What is Lead Time?
Lead time is the elapsed time between placing an order and receiving it. It includes supplier processing, manufacturing, transport and customs clearance. Accurate lead time is critical for inventory planning, safety stock calculations and just-in-time systems.
How It Works
- Track each component: order processing, manufacturing, transit, customs, delivery.
- Aggregate to total lead time and monitor variability.
- Adjust reorder points and safety stock for lead time and demand variability.
- Identify bottlenecks and work with suppliers to reduce them.
Saudi Context
Saudi importers using Jeddah Islamic Port or Dammam typically build 3 to 6 weeks of total lead time for goods from East Asia, including customs and inland transport.
Example
If a supplier ships in 3 weeks and inland transport takes 1 week, total lead time is 4 weeks. The reorder point is calculated to cover 4 weeks of expected demand plus safety stock.