Time waits for no human, or business, or project.
And when it comes to keeping supply levels ample or turning around a lengthy assignment, you’ll want to apply a deeply scientific lens to your timekeeping.
This pretty much summarizes lead time management, and if you get it right, you can enjoy better profitability by reducing downtime and wastage.
So, let us tell you everything you need to know about what lead times are, why the practice of lead time management is so valuable, and the best ways to improve lead times with the latest software.
What does lead time mean?
Simply put, lead time refers to the ‘latency’ (time interval) between the start and completion of a certain task.
It is most often used in supply chain circles and is an important measure for all product-based businesses.
Lead times must be carefully calculated and accounted for to avoid periods where orders cannot be fulfilled due to lack of stock.But the term is not exclusive to inventory management.
As the definition indicates, any task, project, or assignment has a lead time. The period between a manager delegating a task to their employee completing the task is a lead time, as is the amount of time it takes for a contractor to fulfill their obligations to their clients.
In order to account for lead times accurately, you should become familiar with the different definitions depending on what field of work the term is used in.
Check out the below list of lead time definitions for different business operations:
Supply chain management
In supply chain management, lead time exclusively refers to the time it takes for a supplier company to have goods ready for delivery.
For example, an apparel company may have a 7-day lead time for custom t-shirts. Typically, this measurement does not include shipping time.
Manufacturing
For a manufacturing company, the definition accounts for shipping as well as manufacturing time in turning around goods for a client.
This is because manufacturers need to know exactly when parts requested are ready to be constructed with other parts, using the most efficient manufacturing practices.
Order lead time
Order lead time applies to traditional B2C (business-to-consumer) contexts, and it refers to the time it takes for a good to be received by a customer starting from the receipt of the customer’s order.
Project management
In project management, lead time mostly refers to the time it takes — or time that is allowed — to finish something. Lead time in this context could refer to the completion of a single task or an expansive team project.
Why is lead time important?
Lead time is an essential metric across many industries. Reliably calculating accurate lead times is crucial to avoid a supply delay, which could negatively affect customer satisfaction, contractor dependencies, and cost efficiencies across the board.
Here are the 5 most important reasons why lead times matter:
1. Competitive edge
For customers, a faster lead time is almost always more attractive. If company A offers a lead time of 3 days, and company B offers next-day delivery, the chances are that company B will win the sale — assuming everything else is comparable.
You only need to look at the dominance of Amazon to understand how much customers value speedy lead times.
2. Better productivity
When lead times are accurately calculated and understood by both parties, you can operationally plan for limited or zero downtime, meaning you can produce at a higher rate and fulfill demand to a better standard.
3. Cost reduction
In line with the previous point, this reason also has significant effects on a business’s bottom-line.
Downtime and wastage all cost money, whether it’s in storage costs or the cost of unsellable, spoiled goods.
Reducing lead times means increasing profitability, and you can only perform lead time reduction after having figured out current lead times.
4. Customer satisfaction
This applies both to B2C and B2B businesses. Ignoring the competitive element of offering better lead times, customers and clients will typically end up more satisfied with your services if they are fulfilled quicker.
The added value of speedier lead times will encourage customer loyalty and positively impact your future revenues.
5. Project dependencies
In the project management context, lead times are important when a certain task or assignment is required before progress can be made for the rest of the project.
For example, to complete a marketing campaign, graphic designers are dependent on copywriters to complete their drafts. They require lead time estimates from the copywriters in order to keep the campaign progressing smoothly.
Lead time is more than just an ‘estimated delivery date.’ It has cascading effects throughout the entirety of any given business operation.
The accuracy of its calculation is powerful enough to meaningfully impact profitability, so you want to be sure to get it right.
The following section will focus on how exactly you can calculate lead times in different contexts.
How is lead time calculated?
Fortunately, lead time is not all that complicated to figure out when you know what variables to consider in the context of the business operation you want to calculate lead time for.
To calculate ‘total’ lead time for a given order, you need to account for the 3 main processes that occur between order and fulfillment.
Those 3 processes can be defined as such:
Procurement time: the time it takes to complete the administrative duties related to a new order (getting materials, assigning work, etc.).
Manufacturing time: the time it takes to finish a good to a ship-ready standard after finishing procurement.
Shipping time: the time it takes to send the goods to the recipient from the location of origin.
