Lead time

Lead time is the total elapsed time between when you place an order with a supplier and when the goods are received, processed, and available to sell.

It's the most operationally important number in your supply chain — and the one most likely to be wrong on the spreadsheet.

Lead time drives every reorder decision. If your lead time is 8 weeks, you have to commit to a forecast 8 weeks before you need the stock. Get the lead time wrong by even a fortnight and you've either stocked out or bought too early. The further your forecast horizon, the more uncertainty you've absorbed.

What's actually inside "lead time"

The headline number ("60 days from China") usually hides four or five sub-stages:

1. Supplier processing time. From PO confirmation to the start of production. Often 3–10 days for a known supplier, longer for a new one.
2. Production time. Manufacturing or pick-and-pack at the supplier. Can range from 5 days for a stocked SKU to 60+ days for made-to-order.
3. Inland transit (origin). Factory to port or hub. Usually 2–7 days.
4. International freight. The big variable. Sea freight Asia → UK is typically 30–45 days; air freight 5–10. Costs differ by an order of magnitude.
5. Customs clearance + inland transit (destination). UK port to your warehouse. 3–10 days, longer if customs flag the shipment.
6. Inbound processing. Goods receipt, QC, putaway. 1–3 days, but a backlog at the warehouse can extend this.

Add them up. That's your real lead time. Not the supplier's quoted lead time, which usually only covers stages 1–3.

Why your lead time is probably wrong

Three patterns I see repeatedly:

You're using the supplier's quoted time, not yours. Suppliers quote lead time from their perspective: until the goods leave their dock. You care about availability in your warehouse, ready to sell. That's a different number.

You're using the average instead of a percentile. The average lead time is 45 days. The 95th percentile is 70 days. If you reorder against the average, you stock out one cycle in twenty. Use a percentile that matches your service-level target.

You're not tracking it at all. Lead time on the spreadsheet says "60 days" because someone wrote that down two years ago. Actual recent POs averaged 78. Nobody updated the spreadsheet.

Track lead time per supplier, per SKU (or product family), and per route. Update it whenever a PO closes. Roll up the data quarterly to spot drift.

Lead time variability

The number that matters more than the average is the variability.

Two suppliers, both averaging 45 days. Supplier A always lands between 42 and 48. Supplier B sometimes lands at 30, sometimes at 75. Same average, very different planning implications.

Supplier B requires more safety stock, more buffer in your reorder timing, more cash tied up in inventory. The variability — measured as standard deviation or as the gap between your worst and best recent POs — is what you plan around, not the average.

Lead time vs cycle time

These get confused.

• Lead time is external — the total time from placing an order to receiving usable stock. The customer-facing or supplier-facing duration.
• Cycle time is internal — how long it takes for a single unit to move through one stage of your process (e.g. production cycle time, pick cycle time).

You can have a 60-day lead time and a 2-day production cycle time on the same SKU. The lead time is dominated by transit, not manufacturing.

How lead time interacts with the rest of planning

Lead time is the input to four other decisions:

• Reorder point. When to trigger the next PO so stock arrives before you run out.
• Safety stock. Buffer to absorb lead-time variability.
• MOQ negotiations. Long lead times push you towards larger orders to reduce reorder frequency. Short lead times let you order leaner.
• Cash flow. Working capital tied up in goods on the water. Longer lead time = more capital in transit.

Get lead time wrong and every downstream decision is wrong. Get it right and the rest of planning gets dramatically easier.