delivery of a new car from a manufacturer may be anywhere from 2 weeks to 6 months. In industry, lead time reduction is an important part of lean manufacturing.

Journalism

Lead time in publishing describes the amount of time that a journalist has between receiving a writing assignment and submitting the completed piece. Depending on the publication, lead times can be anything from a couple of hours to many months.

Supply chain management

A more conventional definition of lead time in the supply chain management realm is the time from the moment the customer places an order (the moment you learn of the requirement) to the moment it is received by the customer. In the absence of finished goods or intermediate (work in progress) inventory, it is the time it takes to actually manufacture the order without any inventory other than raw materials.

Manufacturing

In the manufacturing environment, lead time has the same definition as that of Supply Chain Management, but it includes the time required to ship the parts from the supplier. The shipping time is included because the manufacturing company needs to know when the parts will be available for material requirements planning. It is also possible for lead time to include the time it takes for a company to process and have the part ready for manufacturing once it has been received. The time it takes a company to unload a product from a truck, inspect it, and move it into storage is non-trivial. With tight manufacturing constraints or when a company is using Just In Time manufacturing it is important for supply chain to know how long their own internal processes take.

Lead time is made of:

• Preprocessing Lead Time (also known as "planning time" or "paperwork"): It represents the time required to release a purchase order (if you buy an item) or create a job (if you manufacture an item) from the time you learn of the requirement.
• Processing Lead Time: It is the time required to procure or manufacture an item.
• Postprocessing Lead Time: It represents the time to make a purchased item available in inventory from the time you receive it (including quarantine, inspection, etc.)

Example

Company A needs a part that can be manufactured in two days once Company B has received an order. It takes three days for company A to receive the part once shipped, and one additional day before the part is ready to go into manufacturing.

• If Company A's Supply Chain calls Company B they will be quoted a lead time of 2 days for the part.
• If Company A's Manufacturing division asks the Supply Chain division what the lead time is, they will be quoted 5 days since shipping will be included.
• If a line worker asks the Manufacturing Division boss what the lead time is before the part is ready to be used, it will be 6 days because setup time will be included.

In more detail

Lead Time terminology has been defined in greater detail. The Supply Chain from customer order received to the moment the order is delivered is divided into five lead times.

• Order Lead Time - Time from customer order received to customer order delivered.
• Order Handling Time - Time from customer order received to sales order created.
• Manufacturing Lead Time - Time from sales order created to production finished (ready for delivery).
• Production Lead Time - Time from start of physical production of first submodule/part to production finished (ready for delivery).
• Delivery Lead Time - Time from production finished to customer order delivered.

Example

A restaurant opens up and a customer walks in. A waiter guides him to a table, gives him the menu and asks what he would like to order. The customer selects a dish and the waiter writes it in his notepad. At that moment the customer has made an order which the restaurant has accepted - Order Lead Time and Order Handling Time have begun. Now the waiter marks the order in the cash register, rips the paper from the notepad, takes it into the kitchen and puts into the order queue. The order has been handled and is waiting in the factory (kitchen) for manufacturing. As there are no other customers, the waiter decides to stand outside the kitchen, by the door, waiting for the dish to be prepared and begins calculating Manufacturing Lead Time.

Meanwhile, the chef finishes what he was doing, takes the order from the queue, starts his clock as a mark for the start of Production Lead Time and begins cooking. The chef chops the vegetables, fries the meat and boils the pasta. When the dish is ready, the chef rings a bell and stops his clock. At the same time the waiter stops calculating Manufacturing Lead Time and rushes through the kitchen door to get the food while it's hot.

When he picks it up, begins counting of Delivery Lead Time that ends when the dish is served to the customer, who can now happily say that the Order Lead Time was shorter than he had expected.

Semiconductor industry

About Lead time as per company rules

In very complex manufacturing environment, like the manufacture of microprocessors, a usual Lead Time may be between 5–7 weeks. This is due to the sequence of operations, where there are multiple very similar steps repeated, and none can be skipped. If a manufacture of a CPU requires 35 exposure masks, that translates approximately into 35 x (photoresist coating, exposure, development, main process step (like etching, diffusion, metal filling), photoresist stripping and/or polishing, and other possible steps) plus additional steps before and after all processing. There are wait times not only associated with scheduling a product into production, since the product lines are busy, but also a beginning run of production goes to scrap (plus tool change and alignment takes time), and there are possible wait times of batches being processed during the production. (Not all machinery works at the same speed, or requires maintenance steps, tool change, plus there is the time it takes to physically transport the silicon wafers from one processing machinery to another in small transport batches.)

Project management

In project management lead time is the time it takes to complete a task or a set of interdependent tasks. The lead of the entire project would be the overall duration of the critical path for the project.

Lead time is also the saved time by starting an activity before its predecessor is completed.

According to the PMI (2008), lead is a dependency between two activities (p. 140). An example would be scheduling the start of a 2 week activity dependent with the finish of the successor activity with a lead of 2 weeks so they will finish at the same time.

See also

• Time limit
• Safety stock
• Latency (engineering)