Lead Time
The total time from receiving a customer order to delivering the finished product.
Lead Time is the total duration from initiating a process until its completion. In manufacturing context, it typically refers to the time between placing a customer order and delivering finished goods, or the time between placing a purchase order and receiving materials from supplier. Understanding and reducing lead time is critical for customer satisfaction, inventory management, and competitive advantage.
Types of Lead Time in Manufacturing
1. Customer Lead Time (Order-to-Delivery)
Time from customer placing order until receiving finished product at their location.
Components:
Order Processing (0.5-1 day) → Production Planning (1-2 days) → Raw Material Procurement (3-15 days) → Manufacturing (5-20 days) → Quality Inspection (1-2 days) → Packing & Dispatch (1 day) → Transportation (1-7 days)
Example: Customer orders custom steel trolleys on May 1st. Factory takes 2 days to procure special casters, 7 days for fabrication, 1 day for powder coating to cure, 1 day for inspection and packing, 2 days for transport. Customer receives trolleys on May 14th. Customer Lead Time = 14 days
2. Manufacturing Lead Time (Production Time)
Time from raw material entering production floor to finished goods coming out (excludes procurement time).
Calculation: Manufacturing Lead Time = Queue Time + Setup Time + Processing Time + Wait Time + Move Time + Inspection Time
- Queue Time: Material waiting for machine to become available
- Setup Time: Preparing machine for production (changing tools, loading programs, trial runs)
- Processing Time: Actual operations being performed
- Wait Time: Waiting between operations
- Move Time: Transporting between workstations
- Inspection Time: Quality checks
Example breakdown for machined component:
| Activity | Duration |
|---|---|
| Queue time at CNC machine | 6 hours |
| CNC setup & programming | 45 minutes |
| Actual machining (processing) | 30 minutes |
| Move to grinding section | 15 minutes |
| Queue time at grinding | 4 hours |
| Grinding setup | 20 minutes |
| Grinding (processing) | 15 minutes |
| Quality inspection | 10 minutes |
| Total Manufacturing Lead Time | 12 hours 15 minutes |
Value-Add Time: Only 45 minutes (machining + grinding)
Non-Value-Add Time: 11.5 hours (waiting, moving, setup)
Efficiency: 45 / 735 minutes = 6.1% (Typical manufacturing efficiency is 5-15%!)
3. Procurement Lead Time (Supplier Lead Time)
Time from placing purchase order with supplier until material received and inspected at factory.
Example: Factory orders steel sheet from supplier. Supplier confirms order (1 day), manufactures/sources material (7 days), packs and dispatches (1 day), transport (2 days), goods receipt and inspection at factory (0.5 days). Procurement Lead Time = 11.5 days
Why Lead Time Matters
- Customer Satisfaction: Shorter lead times mean faster delivery, increasing customer preference for your products over competitors
- Inventory Reduction: Longer lead times force you to maintain higher safety stock "just in case." Shorter lead times reduce inventory needs
- Cash Flow: Faster lead time means finished goods convert to cash faster, improving working capital
- Flexibility: Short lead times allow you to respond quickly to market changes and customer requests without holding excessive inventory
- Competitive Advantage: If competitor delivers in 30 days and you deliver in 15 days, customers prefer you
Lead Time Reduction Strategies
1. Reduce Queue Time (Usually 70-90% of total lead time)
- Balance production lines so no single machine becomes bottleneck
- Implement Kanban/pull systems to limit WIP and prevent overloading workstations
- Sequence jobs intelligently to minimize changeovers
2. Reduce Setup Time (SMED - Single Minute Exchange of Dies)
- Convert internal setup (done while machine stopped) to external setup (done while machine running)
- Standardize tools and fixtures across similar products
- Pre-stage tools and materials before changeover
- Example: CNC tool changeover reduced from 45 minutes to 8 minutes by pre-setting tool offsets offline
3. Improve Process Times
- Upgrade to faster machines where high-volume justifies investment
- Run multiple parts simultaneously (batch processing)
- Use better tooling (carbide tools vs HSS for faster machining)
4. Eliminate Wait & Move Time
- Rearrange factory layout—place related processes adjacent to each other
- Create production cells (U-shaped layouts) instead of functional departments
- Use conveyor systems or gravity chutes to move parts between operations
5. Reduce Supplier Lead Time
- Source locally when possible (2-day lead time vs 15-day from distant supplier)
- Work with suppliers to keep buffer stock of frequently used materials
- Share production forecasts with suppliers so they can plan ahead
- Develop alternate suppliers to avoid single-source dependencies
Real Factory Example: Lead Time Reduction Project
Company: Small sheet metal job shop, 25 employees
Initial State: Average customer lead time = 18 days
Customer Complaints: "Competitors deliver faster, losing business"
Analysis revealed:
- Actual processing time: 2.5 days
- Queue time (material waiting): 10 days
- Material procurement delays: 4 days
- Quality inspection delays: 1.5 days
Improvements implemented (over 6 months):
- WIP limits: Set maximum jobs allowed at each workstation. Stop feeding more until queue clears. Result: Queue time reduced to 4 days
- Vendor development: Identified local steel supplier for standard sheets, kept 1-week buffer stock. Result: Procurement lead time from 4 days to next-day delivery
- In-process inspection: Instead of final inspection, operators check first piece and then every 10th piece. Result: Inspection delays eliminated (down from 1.5 days to 0.2 days)
- Visual planning board: All jobs visible on kanban board. Supervisors prioritize based on customer deadlines instead of "first-come-first-served"
New Lead Time: 8 days (56% reduction)
Business Impact: Quoted lead time reduced from 18 to 10 days (built in 2-day buffer). Customer orders increased 35% in next year because of faster delivery reputation.
Lead Time vs Cycle Time
Lead Time: Customer perspective—how long from ordering to receiving
Cycle Time: Production perspective—how long to produce one unit from start to finish
If factory has 5-day cycle time but 3 days of queue time before production starts, customer lead time is 8 days. Reducing cycle time OR queue time both reduce customer lead time.
How Karygar Tracks Lead Time
Karygar ERP automatically calculates lead times by tracking timestamps: order received → production started → production completed → quality cleared → dispatched. Real-time dashboards show average lead time trends, identify bottleneck operations causing delays, and alert when orders risk missing committed delivery dates. Historical lead time data helps in making realistic delivery commitments to customers.
See Lead Time in Action
Don't just read about Lead Time. See how Karygar automates this process to reduce manual work and errors on your factory floor.