Lead time translates to "throughput time" and is the time it takes for a product from its initial phase until delivery.
However, if we refer to lead time from a customer's perspective, we can define it as the total time that the customer waits to receive the product after ordering it.
Lead time requires necessary durations to perform various operations that take place inside or outside the company. These operations are called order cycle and are divided into:
- Order recording and transmission;
- Order receipt;
- Passage to the warehouse;
- Organization of shipments;
- Packaging;
- Preparation for the dispatch of goods;
- Transport and delivery of goods.
The customer evaluates the response time based on how long they have to wait to receive a product after ordering it; the quicker and more efficient the delivery, the more satisfied the customer will be.
How is lead time calculated?
To calculate lead time there is a very simple formula:
Order Date + Delivery Date = Lead Time.
The result equals the delivery time that the customer must wait for the arrival of their product.
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