Lead Time

In the most common definition, lead time is the time that elapses from when a customer places an order until the order is received.

A variation on the definition of lead time looks at the time from when raw material arrives at a facility until the finished product ships. This is company focused, though, rather than customer focused.

We recommend using the first definition. Lead time should be a customer oriented metric. The shorter your lead time is, the happier your customer will be.

Lead time is a function of cycle time (the time you are actually working on the product) and the amount of WIP in your system. The more work-in-process you have blocking flow, the longer your lead time will be.