Get to know the vital terms of Logistics and Supply Chain Management.
Lead time in logistics refers to the entire time from when an order was placed until it reaches a customer. This duration incorporates all the involved steps, which may include order processing, manufacturing (when necessary), packaging, and transportation. It is a key measure in supply chain management, affecting inventory levels and schedules of production, and of course, customer satisfaction.
Order Processing Time: The time taken between when the order arrives and is ready for production or dispatch. This will involve validating order details, checking of inventory, and preparing any documentation that needs to be provided.
Production or Sourcing Time: Lead time, if the order requires manufacturing, includes lead time to produce or assemble the piece. For retail or distribution orders, it refers to the time needed to source the product from a supplier.
Transit time: This is the time in which the product is transferred from the source, up to the point of final delivery. Lead time will differ according to shipments and distances as well as outside factors like weather or clearing customs.
Receiving and inspection: Once the shipment arrives, lead time may also include time needed to unload, inspect, and deliver.
Maintain optimum levels of inventory: Knowledge about lead times allows you to manage the optimum level of inventory, in adequate stock levels that never lead to overstocking.
Customer satisfaction: Shorter lead times mean happier customers because it will signal quicker fulfilment and delivery. Accurate estimation of lead times will further support them in setting up proper expectations with their clientele concerning delivery.
Supply Chain Efficiency: Lead-time monitoring increases visibility on the lead time points at which delays or inefficiencies are happening in the supply chain. Optimization and tracking leads will also permit a decrease in the overall cost structure of a business.
Lead time is an important parameter in the logistic measure as it directly impacts the level of inventory management, scheduling production, and customer satisfaction levels. Knowledge of lead times and control over such factors will help improve the overall efficiency of operations in a business and enhance their ability to meet customer expectations.