Lead time

Explanation of lead time: What is it and how do you shorten it?

When we talk about achieving an efficient production process, shortening the lead time becomes an essential component. But what exactly is lead time? And how can you reduce lead time to achieve an overall more efficient process? We will explain!

What is the lead time of a product?

Lead time is often confused with cycle time, yet the definitions of cycle time vs. lead time are indeed different. The lead time of a product refers to the total time the entire product process takes—from the customer placing the order to the product’s manufacture and delivery at the desired address. Because it accounts for the overall time needed to fulfil an order, lead time is also known as delivery lead time. Therefore, lead time encompasses all steps required to process an order, including the waiting times between necessary process steps. This includes the time the system needs to process the order. The lead time of a production process reveals much about its efficiency and the potential for improvement. Regularly recalculating lead time within the supply chain is thus a good foundation for discovering process improvement potential in the factory.

Why is lead time important?

A lengthy lead time simply means wasted time. This time waste might occur at one or more points in the production process. There could be production processes that frequently need to be redone, consuming considerable time or process steps that do not seamlessly connect, resulting in long waiting times. These unnecessary causes of extended lead time can negatively impact profitability and customer satisfaction. Customers might become annoyed if their orders take longer than expected, business relationships might face scheduling issues if orders aren’t delivered on time and it also costs extra money to redo steps in the production process. Shortening lead time is thus key to higher efficiency within the production process, resulting in increased customer satisfaction and profitability.

How do you calculate lead time?

Calculate the lead time of your supply chain: you can do it yourself quite easily! Lead time is formed by three different types of time: processing time, waiting time and repair time. When you add these times together, you get the process lead time. The formula for lead time is as follows:

Cycle time, lead timeLead Time = Processing Time + Waiting Time + Repair Time

Below, we will explain what to consider in each of these parts of lead time.

  • Processing Time

Processing time encompasses the time needed to add value to the product. In Lean terms, this is known as Value Add Time or VAT. Processing time is the total time required for each process step.

  • Waiting Time

Waiting time refers to the periods when the product is ‘idle’. So, waiting time is the time between processing steps. Transport time (the time needed to move products from the factory to the recipient) is also part of waiting time. You can choose to consider transport time as an additional separate component of lead time, especially if there is significant transport time within the process.

  • Repair Time

Earlier, we briefly discussed extended lead time due to steps in the production process that are not always executed (correctly) in one go and therefore need to be repeated. This is precisely what repair time addresses. Repair time is the time it takes to rectify a step in the production process because it was not all executed previously or was executed incorrectly.

Shortening lead time

Lead time can be influenced by several types of time. Time waste occurs in one or more steps that can be categorized into one or more of these parts of lead time. For instance, you can reduce lead time by addressing waiting time, particularly transport time. By reducing transport time and eliminating time waste, you actively work on lead time reduction. If you discover that most waste can be attributed to repair time, you can quickly and easily address this by consistently executing all steps in the production process efficiently. Clear work instructions can help in this regard. When audits are imminent, you want to demonstrate that everything is consistently done in a safe and efficient manner. Are you also ready to shorten lead time using work instructions and checklists from the EZ-GO platform? Feel free to reach out to us for more information!