EconGuru Economics Guide RSS Syndication

Get published on EconGuru.com. Start here!

© Copyright 2006 - 2011 EconGuru.com. All rights reserved. Assets marked and linked to the original sources are hereby used for educational purposes only and are copyrighted by their respective owners.

Subscribe to EconGuru.

What is Lead Time?

Subscribe to EconGuru:

When a customer orders a product there can often be a delay before they actually receive it. For instance if a buyer goes onto Amazon and purchases a book they won’t receive it right away. It can take a few days to get to them and this is referred to as the lead time. In simple terms then it is the difference between the order of a product and its final delivery. This delay can be very short or it could take months if the product involves a complicated assembly.

Why is Lead Time Important?

This delay in getting a product to the customer can be important for a number of reasons. If the competition is able to get their product to a customer with a shorter delay then this could make what they are selling more attractive. This is why a lot of companies will take this issue very seriously and will be always looking for new ways to improve their lead time. These businesses know that their failure to cut this down sufficiently could be the difference between success and failure.

The Factors that Influence Lead Time

There are many factors that can impact lead time. A lot will depend on the type of machinery that a business uses and the productivity of the team. If the competition has better machines and more productive employees then they will be able to get their product out faster. There are also seasonal and supply factors that can lead to greater delays. If suppliers are slow to provide needed parts then this will slow down the time it takes to finish the product. If there is a period of the year when demand is particularly high then this can cause a backlog and further delay how it takes to get the product to the customer. Those businesses that rely on the postal service to deliver their product can also experience longer delays if there is a problem with this service.

Difficulties with Changing Lead Time

A business will understand the risks of a long delay between a customer’s order and final delivery. Some may feel tempted to cut corners in order to get their products out faster. This strategy can be unproductive because it could mean that the product is not ready for sale. Rushing something past quality control to get it into a truck on off to the customer is a good way to ruin a business. Therefore the manufacturer needs to balance their wish to reduce lead time with their commitment to a quality product. This is why there is a constant push to find better ways of doing things that don’t involve any loss of quality. This can occur through investing in new technologies and providing training so that team members can be more productive.

Lead time is a concern for most business and this is an issue that never really goes away. When one business stops improving on their delay time it leaves the door open for the competition to take advantage.

Share This Article:
Meet the Author

Anthony Carter currently resides in Fife, Scotland with his wife Lisa, and their three wonderful children. As a senior editor for various publications, if he's not reading and writing, you would find him photographing and traveling to some of the most far-flung locations around the world.

Tags

Tags: , ,

EconGuru Economics Guide

Educating the public since 2006.