Together, you can calculate a total lead time with the following formula:
Lead time = Procurement time + Manufacturing time + Shipping time
Let’s bring this formula to life with an example.
In supply chain management, you would include all the variables to calculate total lead time.
Let’s say you’re a convenience goods supplier for a small corner store, and your client asks you for a total lead time for 1 inventory round.
If the procurement time — the time it takes to receive the wholesale supply and packaging — is 3 days, the packaging time is 1 day, and the shipping time is 2 days, the total lead time would be calculated as 3 + 1 + 2 for a total lead time of 6 days.
For a more project management-oriented example, let’s look at a corporate sales team creating and delivering a report.
Shipping time is irrelevant here, but procurement time would relate to the time it takes to assign team members to certain roles and set deadlines, which could be 2 days.
Then, manufacturing time could be linked to the time it takes to undertake the research and produce the report, which could be 14 days. 2 + 14 = 16 days lead time to produce a report from request date to delivery.
How to improve lead times with software
With today’s technologies, you don’t have to rely on back-of-the-napkin calculations to give and receive reliable lead times.
Software solutions to manage and improve lead times is a whole industry in itself. There are now countless ways to create new efficiencies in lead times across many industries.
These efficiencies can improve profitability, decrease wastage and downtime, and level up your customer satisfaction.
We’re going to walk you through each step to establishing a robust, efficient lead time management system and how to make lead time management easier with a few nifty software features.
Import spreadsheet data, integrate with existing tools
First, you’re going to want to feed your valuable inventory management data (customer orders, supplier orders, and labor workflow) into a project management system.
This will act as your central hub for measuring lead times, as you can gain a broad oversight into the start and end of your order process, from request to fulfillment, in a glance.
As you probably use a variety of different platforms and systems to record and monitor this data, you’ll want to ensure you’re using a project management system that is friendly to third-party integrations.
monday.com: integrations
Which is, funnily enough, exactly what we at monday.com pride ourselves on.
With our platform, you can easily turn old-fashioned spreadsheets into smart boards. Import all of your data from your existing order and supply chain systems to our customizable dashboards with a vast universe of third-party integrations like Microsoft Excel and Woocommerce.
Create a visual lead time workflow
Not a numbers person? You don’t have to be to get a better sense of your lead times.
Project management solutions allow you to design custom workflows. You can intricately connect them to each other to display procurement, manufacturing, and shipping information visually.
Simply create dashboards that utilize data from your order tracking systems to represent the progress of a good from the order date to fulfillment.
Color code different sections to gain instant clarity on where an order is in the fulfillment process and what action needs to be taken next.
monday.com: flexible templates
Creating intelligent lead time workflows is not a complicated task on monday.com.
With one of our many ready-made inventory management templates, you can save time and still have total control with simple and effective drag-and-drop column customization.
Automate routine work and stay notified
Perhaps the most valuable thing you can do to improve the accuracy, consistency, and reliability of your lead time estimates is to stop calculating them altogether.
And you can do exactly that with intelligent software automations.
If your project management tool allows, you can configure automation instructions to notify you of lead time disruptions before they happen and send out new orders to suppliers when inventory hits a certain level.
You can also notify customers and clients when lead times are extended or reduced.
In non-supply chain contexts, you can set up automations to remind employees with dependent tasks that their deadline is upcoming or notify the rest of the team when they can expect a longer lead time.
With the right software, the possibilities are endless.
monday.com: automations
You don’t have to have a computer science degree to configure automations that keep you up-to-date on all things lead time. Easily set up automations with simple ‘if [this], then [that]’ recipes that work with your third-party tools.
Receive instant notifications about the status of your inventory and process orders faster and more efficiently — no coding required.
Time to act
In today’s business landscape, there’s no escaping sharper lead times. And the demand for faster fulfillment is only increasing — for customers, businesses, and teams alike.
Having said that, every business is unique. And you should be able to design a lead time management workflow that complements your team’s individual processes and obligations.
Don’t ignore the efficiency-creating opportunities that intelligent project management solutions can offer. Integrate your tools, create intuitive lead time dashboards, and set up automations to do the busy work of lead time calculation and even reordering on your behalf.
You can try out all the incredible features we’ve mentioned to begin tracking and managing your lead time using monday.com’s inventory management solutions.