Lead Time
Also called: supplier lead time, delivery lead time
What is Lead Time?
Lead time is the elapsed time between placing a purchase order and having the goods available to sell. It includes the supplier's processing time, transport and your own receiving and put-away.
Why Lead Time matters
Every reorder point depends on lead time, so an optimistic figure produces stockouts no matter how carefully the rest is calculated. Quoted lead times and actual ones frequently differ.
Lead Time formula
Lead time demand = Average daily usage × Lead time in days
This is the core of the reorder point.
How Lead Time works in practice
Record the actual gap between order and availability for each supplier over a few orders and use the observed figure. Track variability too, because an unpredictable supplier costs more in buffer stock than a slow but reliable one.
Frequently asked questions
Only as a starting point. Use your own measured average once you have a few orders of history.