Lead time
The time between placing an order and receiving the goods, or between a customer's order and delivery to them.
What it means in business
Supplier lead time runs from your purchase order to the goods arriving at your gate. Production lead time runs from starting a job to finishing it. Customer lead time is what your customer waits from order to delivery. Lead time decides how early you must order and how much safety stock you hold.
Example
A bearing supplier quotes three weeks. The factory therefore orders when it still has three weeks plus a margin of stock left, so it does not stop for want of bearings. This is an illustration of normal business use rather than a quoted case study.
How to use it correctly
Measure actual lead times from the dates on your orders and receipts, not only the supplier's promise. Use the real figure, and the variation in it, when setting reorder points and safety stock.
Common confusion
A supplier's quoted lead time is often shorter than what really happens. Lead time is also not the same as processing time: waiting and transport count.
Related glossary terms
Written on 24 October 2026 for lamp. Confirm the current rules with the official source or an adviser before relying on it.