What Is Lead Time?
Lead Time measures the total elapsed time from when a customer order is placed to when the product is delivered. It includes every stage: order processing, queuing for a production slot, actual production, and shipping.
Not the same as Cycle Time. Cycle Time measures production time per unit. Lead Time includes all the waiting and processing that happens before, during, and after production. Lead time is always much longer than cycle time.
The Formula
Lead Time = Delivery Date − Order DateBroken into components:
- Order processing time
- Queue time (waiting for a production slot)
- Production time
- Shipping time
Typical Values
| Manufacturing Model | Typical Lead Time |
|---|---|
| Make-to-stock | Hours to days |
| Make-to-order | Days to weeks |
| Engineer-to-order | Weeks to months |
Data Requirements
| Source | Required | What You Need |
|---|---|---|
| ERP | Yes | Order entry dates, ship dates |
| MES | Optional | Manufacturing cycle time (for detailed breakdown) |
Lead Time is a Phase 3 metric — it requires ERP order management data.
Why It Matters
- Competitive positioning — faster lead time is a genuine competitive advantage
- Working capital — shorter lead time means less work-in-progress inventory tying up cash
- Customer expectations — realistic lead time commitments require accurate data
- Pricing opportunity — some customers will pay a premium for expedited delivery
Best Practices
- Break lead time into components to identify which stage is the bottleneck — queue time is often the largest component and the easiest to reduce
- Track by product family for meaningful comparison
- Quote realistic lead times based on actual data, not aspirational targets
- Reduce queue time through better scheduling and flow
Related Metrics
- Cycle Time — the production component of lead time
- On-Time Delivery — shorter lead time makes on-time delivery easier
- Work in Progress — high WIP extends lead time
- Backlog — growing backlog extends lead time for new orders